Who Will Gain From the GM Bankruptcy

The huge General Motors bankruptcy is the best of several bad options for America’s biggest automaker. By allowing the company to shed debt, unload its weakest assets and rapidly streamline, the Chapter 11 filing allows GM to stay in business, become competitive once again and someday return to profitability.

But it also imposes pain on millions who cast their lot with GM over the years. Stockholders will lose virtually the entire value of their holdings. Some bondholders, like big banks and other investing firms, will lose a portion of their investment. Others, like retirees and families who bought GM bonds thinking they’d be a safe fixed-income investment, could lose a lot more.

[See which stockholders will lose the most from the GM bankruptcy.]

The bankruptcy also gives several GM competitors a boost. Here’s who stands to gain the most (not including the bankruptcy lawyers):

Ford. It’s got financial problems of its own, but GM’s crosstown rival looks like it may be able to solve them without declaring bankruptcy or asking for a bailout. That puts Ford at the top of a troubled domestic heap. “Ford’s in a good position,” says Craig Cather, CEO of forecasting firm CSM Worldwide. “Anybody who wants to buy American would be likely to have more confidence in Ford than in GM or Chrysler.”

CSM predicts that Ford’s U.S. market share, about 16 percent now, could rise to nearly 19 percent by 2015. With overall industry sales expected to rebound nicely by then, a few extra points of share could push Ford’s overall U.S. sales from about 1.5 million this year to 3 million by 2015. That would be a huge gain almost certain to propel Ford past GM as the biggest U.S. automaker.

[See how buying a car is going to change.]

Chrysler, the other domestic automaker, probably won’t benefit from GM’s woes. Even though it will emerge from bankruptcy sooner than GM, Chrysler still has a weak product portfolio, and new vehicles from partner Fiat won’t arrive for a couple of years at least. CSM predicts Chrysler’s U.S. market share will dwindle from about 11 percent this year to a mere three percent by 2012.

Toyota. Japan’s biggest automaker is losing money, too (recurring theme: the car industry is a really lousy business right now) but it’s not in dire straits like its American counterparts. And Toyota’s steady growth in the U.S. should continue. With GM getting smaller and Ford moving carefully for awhile, CSM’s projections show Toyota edging out the two American carmakers to become the top seller of cars in the U.S. by 2011. If gas prices spike unexpectedly, Toyota could grow faster, thanks to its pole position in high-mileage hybrids.

[See why foreign automakers are more “domestic” than Detroit.]

Hyundia and Kia. Jack Nerad of car-research site kbb.com says that bargain-hunters concerned mostly about price tend to buy either domestics or Korean-made vehicles, since Japanese and European brands tend to be a bit more expensive. With GM and Chrysler looking shaky, “the Korean brands are likely winners,” says Nerad. Both brands have been on the rise anyway, thanks to big quality improvements, base models that include a generous set of features, and surprise hits like the luxurious Hyundai Genesis.

[See how to tell if you should buy an American car.]

Imported minicars. They could come from Korea or China or India, but the odds are rising that more cheap, small imports will make it into U.S. showrooms. One possible entry point is Saturn, the money-losing division that GM plans to sell. With nearly 400 modern showrooms and a recognized brand name, Saturn could offer a foreign-based carmaker a ready-made retail network in the United States. Penske Automotive Group, one possible buyer, might try to sell cheap Korean cars as Saturns.

[See 7 American cars worth bailing out.]

General Motors. The biggest beneficiary of the GM bankruptcy may be GM itself. “They’re going to be in a good position once they’re out of bankruptcy,” predicts Gary Dilts of J.D. Power & Associates. “GM has a pretty good product plan, and they’re leaving 10 years of debt on the side of the road.” The most important things for GM are minimizing the damage to its brand image, erasing doubts in car buyers’ minds, and detaching the surviving divisions—Chevrolet, Cadillac, Buick and GMC—from the troubled parts of the company, which could wind through bankruptcy for months. If it does that, GM could bounce back smartly by 2011. Call it a counterconventional bet.