F&I Management & Training

Shares in US carmaker General Motors fell steeply in European trade after a report the US government wants the firm to start bankruptcy proceedings soon. The New York Times said the Treasury Department wants a court-supervised restructuring to start by 1 June, but the firm would prefer other options. In early trade in Frankfurt, GM shares were down 14.3% at 1.32 euros after closing 16% lower in New York. Meanwhile, GM is recalling 1.5 million vehicles over engine fire fears. The recall involves vehicles with a 3.8-litre V6 engine, and includes the 1998-1999 Oldsmobile Intrigue, the 1997-2003 Pontiac Grand Prix, 1997-2003 Buick Regal, and the 1998-2003 Chevrolet Lumina, Monte Carlo and Impala. The recall comes after US government safety agencies said drops of oil could fall into the exhaust system and cause a fire in the engine. 'Broad implications' Car firms worldwide have been hard hit by a slowdown in demand, as consumers tighten their belts faced with the current financial crisis. In February GM announced a restructuring plan, which involved 47,000 job cuts, cutting five plants, and axing 12 car models. On 30 March, the US government gave GM 60 days to develop a new restructuring plan as a condition for further state aid. Should GM enter bankruptcy, the ramifications would be felt around the world and not just in the US, as can be seen by the reaction of the German markets. Earlier, in Japan, the biggest downward move on the Nikkei was from carmakers and other automotive shares, with some analysts saying the move was on fears about the fate of GM. "If GM were to go bankrupt, that would raise questions about what would happen to Japanese auto-parts makers and Japanese automakers' dealer networks. The implications are broad," said Takahiko Murai, general manager of equities at Nozomi Securities. US car firms, including GM, have faced increasingly tough competition from Japanese car firms, which have developed more energy-efficient and smaller models. The White House has already given GM $13.4bn (£9bn) in public money to prevent it from collapsing, but any additional aid requires the firm to meet tougher rules.

DATED: 14.04.09

FEED: AW