As LaRouche Warned, GM is "Effectively Bankrupt"
<body><div id="article"><tr><td height="28" valign="middle" width="184"></td><td valign="middle" width="185"></td></tr><h1>As LaRouche Warned, GM is "Effectively Bankrupt"</h1><p>May 24 (LPAC)--GM confirmed for the first time on May 22 to auto analysts that Cerberus Capital Management, which just did a private equity takeover of Chrysler, has pulled out of the bid by a consortium of hedge funds to buy control of the bankrupt auto supply company Delphi.</p><p>GM then, on May 23, increased its own estimate of what it will have to kick in for Delphi's labor-retirement and other costs, to $7 billion. And GM announced it would take an immediate $1 billion charge against its earnings in this quarter, and borrow another $1.1 billion in junk bonds. Delphi was the parts division of GM until 2000. Auto industry sources think that GM is throwing this $1 billion into the 18 month-old negotiations between Delphi and the United Auto Workers (UAW), taking place in bankruptcy court in New York, to finally get a settlement in the near future. This would clear the decks for the "Big Three" automakers to confront the UAW and demand "transformational" concessions from the union in national contract talks this Summer. Under Cerberus' ownership, Chrysler will lead that confrontation.</p><p>GM's condition is now "effective bankruptcy," as Lyndon LaRouche warned in February 2005 that it would be, under continued economic policies. From 1999-2006, GM's gross profits have declined from $40 billion to $22 billion--the company has shrunk; its debt, however, has grown from $199 billion to $450 billion. In just three years, its debt-interest expenses have risen from $9 billion to a projected $18 billion this year. It's auto sales have shrunk by 2% globally, 7% in the United States.</p><p>During the six months that Cerberus appeared to be leading a hedge-fund syndicate to buy Delphi, it carried out Felix Rohatyn's original 2005 restructuring plan for that company. The Steering Division was sold off to Platinum Partners hedge fund; the Interiors Division was sold of to private equity vulture Renco Group, Inc.; two more of the remaining plants in Michigan and Ohio were closed, and closing of a third, in Moraine, Ohio, was announced; the early-retirement buyout of 22,000 out of 34,000 union workers was completed. Delphi announced, in late April, that it intended to emerge from bankruptcy as primarily "an information technology company," rather than an auto supplier. That "stripping and flipping" work done, Cerberus withdrew, leaving the actual ownership of the post-bankrupt shell to the other hedge funds and banks--and the longer-term expenses of it to GM.</p></div></body>