Bankruptcy may prove to be the best thing that's happened to General Motors in a long time. After years of losing market share and money, it looks like the restructured board is finally taking control of this tarnished American icon.

Out is Fritz Henderson as CEO. According to Bloomberg, the career GM man didn't make the cut after the board's 100-day review. The board, led by Chairman and now interim CEO Ed Whitacre, apparently had seen enough, after deals to sell the Saturn and Opel brands fell apart, and plans to sell Saab stalled, all on Henderson's watch.

General Motors still has plenty of issues to contend with but at least the status quo of watching the ship sink while the band plays on looks to be a thing of the past.

Whitacre says the job of finding a replacement "begins immediately." Unfortunately, replacing the CEO won't be as easy as ousting him. Just ask Bank of America.

As Henry and Aaron discuss in this clip, there are many parallels between these two fallen giants...

The program was "very important for Michigan - it was great economic stimulus" and provided "immediate jobs" as automakers ramped up production, says Rep. Peters, a Democrat. "The whole idea of ‘cash for clunkers' was to act as priming the pump and get people back into showrooms. It was very successful at that."

Moreover, GM and Chrysler are now poised to return to profitability "in the next year or two" when car sales return to "normal" levels of around 13 million units, according to Rep. Peters. "As the American consumer gets confidence, get back in the showroom and buys that car they've been postponing, both these companies will be very profitable."

In fact, after their "painful restructuring," the Congressman says both GM and Chrysler are now positioned for profitability if car sales merely return to the 10 million range.

With the Treasury Department having invested about $80 billion and the Energy Department awarding $25 billion in low-cost loans to the auto industry, let's pray Rep. Peters is right when he says...

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Indeed the taxpayer-funded Cash for Clunkers program boosted auto sales in August.Ford was a winner with a 17.2 percent sales gain compared with August a year ago. But both GM and Chrysler posted lower sales versus August 2008.

But as our guest Jeremy Anwyl, chief executive of Edmunds.com, points out, was the clunkers program ultimately needed?

"What happens when you have a big incentive like Cash for Clunkers is it brings people into the market but many of these people were going to buy a car at some point in the near future anyway," Anwyl says.

Longer term, the "car business has reached some level of stability and its even modestly improving even without the Cash for Clunkers program," Anwyl says. "Eleven to 12 million is not an unreasonable forecast” for car sales next year, he added.

But if Hyundai's sales are any indicator, the consumer remains focused on affordability. Among the foreign auto manufacturers, Hyundai's August sales surged 47 percent versus a year ago.

August auto sales figures released Tuesday show GM and Chrysler sales fell, while Ford and Toyota sales rose the same month, aided by the federal Cash for Clunkers program.

However, data gathered from popular car buying guide site Edmunds.com shows American auto manufacturers fared better thanks to clunkers. (And contrary to popular belief, foreign cars weren't the biggest beneficiaries of clunkers.)

The program, which ended in August, offered up to $4,500 toward new, more fuel-efficient cars. Consumers had jammed once sleepy summer showrooms for last-minute deals.

Why the discrepancy in data? Edmunds.com CEO Jeremy Anwyl says they parce data by car models, while the government breaks down their numbers further. Bottom line: American automakers have indeed benefited from the Clunkers program.

Bigger picture, though, auto sales are likely to drop in the fall as the sector adjusts to life after the federal program. Anwyl also notes there are questions about whether the program should have been launched earlier this year, when the U.S. economy really was hurting, thus giving clunkers more time to reverberate throughout the auto sector.

"I'm not sure, as I said, at the end of all this if we'll be able to point to a lot of sales that wouldn't have happened otherwise," Anwyl says. "I don't think we really needed it."

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In the market for a new car but your current set of wheels didn't qualify for the "cash for clunkers" program? Edmunds.com CEO Jeremy Anwyl says hold off, if you can. His advice "would be to wait probably until November" when inventory levels normalize.

In an interesting market dynamic, the Clunkers program drove up demand so much, certain vehicles actually got more expensive. Prices "were up during the program and they're still up today because inventories are still very lean," he says.

One of the best examples is the Toyota Corolla, the most popular new vehicle purchased under the program. During the Clunkers program, buyers of the Toyota Corolla paid 29% closer to the full sticker price than before the program started, according to data from Edmunds.com.

But car companies looking to improve margins also create opportunity for those looking to pick up market share. That's exactly what Hyundai Motor's been able to do. The Korean car-maker said Tuesday that August sales rose 47% thanks in part to the program. Sales rose to 60,467 from 41,130 last year and set all-time sales records for the Genesis and Elantra models.

When retail expert and all-around economy watcher Howard Davidowitz appeared on Tech Ticker in February declaring the worst was yet to come for the U.S. economy and that Americans' standard of living has changed permanently, our comment boards lit up.

But surely with the latest rally off the March lows, bearish Davidowitz is more bullish, right? Not a chance. Look at your financial history books.

Two of the biggest rallies of more than 40 percent occurred during the Great Depression, says Davidowitz of Davidowitz & Associates,a retail consulting and investment banking firm. "People were sucked in and ultimately were destroyed," he says. It's a warning to today's investors, who are hoping to extend the rally. 

