The Treasury Department is directing General Motors to lay the groundwork for a bankruptcy filing by a June 1 deadline.

The goal is to prepare for a fast “surgical” bankruptcy, the people who had been briefed on the plans said. G.M., which has been granted $13.4 billion in federal aid, insists that a quick restructuring is necessary so its image and sales are not damaged permanently.

Treasury officials are examining one potential outcome in which the “good G.M.” enters and exits bankruptcy protection in as little as two weeks, using $5 billion to $7 billion in federal financing, a person who had been briefed on the prospect said last week.

The rest of G.M. may require as much as $70 billion in government financing, and possibly more to resolve the health care obligations and the liquidation of the factories, according to legal experts and federal officials.

Of course, GM could theoretically reach an agreement with the UAW and GM bondholders to exchange roughly $28 billion in debt into GM Equity before the deadline, but I’ll not start holding my breath now.

Alas, today after making public the company’s Viability Plan, GM announced that the High Performance Vehicle Operations Team will be dismantled, its members moving to other departments.

“All high-performance projects are on indefinite hold. – Vince Muniga, GM Spokesman

No doubt it was a foolish hope of mine, but after seeing the the performance of the V-Series Cadillacs, and seeing the teams potential in cars like the Chevrolet Cobalt SS and the HHR SS, I was looking forward to what else might come from these talented engineers.  I still firmly believe that domestic automakers should need to compete on the same playing field as their import competitors, and that includes comparable small performance automobiles that are within reach of the average buyer.

As for the Plan itself?  GM is requesting an additional $16.6 billion, bringing the total amount of money lent to $30 billion if approved.  GM proposes that they will be able to start repaying the loans in 2012, assuming all goes as planned.  HUMMER will be sold or phased out, SAAB will request assistance from the Swedish government (and will be filing bankruptcy at the end of the month if no agreement with Sweden is reached), and as for poor Saturn…  the brand will be laid to rest in about 3 years when the current product cycle ends unless the dealers and investors can come up with a way to sell it or spin off the line into something else.

Going forward, GM will mainly focus on the Chevrolet, Cadillac, Buick and GMC brands, with Pontiac morphing into a niche brand with fewer models.

Only time will tell if it’s enough to save GM.

“This is the only possible path for our company,” Circuit City’s acting Chief Executive James A. Marcum said in a statement. “We are extremely disappointed by this outcome.”

It is still unclear what will happen to the 765 retail stores and outlets in Canada, as there are still bids for the Canadian business.

(from Barron’s and Yahoo/AP)

While the loss of these jobs is horrible and couldn’t come at a worse time, in my personal experience Circuit City never came close to performing as well as its competitors and sadly, this is the end result.

The painful truth companies must face is that no longer will customers continue to put up with bad service, high prices and poor selection, and with the economy growing worse daily, that will not be changing any time soon.

“We have to re-engineer the way we’re doing business in many regards,” Clarke said. “We’re going to be a smaller company.”

Pontiac also will be shrinking, Vice Chairman Bob Lutz told reporters today.  It’s line will be reduced down to just the G8, the G5, the Vibe, the Solstice and the Solstice hardtop coupe.

Saturn – who hasn’t made a profit since 1993 – is being looked at closely as well, said Clarke.

We’ve entered into a very, very open and candid dialogue with our Saturn retailers, it just hasn’t been a good business for us.  We need some breakthrough options here, we can’t continue brands that have no prospect of earning their way.

Between this and the news of GM selling off 250 vehicles from their their private “Heritiage Collection”, it seems GM has seen the light and is ready to make changes.  Let’s hope it’s not too little, too late.

Fuck ‘em.

They’re sunk. Dead men walking. It’s just throwing money into a sewer.

They US automakers have dug their own grave, chiseled their names on a slab of marble and the pallbearers are lining up. There’s no chance in hell they can possibly recover, the only thing now is bankruptcy and selling off their assets to the Japanese.

The way the UAW contracts are structured, they can’t really lay people off – sure, they can close factories, but they still have to pay the employees, up to four years pay in some cases. GM badly needs to axe a couple of brands, but they can’t due to the restrictive dealer structure. There’s no confidence in the cars. There’s no demand for the SUV’s. The US automakers have been competing with substandard vehicles on the basis of price, not quality, and that’s never a good strategy.

Ask yourself: Is there one single model made in Detroit, except trucks, that’s not overshadowed by it’s Japanese or European competition? Have any of you driven an American car made in the last twenty years that made you say “Hey, this is AWESOME, I want one of these?” Sure, a couple of the musclecars are pretty decent, and there’s always the Corvette, but the bread-n-butter lineup from Detroit is largely a bunch of uninspiring shit, and there’s not much in the pipeline to reverse this.

As for management…what can I say. They wrote off little cars twenty+ years ago and either abandoned the marketplace or rebadged imports, then they wrote off compact cars and ceded the largest market segment to the Accord/Camry juggernaut, finally taking refuge in GIANT FUCKING SUV’S. They made money hand over fist for twelve years, but instead of aggressively competing in other market segments, they just gave the money to the stockholders, took huge bonuses and focused only on the short term.

