GM bankruptcy to create much leaner car maker
- Source: Shanghai Daily
- [09:29 June 02 2009]
- Comments
General Motors filed for bankruptcy protection yesterday as part of the Obama administration's plan to shrink the auto maker to a sustainable size and give a majority ownership stake to the federal government.
GM's bankruptcy filing is the fourth-largest in US history and the largest for an industrial company. The company said it has US$172.81 billion in debt and US$82.29 billion in assets.
As it reorganizes, the fallen icon of American industrial will rely on US$30 billion of additional financial assistance from the US Treasury Department and US$9.5 billion from Canada. That's on top of about US$20 billion in taxpayer money GM already has received in the form of low-interest loans.
GM will follow a similar course taken by smaller rival Chrysler LLC, which filed for protection in April. A judge gave Chrysler approval to sell most of its assets to Italy's Fiat, moving the US auto maker closer to a quick exit from court protection, possibly this week.
The latest plan is for the US government to take a 60 percent ownership stake in the new GM. The Canadian government would take 12.5 percent, with the United Auto Workers getting a 17.5 percent share, and unsecured bondholders receiving 10 percent. Existing GM shareholders are expected to be wiped out.
Albert Koch, who helped Kmart Corp through its bankruptcy reorganization, will serve as GM's chief restructuring officer. Administration officials said they expect the bankruptcy court process to last 60 to 90 days.
If successful, GM will emerge as a leaner company with a smaller work force, fewer plants and a trimmed dealership network.
GM said yesterday it will permanently close nine more plants and idle three others.
GM will move forward with four core brands - Chevrolet, Cadillac, Buick and GMC - and eliminate four others. The company plans to cut 21,000 employees, about 34 percent of its work force, and reduce the number of dealers by 2,600.
"There is still plenty of pain to go around, but I'm confident this is far better than the alternative," said Senator Carl Levin, a Michigan Democrat.
GM said it believed the filing was not an acknowledgment of failure but a necessary way to cleanse itself in an orderly fashion of problems and costs that had dogged it for decades.
GM first sought help from the Bush administration last year as it was in the midst of being staggered by US$30.9 billion in losses and seeing its cash resources shrink by more than US$19 billion.