March Auto Sales Remain in a Slump
Wednesday, April 01, 2009PAUL KANGAS: U.S. auto sales hit the skids again in March, more stark evidence of an industry in crisis. But, there were also a few glimmers of hope for the auto makers. The monthly numbers were better than expected and sales picked up in the last week as consumers took advantage of deals and incentives. March sales at General Motors were down 45 percent. But executives at the auto maker are now suggesting the industry has hit a bottom. Ford saw a 41 percent decline, saying it's too early to call a bottom. Chrysler sales were off 39 percent, but it was the first time since last fall Chrysler sold more than 100,000 vehicles in a month. Toyota was also down 39 percent. The auto maker now sees signs of optimism in the U.S. market. Those sales numbers underscore the increased pressure on General Motors and Chrysler to prove they deserve more Federal bail out money. As Darren Gersh reports, if GM goes into bankruptcy, experts say it will be a bumpy road.
DARREN GERSH, NIGHTLY BUSINESS REPORT CORRESPONDENT: When experts hear talk of General Motors emerging quickly from a surgical bankruptcy, two things come to mind. Bankruptcy law Professor Adam Levitin thinks messy and slow.
ADAM LEVITIN, ASSOCIATE PROFESSOR, GEORGETOWN UNIVERSITY LAW CENTER: This is not outpatient surgery. That bankruptcy, even with a pre-packaged bankruptcy for a company the size of GM is going to involve - it's going to be inpatient. It's going to involve some stay in the hospital, some anesthesia. And there is going to be a recovery period from this.
GERSH: Levitin and other lawyers we spoke to guess the patient will spend up to a year in bankruptcy court. Consider the symptoms: $27 billion in bondholder claims to sort through, tens of billions in claims from suppliers and dealers. And GM owes $20 billion to the union health plan. And then there is the plan itself, which appears to be using bankruptcy to split GM into a good company that quickly emerges from bankruptcy and a bad company that doesn't. Leading bankruptcy lawyer Howard Seife says that strategy smells very much like a plan of reorganization, a contentious process.
HOWARD SEIFE, GLOBAL HEAD BANKRUPTCY GROUP, CHADBOURNE & PARKE: There are going to be creditors left behind dealing with the crumbs and the dregs and the hummers and they are not going to be very happy and that constituency could create quite a ruckus.
GERSH: That assumes GM comes into court with agreements to change its labor contracts. Seife says a dispute over that alone could set up a series of legal appeals.
SEIFE: And any time you are dealing with a courtroom situation and an independent bankruptcy judge, you kind of lose control a little bit. So there's no guarantee it's going to be quite as smooth as the folks in the government and General Motors might hoping it would be.
GERSH: Splitting General Motors in two may be a good idea, but it is also complicated, the corporate equivalent of surgery to separate conjoined twins.
LEVITIN: And complication of course adds risk and complication means that this will take more time.
GERSH: But GM would have something other bankrupt companies don't, the Federal government providing financing and standing behind its warranties. Darren Gersh, NIGHTLY BUSINESS REPORT, Washington.