Don't get Davidowitz started on the economy or fundamentals. "Barack Obama's numbers have all gone mad," Davidowitz says. The Obama administration recently announced the U.S. budget deficit will be $9 trillion during the next decade; $2 trillion higher than the original forecast.

And, the proposed price tag for health-care reform? "Minimum $3 trillion," Davidowitz says. "One trillion? Are you kidding?"

Stimulus binges? Roller coaster equity performance over years? Stubborn consumers holding out for sales as deflationary pressures loom over the recovery? Sounds like the U.S. economy is turning Japanese, Davidowitz says.

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If you get a kick out of tales of government ineptitude, and let's face it there are many, you've got to be loving the way lawmakers have bungled the cash for clunkers program.

The clunkers deal was meant to get old gas guzzlers off the road and drivers in to more fuel-efficient rides with a nice discount. Problem is, so many people were interested, the whole thing was about to run out of money a week into its existence. Since late Thursday, we've had to deal with something approximating this regarding the program: It's over. It's suspended. Wait. It's going to be. No, it's back on. Now there's nothing to worry about. False alarm. Hang on, bad news after all.

The House of Representatives came in Friday to save the day, saying it was willing to throw a couple billion more dollars at the thing because the original $1 billion wasn't enough. Now it's up to the Senate to agree to free up some added funds.

Hey, I'm all for it. Get people to feel good about themselves by driving around in something that looks sharp and burns less gas, start them thinking about their carbon footprints, ensure that they'll be humming happy tunes like the ones in those Prius ads. The world will be a better place. Plus, car dealers get people on their lots again. Car makers look like they might have reason for hope. All good.

Unfortunately, the experience of the last few days has to make you wonder if the government really is capable of running anything other than a long-winded Q&A session with Ben Bernanke during which he has to spend five hours explaining the fundamentals of supply and demand. If Washington can't make clunkers operate smoothly, then pardon me for worrying just a wee bit about its ability to seriously take on health care...

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The Cash for Clunkers program is a hit! It’s sparked so much interest the Obama administration is scrambling to keep the $1 billion program alive. On Friday afternoon, the House of Representatives approved $2 billion to keep the program going; the Senate is expected to vote for additional funding next week, The AP reports.

Contrary to reports of its demise, the program is still in operation and White House press secretary Robert Gibbs told reporters Friday: “If you were planning on going to buy a car this weekend, using this program, this program continues to run.”

Named the Car Allowance Rebate System, the program provides credits of as much as $4,500 for the purchase of a new car when turning in an older vehicle to be scrapped. Lawmakers had expected the program to generate about 250,000 vehicle sales and to have enough money to last until about November 1.

Christopher Rupkey chief financial economist at Bank of Tokyo-Mitsubishi says continuing the program is a smart move. “You get a lot of bang for the buck with that $1 billion unlike a lot of these other programs.” And that’s exactly what you want, "the money hits the economy sooner rather than later,” he says.

But what about those doubters that say the size of the stimulus will lead to inflation?

Rupkey isn’t buying it...

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From The Business Insider, July 10, 2009:

A person familiar with the situation tells the AP that GM has emerged from bankruptcy.

All it took was 40 days, 2 fewer than Chrysler. Bravo to Steve Rattner. Now let's see if the turnaround plan will work.

Here's longer look at the turnaround plan by the AP:

By TOM KRISHER and EMILY FREDRIX – DETROIT (AP) — After a night spent signing mounds of paperwork authorizing the transfer of cash, real estate, technology and other property, GM attorneys are expected to officially usher the new General Motors out of bankruptcy protection on Friday and onto a path toward a hopefully profitable future.

Once the world's largest and most powerful automaker, the troubled company is expected to emerge cleansed of massive debt and burdensome contracts that would have sunk it without federal loans. Spurred on by the Obama administration's support, the process took just 40 days, even slightly quicker than crosstown rival Chrysler Group LLC's 42-day timeframe.

On Thursday, a bankruptcy court order allowing GM to sell most of its assets to a new company went into effect. The new GM, 61 percent owned by the U.S. government, will face a brutally competitive global automotive market in the middle of the worst sales slump in a quarter-century.

At a 9 a.m. press conference Friday, CEO Fritz Henderson will announce that GM will cut another 4,000 white-collar jobs, including 450 top executives. The company still employs 88,000 people in the U.S. and 235,000 worldwide.

Click here for the full AP story.

For more coverage, see The Business Insider:

U.S. retail sales edged up 0.5 percent in May, sparked in part by deep discounts, notably in autos. Definitely goods news, indicating the U.S. consumer is recovering. On a related note of optimism, home-improvement retailer Home Depot said fiscal year earnings may not fall as much as feared.

And yet another sign of the shifting consumer: investors are dipping into equities again. Long-term mutual funds have had positive inflows for 12-straight weeks, according to  Investment Company Institute.

But reality looks more like a search for a "new normal," as noted by Mohammed El-Erian, CEO and co-CIO of Pimco. Case in point the U.S. auto sector: U.S. auto sales peaked at 17 million in 2005, but a new normal of 10 to 12 million a year going forward seems more likely and hopeful.

So the consumer may be coming out of the bunker, but with unemployment on the rise and debt levels still very high, don't expect a recovery to the free-spending days of a few years ago anytime soon.

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