General Motors Corp said on Thursday night it would most likely pursue
the same legal strategy as Chrysler if it spirals into bankruptcy,
while Chrysler unveiled details for slashing its dealer network.
Rattling the industry
further, the Financial Times reported on its website that Toyota Motor
Co is planning one of the most drastic management shakeups in its
70-year history next month when Akio Toyoda, grandson of the company's
founder, takes over as chief executive.
Toyota will replace 40
percent of its senior managers and is said to be preparing a sweeping
reorganization of its North American business that would unify sales
and manufacturing arms, the report said.
In a bright spot, Ford
Motor Co, the only Detroit automaker not taking government bailout
funds or dogged by bankruptcy or bankruptcy expectations, assured
shareholders it is on track to at least break even in 2011, sending
The GM disclosure, in a regulatory filing, marked
the first time the automaker has said it would most likely follow the
same legal strategy Chrysler is using under federal oversight to slash
debt and restructure dealerships.
GM faces a June 1 deadline to
restructure its bond debt and reach a sweeping deal with the United
Auto Workers. The company restated in its filing with the Securities
and Exchange Commission that it expects to seek Chapter 11 if
negotiations with bondholders fall short.
CHRYSLER CUTTING DEALERSHIPS
said it would terminate business with 789 of its 3,181 dealerships as
of June 9, a move that could cost up to 40,000 jobs, according to the
leading dealer trade group. Dealers in Pennsylvania, Texas, Ohio,
Illinois and Michigan -- where Chrysler is based -- would be hit
The bankruptcy process that we are in allows us a
once-in-a-lifetime chance to achieve a right-sized dealer body,
Chrysler Vice Chairman Jim Press said on a conference call. We do not
have enough production or sales to keep all the dealers alive or
Chrysler sought permission from a U.S. bankruptcy
court in New York to terminate franchise agreements with the dealers.
Fifty percent of its U.S. dealers account for 90 percent of sales,
according to court documents.
GM also plans to announce up to 2,000 dealer terminations as early as this week, sources have told Reuters.
and GM face pressure to bring large sales networks in line with those
run by more successful automakers. Toyota has 1,200 dealers in the
Chrysler dealers reacted with a mix of anger and
sadness, but most, even those surprised by the news, entertained little
hope they could stop Chrysler.
Mike Jackson, chief executive of
AutoNation Inc, the largest public dealership group, said Chrysler's
dealer consolidation plan was long overdue but noted it could put
pressure on vehicle prices in the short term.
This is an
unprecedented event in the midst of an unprecedented economic
situation, Jackson said. I think it's a relatively short-term painful
U.S. Rep. Gary Peters, whose Michigan district includes
Chrysler headquarters, and other lawmakers from the state said they
would consider whether legislation may be needed to provide a softer
landing for outgoing dealers.
The National Automobile Dealers
Association has spent this week urging Congress and the Obama
administration's autos task force overseeing industry restructuring to
slow the process.
Chrysler's move to cut dealers will help it
cement an alliance with Fiat. U.S. antitrust officials said on Thursday
the plan poses no competitive issues.
Separately, the German
government said it wants Fiat and Austrian-Canadian parts supplier
Magna to present proposals for partnering with GM's European unit,
Opel, within a week.
In Wilmington, Delaware, Ford executives told shareholders at the
company's annual meeting that restructuring is on track to be at or
above break-even in 2011 excluding special items.
shareholders also approved a funding plan for a healthcare trust for
union retirees and rejected a challenge to the share voting structure
that gives the Ford family control of the automaker.
Ford shares rose 4 percent to $5.16 on the New York Stock Exchange, while GM shares fell 4.9 percent to $1.15.
The entire industry is dependent on a sharp reversal in plunging U.S. sales.
firm A.T. Kearney said in a report on Thursday that domestic sales are
expected to drop 24 percent to 10 million units this year. Industrywide
sales were 13.2 million in 2008.
In Chattanooga, Tennessee,
Volkswagen executives said on Thursday they see no recovery in demand
for U.S. vehicles before the end of the year with industrywide sales at
risk of dropping below 10 million units.