Bankrupt - General Motors

Summary

This video explores the dramatic financial struggles of General Motors, one of the world's largest auto manufacturers, during the 2008 recession. It delves into the company's history, its rise and fall, the controversial decisions under CEO Roger Smith, and the eventual declaration of Chapter 11 bankruptcy. The narrative highlights GM's restructuring with government intervention, the challenges faced, and the company's efforts to reinvent itself, focusing on fuel-efficient vehicles and electric cars, ultimately leading to a hopeful future.

Takeaways

• 😀 General Motors (GM), founded in 1908, became a global leader in automobile manufacturing, acquiring brands like Oldsmobile and Cadillac.
• 📈 Despite the Great Depression, GM emerged unscathed due to its international presence and the growth of Chevrolet, becoming the largest corporation and employer in the world by the mid-20th century.
• 🔧 In the 1980s, under CEO Roger Smith, GM underwent controversial changes, including automation, plant closures, and layoffs, impacting local economies like Flint, Michigan.
• 🚗 GM's lineup included iconic vehicles such as the Corvette, Malibu, GTO, Bel Air, and Camaro, which contributed to its market dominance.
• 📉 The early 2000s saw GM face financial challenges, including cash issues and a massive loss of over $10 billion in 2005, leading to a precarious financial situation.
• 💔 The 2008 recession exacerbated GM's financial woes, with a reported $15 billion quarterly loss, as the company struggled with the economic downturn and rising gas prices.
• 🏦 In 2008, GM declared Chapter 11 bankruptcy protection, seeking government aid to survive, which led to a restructuring plan and a $50 billion bailout from the U.S. government.
• 🛑 GM's restructuring involved closing brands like Saturn, Pontiac, and Hummer, reducing dealerships, and downsizing production, resulting in significant job losses.
• 🚀 Post-bailout, GM focused on more fuel-efficient vehicles and attempted to innovate with electric vehicles like the Chevy Volt, though facing competition from other brands.
• 💼 Despite the company's financial struggles, former CEO Rick Wagner received a substantial severance package, highlighting the controversy of executive compensation.
• 🔄 GM's turnaround under new leadership saw a return to profitability in 2010, with a focus on refining its business plan and investing in main brands to regain public trust.

Q & A

What major event led to General Motors declaring Chapter 11 bankruptcy?

The 2008 recession, along with a series of financial issues and controversial decisions, led to General Motors declaring Chapter 11 bankruptcy.

What was the impact of General Motors' bankruptcy on the American economy and culture?

General Motors' bankruptcy had the potential to significantly change the economy, industry, and culture of America due to its size and influence.

How did General Motors fare during the Great Depression?

General Motors came out of the Great Depression relatively unscathed, largely due to its strong presence in other countries and the growth of its Chevrolet brand.

What controversial changes did Roger Smith implement during his tenure as CEO of General Motors?

Roger Smith implemented controversial changes such as investing heavily in automation, shutting down plants, laying off thousands of employees, and consolidating GM's lineup to better fit market needs.

How did General Motors' financial situation worsen in the early 2000s?

General Motors faced a cash issue due to increased interest rates and the cost of their employees' benefit fund, leading to a significant financial crisis.

What was the role of the United States government in General Motors' restructuring?

The U.S. government provided General Motors with almost 50 billion dollars in taxpayer money, effectively taking ownership of the company during its restructuring process.

What were the consequences of General Motors' bankruptcy for its employees and the automotive industry?

Over 22,000 employees lost their jobs, numerous car dealers were closed, and 13 manufacturing plants were shut down, significantly impacting the automotive industry.

How did General Motors change its business strategy after emerging from bankruptcy?

General Motors focused on a refined business plan with four major brands, developed more fuel-efficient vehicles, and attempted to innovate in the electric vehicle market with the Chevy Volt.

What was the public perception of General Motors during and after its bankruptcy?

The public perception was initially negative due to the company's financial missteps and controversial decisions. However, after restructuring and focusing on innovation, the company managed to change the public's view.

How did General Motors' financial situation improve after the 2008 recession?

General Motors made its first profit since 2004 in 2010, with a revenue of 4.7 billion dollars, indicating a recovery and improved financial health.

What was the role of Rick Wagoner in General Motors' bankruptcy?

