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GM Goes Down

DETROIT: General Motors is trading for 67 cents a share this morning. The grand old dame of the auto industry, incubator of the Corvette, Camaro, GTO, Firebird and Trans Am and hundreds of other models, filed for bankruptcy on Monday after a protracted but futile effort to stay afloat. GM filed for Chapter 11 protection in the U.S. Bankruptcy Court for the Southern District of New York. The company reported assets of $82.3 billion and debt of $172.8 billion. GM’s represents one of the largest bankruptcies in U.S. history and that of a second of a major car company in about a month. Chrysler filed April 30.

The federal government has agreed to provide GM $30 billion in exchange for 60 percent of the reorganized company. Judge Robert E. Gerber yesterday released $15 billion of that as debtor-in-possession financing and scheduled the asset sale for June 30.

General Motors and its dealers represent one of the biggest revenue sources in broadcast TV. GM dealerships alone contributed $264 million in spot buys among the top 100 TV markets last year. Several broadcast groups issued caveats in 1Q09 filings regarding the impact of a GM bankruptcy on 2Q results. Some of the country’s top media buying agencies are listed among GM’s creditors. Starcom Mediavest is No. 1 on the list, claiming to be owed $121.5 million. Magna International is No. 10 with a $26.8 million claim. Publicis Groupe SA is No. 13 with $25.3 million. Interpublic, No. 15, is owed $16 million.

GM’s post-reorg ad campaign is already on deck, according to Business Week. Starting next week, GM ads will address “its past mistakes” and say the car company “is still in business and ready for the big fight,” the article said. Ad dollars will be concentrated on the Chevy and Cadillac brands, with Chevy matching Toyota dollars in 2010. A campaign for the Buick Lacrosse sedan and Enclave SUV will be launched this month.

GM brands include Buick, Cadillac, Chevrolet, GMC, GM, Pontiac, Saab, Saturn, Hummer and a few others. Pontiac previously was slated for phase-out by the end of next year. Hummer, Saab and Saturn are expected to be sold by the end of this year. Of GM’s 235,000 employees, 90,000 work in U.S. operations--where the bankruptcy is focused.

The car company previously received around $19 billion in bail-out money from the Fed, but was nonetheless able to restructure without bankruptcy protection. Yesterday’s hearing drew a crowd that queued up outside of the court in Lower Manhattan, according to Tomoeh Murakami Tse of TheWashingtonPost’s Tomoeh Murakami Tse, who Twittered live from the hearing. She noted that GM chief Fritz “Henderson is wearing a pink tie.” A speaker-phone crack about corporate jet travel also incited the judge, who threatened to disconnect misbehaving hacks.

GM thus falls from a peak of trading at more than $93 a share during the boom years to getting booted from the major stock market indices. Standard & Poor’s said on Monday that DeVry will replace General Motors in the S&P 500, according to MarketWatch. GM is to be removed from the index by the end of today; Devry will be added June 8. Cisco Systems will take the place of GM on the Dow Jones Industrial Average Index. GM was a component of the DJIA for nearly 90 years.--Deborah D. McAdams

(image by Scott Shiffman)

Previous coverage from TVB:
TV Market Sector Summary: June 1, 2009
June 1, 2009
Thousands of car dealerships closing across the country won’t have a huge impact on advertising because most had already cut budgets, Wachovia’s Marci Ryvicker said.

The Future of Car Dealerships
May 29, 2009
DETROIT: More than 2,000 auto dealerships around the country are expected to close in the coming months, eviscerating a mainstay of TV station ad revenue. The closures were a result of the bankruptcy of Chrysler and an expected filing from General Motors. Now The Economist is proposing a similar fate for the showrooms left standing.

Bankruptcy Nears for GM
May 28, 2009
DETROIT: General Motors is expected to file for bankruptcy after its latest effort to hone debt failed. GM is now working out a deal to give bondholders a bigger piece of the restructured company, but the strategy is now seen as a step toward bankruptcy rather than averting it.

General Motors Struggles to Avert Bankruptcy
May 26, 2009
DETROIT: General Motors today agreed to fund a trust to support retiree health care beginning next year. The move is part of the troubled auto-maker’s effort to restructure without declaring bankruptcy.

One-fourth of Chrysler Dealerships to Close
May 14, 2009
DETROIT: A total of 789 Chrysler dealerships will close under the automakers bankruptcy terms. The number comprises nearly one-fourth of the roughly 3,200 dealers doing business today, and around 14 percent of Chrysler’s total sales volume.