Risk register · entry
Q1 · PredictableGeneral Motors bankruptcy
America's biggest carmaker spent decades ignoring the math. The bailout cost taxpayers $11.2 billion.
Documented, foreseeable risks that were ignored anyway. The failure is attention, not information.
Why this room
The event sits in q1 because the arithmetic that killed GM was documented, public, and stable for decades before the filing. GM's US market share slid from a peak of 51% to over 28% in 2000 and under 20% by 2009, while its break-even volume stayed at 11.5 to 12 million US units a year against 2009 sales of 10.4 million, and retiree health care and pension costs added an estimated $1,500 to the cost of every US-made vehicle, more than the steel in them. None of this was hidden or novel; the 2008 credit freeze was the trigger, not the cause. The failure was one of attention and of successive decisions to defer, not of information: the company entered the crisis with roughly $30 billion of unfunded retiree health and pension obligations already on the record.
The record
- The US government realised $11.2 billion in losses on its assistance to GM, which could be partially offset by $0.7 billion in net income, for a final shortfall of $10.5 billion (Congressional Research Service, March 2014).certain
- Old GM and New GM together received more than $50 billion in federal assistance through TARP; the Treasury took 60.8% of the new company in exchange.certain
- GM's US market share fell from a peak of 51% of all autos sold in the United States to over 28% in 2000 and under 20% in 2009.certain
- Old GM estimated that retiree health care and pension costs added $1,500 to the cost of every US-made vehicle, exceeding the cost of the steel in them; at the time of bankruptcy it had obligations of nearly $30 billion to fully fund retiree health care and pension funds.high
- GM needed US sales of 11.5 to 12 million vehicles a year to break even; 2009 US industry sales were 10.4 million units, down from just over 16.5 million in 2007.certain
- General Motors Corporation filed for Chapter 11 on 1 June 2009 in the Southern District of New York (Case No. 09-50026); substantially all of its assets were sold to the new entity under section 363 on 10 July 2009.certain
Sources
- Congressional Research Service, 'The Role of TARP Assistance in the Restructuring of General Motors', R41978, updated 18 March 2014
- U.S. Securities and Exchange Commission (EDGAR) - Motors Liquidation Company Form 8-K, August 2009
- U.S. Department of the Treasury - Auto Industry Program (TARP) overview
The book
This entry is one of 111 in the register. The full story, and what it cost the people who lived it, is in Risky Business by Claudia Zeisberger, David Munro and Joanna Reijgersberg-Siew.
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