Rick Wagoner was the chairman and CEO of General Motors during its bankruptcy. He was forced to resign as part of the restructuring process, but left with a substantial golden parachute.

Outlines

00:00

🚗 The Rise and Fall of General Motors

This paragraph delves into the history of General Motors (GM), tracing its origins back to 1908 and its growth into a global automotive leader. It highlights GM's acquisition of brands like Oldsmobile and Cadillac and its resilience during the Great Depression. The script discusses the iconic vehicles produced by GM, such as the Corvette and Camaro, and its status as the largest corporation and employer in the United States by the mid-20th century. The narrative also touches on the company's challenges in the 1970s, including controversial decisions made by CEO Roger Smith, which led to financial difficulties and a loss of consumer trust.

05:02

📉 GM's Descent into Bankruptcy

The second paragraph focuses on the financial turmoil that led to General Motors filing for Chapter 11 bankruptcy protection in 2008. It outlines the company's cash issues in the early 2000s, the impact of increased interest rates, and the strain on its pension plans. The script details GM's desperate attempts to secure funding, including selling stakes in other companies and the eventual rejection of their business plan by the Senate Banking Committee. The paragraph also describes the deepening economic recession and its effects on the automotive industry, culminating in GM's declaration of bankruptcy and the involvement of the U.S. government in a bailout.

10:02

🛠️ GM's Restructuring and Recovery

The final paragraph discusses the restructuring of General Motors following its bankruptcy. It covers the resignation of CEO Rick Wagner, the government's financial support amounting to nearly 50 billion dollars, and the strategic decisions to sell off or discontinue certain brands and dealerships. The script highlights the company's shift towards a more streamlined business model with a focus on four main brands and the development of more fuel-efficient vehicles. It also mentions GM's efforts to innovate in the electric vehicle market, the challenges it faced in catching up with competitors, and its eventual return to profitability by 2010. The paragraph concludes with reflections on GM's recovery and the positive outcomes of job preservation and the introduction of new vehicle models.

Keywords

💡Chapter 11 Bankruptcy

Chapter 11 bankruptcy is a legal procedure that allows a company to reorganize its debts while continuing to operate. In the video, it is the pivotal event that General Motors (GM) faces, signaling a critical moment in its financial struggles. The script mentions that GM declared Chapter 11 bankruptcy during the 2008 recession, which was a response to severe financial difficulties and a necessary step for its survival.

💡General Motors (GM)

General Motors, commonly known as GM, is a multinational corporation that designs and sells vehicles and vehicle parts. It is a central figure in the video, illustrating the company's history, growth, and eventual financial crisis. The script discusses GM's rise to become the largest auto manufacturer, its challenges in the 21st century, and its restructuring after declaring bankruptcy.

💡2008 Recession

The 2008 Recession refers to a severe economic downturn that affected global economies. In the context of the video, it is the backdrop against which GM's financial troubles worsened, leading to its bankruptcy filing. The script describes how the economic climate impacted consumer spending, contributing to GM's plummeting sales and financial collapse.

💡Roger Smith

Roger Smith was the CEO of General Motors during the 1980s and early 1990s. His tenure is highlighted in the script as a period of controversial changes, including increased automation, plant closures, and layoffs. These decisions had significant social and economic impacts, such as the decline of Flint, Michigan, and are presented as contributing factors to GM's later financial difficulties.

💡Automotive Industry

The automotive industry encompasses the design, development, manufacturing, marketing, and selling of motor vehicles. The video's theme revolves around this industry, with a focus on GM's role as a major player. The script discusses the industry's challenges, such as market fluctuations and competition, which affected GM's performance and strategic decisions.

💡Restructuring

Restructuring in a corporate context refers to the process of reorganizing a company's structure, operations, or management to improve efficiency or address financial difficulties. The video describes GM's extensive restructuring efforts after its bankruptcy, including brand consolidation, dealership closures, and a shift towards more fuel-efficient vehicles.

💡Fuel-Efficient Vehicles

Fuel-efficient vehicles are designed to maximize fuel economy, reducing fuel consumption and emissions. The script mentions GM's renewed focus on developing such vehicles as part of its post-bankruptcy strategy, reflecting a broader industry trend towards environmental sustainability and consumer demand for economical cars.

