GM files for bankruptcy
General Motors, once the worlds biggest automaker,
filed for Chapter 11 bankruptcy protection early Monday,
setting up a scenario under which the U.S. government will become GMs largest shareholder.
Filed in U.S. Bankruptcy Court in Manhattan, it marks history's largest filing of its kind for a U.S. manufacturer. It follows months of speculation that the 101-year-old company might have to restructure through the courts, despite desperate attempts by management to avoid the move.
As it turned out, though, bankruptcy was the only way GM could get its hands on the government money it needs to survive. In its filing, GM lists $82.3 billion in assets and $172.8 billion in debts.
The New York Times reports that the company's largest creditors are Wilmington Trust Co., representing bondholders holding $22.8 billion in debts; and United Auto Workers affiliates, representing $20.6 billion in employee obligations.
The U.S. government already has injected $20 billion into GM, and will provide an additional $30 billion to keep the company going as it works through bankruptcy. The investment will buy the government a 72.5 percent stake.
That will give government officials more power to name members of the GM board, though they have said they dont want to get involved in the daily operations of the company.
That may prove to be quite a challenge, given how much government money is involved.
"It's not forever," Bruce Belzowski, associate director of the Automotive Analysis Division at the University of Michigan Transportation Research Institute, told bizjournals in a telephone interview. "If they had a choice, it would be a short period of time. The longer that it stretches out, the more of a political liability it becomes.
Still, it could take more than a year before GM emerges once more as a publicly traded company.
While most public attention is focused on GM, the automaker's many suppliers are certain to be affected
as well.
President Barack Obama is slated to talk about the auto industry shortly before noon. General Motors CEO Fritz Henderson will follow with a news conference of his own.
Obama administration and GM officials have said they want a much smaller, more competitive GM to emerge from the bankruptcy within 60 to 90 days. GM plans to sell or close such brands as Saturn, Saab, Hummer and Pontiac, and will shed 2,600 dealerships. The company will close 11 U.S. manufacturing facilities by the end of 2010.
Plants throughout GM's system will be idled as the company downsizes. The
list of facilities GM said will be closed and include two assembly plants -- Pontiac, Mich. (October 2009), and Wilmington, Del. (July 2009) -- and three stamping plants: the previously announced closing in June of Grand Rapids, Mich.; Indianapolis (December 2011); and Mansfield, Ohio (June 2010).
The company will be split into a new GM and an old GM. The new GM will be owned by the U.S. and Canadian governments, the UAW and current bondholders in the company.
