GM creates backup plan in case federal aid is not received

Article by Christian A., on August 27, 2010

Everybody knows the existing financial dilemmas of GM, with the Big 3 acknowledging lately that they will be out of funds early in 2009 if the federal government will not step in and help them.

In spite of the gravity of the situation, and the polls showing that majority of the people are in favor of a government bailout of the automotive industry, a strong and gloomy possibility lingers of a rejection of these appeal for loans, in which case GM must put in motion a secondary plan to avoid bankruptcy prior to President-elect Obama's sitting as President of the US. 

Presently, GM is putting into place numerous means to preserve its cash flows at a satisfactory level, but with about $12.5 billion to be demanded any time soon to keep the firm in operation these measures may have to be accelerated to steer clear of bankruptcy.

GM has already announced that it won't be vending any more brand assets except for Hummer, but this doesn't signify that it can't sell other physical assets such as unproductive plants and shares in other companies.

Just lately, GM sold its left over share in Japan's Suzuki of 3%, earning about $230 million for the piece of shares on the open stock market in Tokyo.

General Motors will also be putting off the introduction of new models just to maintain liquidity. It was reported earlier on that GM is compelled to postpone the Cadillac CTS Coupe and the Buick LaCrosse because of high costs.

The automaker will also for the time being defer corresponding payments into its employees' 401(k) accounts as it wrestles to increase liquid cash. The postponement has become effective last November 1, and will impact GM's whole North American workforce.

Moreover, GM is also reported to be assessing the number of paid workers it has, with an eye of laying off up to 5,000 employees in order to greatly reduces its costs. GM is anticipated to make an public announcement after Thanksgiving concerning the odds of its success.

Topics: gm, plan

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