💡Market Share

Market share represents the percentage of an industry's total sales that a company controls. The video uses GM's market share as an indicator of its size and influence within the automotive industry. The script refers to GM's significant market share when discussing the potential allocation of government aid during its financial crisis.

💡Golden Parachute

A golden parachute is a colloquial term for a generous severance package given to executives when they leave a company, often in the context of a merger or bankruptcy. The script mentions the 'golden parachute' received by GM's former CEO, Rick Wagner, as an example of corporate executive compensation practices that can raise public scrutiny.

💡Economic Downturn

An economic downturn is a period of negative growth in an economy, often characterized by high unemployment, low consumer spending, and reduced business activity. The video discusses the impact of the economic downturn on GM, with the script highlighting how the company's financial problems were exacerbated by broader economic challenges.

💡Innovation

Innovation refers to the introduction of new methods, ideas, or products. The script touches on GM's history of innovation, such as the development of the EV1 electric vehicle, and how the company's decisions to discontinue certain projects, like the EV1, impacted its ability to compete in evolving market segments.

Highlights

Atari and Kodak filed for chapter 11 bankruptcy protection.

General Motors declared chapter 11 bankruptcy during the 2008 recession.

GM's history includes its founding in 1908 and acquisition of brands like Oldsmobile and Cadillac.

GM was largely unaffected by the Great Depression due to international presence and growth of Chevrolet.

Post-WWII, GM became the largest corporation and employer in the US, known for iconic vehicles.

Controversial changes and defective vehicles in the 1980s led to consumer distrust.

Roger Smith's leadership involved automation, plant closures, and layoffs.

GM's focus shift to SUVs in the 1990s led to stock price recovery but was short-lived.

Financial issues in the early 2000s included cash flow problems and pension plan funding.

GM's stock price plummeted to under $5 in late 2008 due to the recession.

GM's desperate situation led to a rejected business plan and a 30 billion dollar loss by year-end.

The US government provided almost 50 billion dollars in aid to GM.

GM underwent restructuring, killing off brands like Saturn, Pontiac, and Hummer.

The new GM focused on four major brands and more fuel-efficient vehicles.

GM's attempt at an electric vehicle, the EV1, was discontinued in 1999.

GM made a profit for the first time since 2004 in 2010.

The company continues to evolve, learning from past mistakes and focusing on innovation.

Transcripts

one claims it's the company's only

chance for survival

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Atari has mild for chapter 11 bankruptcy

protection 31

GWA presents the difference

kodak is filing for chapter 11

bankruptcy at

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what's up guys my name is Jake and