The labor situation is abysmal, the workers and the UAW are stuck in 1936 with an armed-conflict mentality and this cannot be undone. Ever. There’s a good reason why foreign companies come here and build auto factories ANYWHERE but the Rust Belt, even though labor is cheap and the land cheaper. They want a fresh crop of workers, not the descendants of the entitlement-drunk UAW guys that picked up their labor-management ideas from Grandpa and Dad.

Again, I hate to say shit like this, but it’s all factual. Ashes to ashes, dust to dust, and all that, I guess.

Pretty harsh words, but he’s not the only one who feels that way either.  A bailout of the Big Three would be viewed by many as rewarding the shoddy management that got the automakers in this position in the first place, and would be unfair to other companies making cars here in the States.  What about BMW, Volvo, Subaru, Isuzu, Toyota, Nissan, Honda, Mazda, and Mitsubishi, not to mention bus and truck maker Navistar and Paccar, the manufacturer of Kenworth and Peterbuilt?  All of these companies have factories here in the United States, should we look to bail them out as well if needed?

The problem is, that in this time of lost jobs and market turmoil, we really can not afford to have any of these companies go under.  The ripple effect would be disastrous – hundreds of large part suppliers are in financial trouble too, and could very well find themselves going under if the Big Three go down.

How bad could it be?  It could mean the loss of 240,000 jobs at the Big Three, the loss of 980,000 jobs at the supplier and local dealer level, plus the loss of 1.7 million additional jobs throughout the economy… that’s a potential loss of 3 million jobs.  Personal income could decline by $150 billion the first year, and by nearly $400 billion over three years, to say nothing of the lost tax revenues to federal, state and local governments and increased spending on welfare programs. (wikipedia)

That’s pretty bad.  So what’s the solution?

Chapter 11 Bankruptcy.

While the credit crisis has accelerated the Big Three’s dilemma, it is not solely to blame for the situation. It’s a commonly known fact that auto execs, workers and unions are overpaid, and that the automakers are in dire need of a dramatic overhaul.  Drastic change is needed in the world of the Big Three, and has been for some time now.

Bankruptcy would give the companies a chance to reduce costs, streamline their operations, change their business models, and by extension, change the way the UAW does business in the workplace.  Throwing billions of taxpayer dollars at the problem will do nothing to correct the underlying issues that have greatly contributed to the situation.

Yes, some jobs would be lost – namely overpaid executives – and the UAW workers would have to say goodbye to their fat pensions and maybe some of their benefits.  It would be a long hard road to recovery, and things would never be the same again.

But that certainly would be better than loosing it all.

Nell Minow is absolutely right in her New York Post article, calling for Henry Paulson to stop the bonus checks to executives at Goldman Sachs, Merrill Lynch and Morgan Stanley.

1. It is hypocritical. The Wall Street guys always rhapsodize about the perfection of the free market – until it stops showering them with money. Then people who are already in the top fraction of a percent of the wealthiest people in the world want to be “made whole” with billion-dollar welfare checks.

2. It is unfair. The only justification for multi-million-dollar pay packages is that they reward performance. That means that in a bad year what had gone up must come down.

3. It is infuriating. I’ve observed many financial scandals, from the savings and loan failures through Enron, WorldCom, and post-Sarbanes-Oxley messes like backdated options. All were recognized as tragic but not pervasive – compartmentalized as the corruption of a limited group of individuals.

But across the country, people see this mess as central to the operation of Wall Street and we are outraged at having to take money that would better be spent on education, the environment, paying down the debt – or lowering taxes – and spend it on making up for the greed and stupidity of a bunch of rich people trying to get richer.

4. It makes it easier for our competitors in global markets. The rest of the world has never really tried to compete with our investment banks, intimidated by their power, expertise, and reach. The current mess has opened up new opportunities for non-US financial institutions.

5. It is asking for trouble from Washington. I’d hate to be a politician who voted for the bailout and has to explain how this money got diverted from customers to bankers. If Wall Street cannot accept some responsibility for creating this problem, Congress and the regulatory agencies will be more than willing to step in to make them.

The most insulting to me out of all this is the fact that there seems to be no way for us, the people who have been saddled with the bill for this bailout, to voice our outrage.  Sure, we can post on blogs, we can rant aloud to each other, and we can mail and call our politicians, but at the end of the day, who will listen to us saying “NO”?  When do our feelings on the matter come into consideration?  After all, it is a debt WE will be paying off, not them!

When we common people perform poorly, or fail, we suffer through the consequences, while these people have the audacity to give themselves huge bonuses while asking for our money to save them from the situation they helped create.  Unbelievable.

American International Group Inc. has used $90.3 billion of a U.S. government credit line since it was bailed out last month, an amount exceeding the size of the original loan meant to save the insurer.

But it’s all being used to save the company, right?  Right?

Maybe, maybe not -

AIG isn’t disclosing “basic stuff” about how the Fed money is being used, UBS AG credit desk analyst David Havens said in an e-mail.

“The lack of disclosure has been a point of frustration,” Havens said. “We lack granular knowledge as to exactly where this $90 billion is going.”

Of course now that AIG has officially, really, honestly, we really do mean it this time, we swear, canceled all company perks, spa trips, and luxury retreats, I’m sure that now we will see an honest accounting of where all our money is being spent.

I won’t be holding my breath though.