welcome to the fifth episode of

bankrupts on this show and in my videos

the corporation's I talked about which

have declared bankruptcy usually simply

just vanish

but today I wanted to talk about

something a little different a

corporation so big that if they did shut

down all operations it would have

changed the economy the industry and the

culture of America forever and in some

cases it did so today let's talk about

the incredible events during the 2008

recession that led to one of the world's

largest auto manufacturers General

Motors to declare chapter 11 bankruptcy

since GM has been so widely talked about

across various media I'll just briefly

touch on our history the company was

founded in 1908 by men who came from the

already established Buick Motor Company

the now newly formed General Motors had

begun to acquire other brands like

Oldsmobile and Cadillac through the

early 20th century the automobile

corporation became a leader in the

markets becoming well known across the

world by the time of the Great

Depression

General Motors actually came out of the

economic downfall pretty unscathed in

large part due to their strong presence

in other countries with the growth of

another GM brand Chevrolet the company

was growing exponentially year-over-year

and generating great profits to show for

him over the following decades General

Motors and their subsidiary brands

produced some of the most iconic

vehicles ever brought to markets like

the Corvettes Malibu the GTO Bel Air

Camaro and many many more after World

War two GM was the largest corporation

in the United States and the largest

employer in the world it had earned the

title in 1965 as the most profitable

private entity in the country by the

1970s General Motors brands like

Oldsmobile and Chevy were booming in the

United States as they began to focus

more on performance oriented vehicles

across their line and directly competed

with Ford General Motors growth since

the early 1900s was astounding and while

GM can

continue to remain number one in auto

manufacturing just a few years later the

company's good fortune began to be

plagued by controversial and defective

vehicles causing a downturn and consumer

trust and this was only the beginning of

the company's rough couple of decades

ahead by the early 1980s Roger Smith

took over the CEO position at GM guiding

the company through the early eighties

recession and as the company

successfully rebounded from their

financial trouble under the leadership

of Smith they began a highly

controversial change to their

manufacturing process first with

investing in more automation in their

factories then slowly shutting down

plants and laying off thousands of

people the company had almost completely

abandoned the town of Flint's where it

all originated from and caused an

enormous local recession all while the

company grew stronger and more

profitable Michael Moorer made a

fantastic documentary about this back in

1989 it perfectly encapsulates the

situation at the time and what GM and

their CEO did to Flint Michigan a town

which is still not recovered from the

company leaving Roger had also

consolidated GM's lineup to better fit

the market needs and nothing more which

many customers saw is them taking the

heart and uniqueness out of the company

and as GM drastically changed their

pickup truck lineup the early 1990s

automobile plateau hit the company

pretty hard sparking more enthusiasm

within the board of directors to allow

Roger Smith to change things as the

market fluctuated and as GM appealed to

the then booming SUV markets the

corporation gained back some of their

losses and had a stock price at an

all-time high of over $90 a share

however from this point on it was all

downhill

General Motors went through a huge cash

issue in the early 2000s as they

adjusted for increased interest rates

and their employees benefit fund by 2003

the company fully funded their pension

plans of around 15 billion dollars along

with a 2005 massive loss of over 10

billion dollars in that year the company

had quickly found itself in a

financially dangerous situation the

company then decided to purchase a 20%

stake in Fiat

for a little over two billion dollars by

this time GM had stopped putting their

logo on all new cars and the company was

looking to make some money back by

selling at stakes and companies like

Suzuki and cutting its annual dividends

to just $1 a share however even with all

of this literal billions of dollars had

been thrown around the company with

investments coming into the corporation

and out of its Wall Street saw GM as an

unsafe investment with the beginning

signs of a lot of turmoil ahead and by

2006 their stock price was now down to

just $19 a share GM continued to sell up

brands like their military based company

Allison Transmission for around 5

billion dollars

this gave the automaker a nice cushion

of liquidity however despite this

longtime investors who held huge stakes

in the company began selling millions of

their shares quickly and dramatically

devaluating their stock by early 2008

the company reported a two billion

dollar operating loss which quickly

escalated to a staggering 15 billion

dollar quarterly loss the 2008 recession

had already begun and despite General

Motors selling all non-essential

investments the quickly deteriorating

economic climate was crushing the

company America and even the global

economy was in a massive recession and

suddenly millions of Americans couldn't

afford a new car along with raising gas

prices jobs being lost left and right

and houses foreclosed the luxury of

buying a new car or even an economy one

became an enormous obstacle for most

Americans GM was already in a rocky

financial state from the former decade

and now General Motors had to deal with

the worst economic situation since the

Great Depression

in November of 2008 GM claimed that they

would run out of money by mid 2009 if

nothing had changed and that set their

stock price on a plummet by late 2008

their stock price had now dropped to

under $5 a share

without help General Motors one of the

world's largest automakers was close to

shutting down completely

Ford and Chrysler were right there with

them in financial trouble though not as

dire as GM so they decided to turn to

the only entity with enough money to

help them the United States government's

the corporation submitted a business

plan with a high probability of a

sustained future - the Senate Banking

Committee but was soon rejected by the

end of 2008 GM was desperate for money

as they claimed cash was quickly running

out and they had posted an almost

unbelievable 30 billion dollar loss by

the end of the year as a new

administration came into the White House

GM had over 90 billion dollars in debt

and finally declared chapter 11

bankruptcy protection this allowed the

company to clear some debts and submit a

new proposal to the US government

however even in the company's most dire

financial times

General Motors executives had flown to

Washington DC to plead their case in

private jets

when will General Motors run out of

money relatively in the near future and

what amounting amount of money would you

need now to prevent that insolvency so

that we can take the three months

necessary to really go into the depth of

what conditions and how this agreement

or this bridge loan should be made I

can't tell you that for certain because

a lot depends on the people that whether

our suppliers will continue to ship us

with that advantage you have to

accounting wise you have to be tells of

everybody acted against your best

interest so what what amount of money

would you need to take you to March 30

we have talked about this 25 billion

bridge loan and why Wow 25 billion

dollar bridge loan is for three auto

companies

I'm asking about General Motors we have

we have talked about an allocation of

the 25 billion that would be

approximately based on our US market

share which suggests relative US market

share which suggests a total

availability against that facility to GM

of 10 to 12 billion maybe I'm denser so

mister wagon I don't quite understand

what the hell you just told me can you

just tell me in absolute terms how much

money do you need to survive Karsen it's

going to pend on what happens with

suppliers and mark I understand it give

me your worst-case scenario

worst-case scenario the amount of money

would be significant I mean we have we

have supplier what is significant

work/live billion dollars every month so

you so what you're telling us that since

you anticipate borrowing fifteen to

eighteen billion dollars under this

authorization you'll be if the market

doesn't turn around and the economy

doesn't recover by that time and I think

you have to be your wishful thinkers I

think it will by March 30th you're out

of money is that correct

the analysis that we've done is based on

an assumption that the US market

continues that about the current rate

which is weak level we don't assume a

lot of recovery we don't we hope it

won't get worse I want that basis we

would with the amount of funding that

proportionally would presumably be

allocated to us we think we have a good

shot to make it through next year the US

government finally sent a proposal for a

loan which after a refinements GM had

accepted their chairman and CEO Rick

Wagner was forced to resign and the

automaker began its long road of

restructuring the enormous company's

stock which remember had soared to over

$90 a share back in the mid 1990s now

fell to under $1 by mid 2009 the United

States government had granted General

Motors almost 50 billion dollars in

taxpayer money GM was now essentially

under the ownership of the government as

they began to fulfill their plan to

completely reinvent the company killing

off or selling huge brands like Saturn

Pontiac and Hummer General Motors also

closed around 900 car dealers across the

country and was forced to scale down

production and closed 13 manufacturing

plants over 22,000 500 employees had

lost their jobs and the restructuring

and by the way if you're worried about

Rick Wagner well don't worry

despite his role in the catastrophic

decline of the company eventually bailed

out by taxpayer money he left his CEO

position with a nice golden parachute of

over 10 million dollars and a lifetime

pension of 74 thousand dollars a year

that makes a lot of sense the new

General Motors was now technically a

separate entity than the original

automaker now called the General Motors

company

LLC focused on a much more refined

business plan down to just four major

brands cadillac buick GMC and chevrolet

the company now focused on developing

more fuel-efficient vehicles for the

masses after the controversy and huge

misstep of the ev1

which was a really innovative attempt at

an electric car that they quickly killed

off back in 1999 the company attempted

to do what they did in the 90s with the

Chevy Volt a new hybrid electric vehicle

though now they have lost their early

progress and had other brands like

Nissan and most notably Tesla out with

new and in some cases superior electric

vehicles that's just an example of how

GM had an innovative and

forward-thinking product yet killed it

off for other motivations and are now

playing catch-up to the market they

essentially spearheaded by 2010 GM had

finally emerged from their long losing

streak and made four point seven billion

dollars in revenue their first profit

since 2004 over the next few years GM

continued to invest in their main brands

turning out some popular vehicles and

doing a pretty good job on changing the

public's perception at the end of all of

this after all the dust had settled it's

truly hard to wrap your head around how

enormous this brand was and how it's

possible that the company was losing

that much money

quarter after quarter I mean it's

telling that the only entity large

enough to save the company was literally

the US government but also demonstrates

how dire of a situation it was back in

2008 and while billions of dollars were

wasted and loaned and dissolved tens of

thousands of jobs were saved and that

genuinely is one thing that was really

good about this whole mess now as they

introduce more forward-thinking vehicles

solid attempts at mass-market sedans and

continue to evolve their popular sports

cars I think General Motors has finally

completed their long and arduous road of

solving their financial problems under

their new leadership the company has

done a great job in avoiding the

horrible and controversial mistakes they

had made in the 80s and 90s and as they

continue to sell millions of cars each

year the future of General Motors might

be a bright one

after all thank you all so much for

watching this episode if you like this

video please consider subscribing to the

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of course I'll leave a link in the

description below anyway guys my name is

Jake follow us on Twitter Instagram and

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watching

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you

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