GM, hours away from bankruptcy, eyes comeback

• Source: xinhua
• [20:54 June 01 2009]
• Comments

By Yang Lei

Many are mourning the iconic collapse of General Motors Corp. as it is just hours away from its bankruptcy filing on Monday. But the once largest company in the world may have been quietly betting on a quick comeback as a leaner automaker.

SMOOTH BANKRUPTCY

As 54 percent of GM bondholders announced their support for a sweetened debt-for-equity offer on Sunday, the GM took another step forward toward a quick exit from bankruptcy protection which the company is expected to file on Monday morning.

Under the new deal, investors holding 27.2 billion US dollars in GM's bonds were offered warrants for another 15 percent in the future on top of the 10 percent stake in the previous deal.

Last Friday, the United Auto Workers (UAW) union ratified a labor contract with an overwhelmingly 74 percent approval. A health-care trust of the UAW will get 17.5 percent stake with the right to buy an additional 2.5 percent stake.

"The GM will benefit from the bankruptcy in the long term," Shusheng Wang, co-director of Global Trade Group at Detroit-based Butzel Long law firm, told Xinhua. He had worked at GM headquarters as legal counselor for nearly 10 years until 2006.

"The GM will shed the bulk of its liabilities, and it will become cost competitive against Japanese transplants under the deal with the union. Even better is that the government will finance the company through bankruptcy," Wang said. "The GM will survive, and become strong again, but as a smaller company focused on vehicles."

Chrysler LLC, another major US automaker which filed for Chapter 11 on April 30, is likely to emerge from bankruptcy as a judge is expected to approve a deal to sell most of Chrysler's assets to a group led by Italy's Fiat SpA.

Chrysler bankruptcy, which was also financed by the US Treasury, has been seen as a model for the GM. Though much larger and more complex, GM bankruptcy would take as little as 60 to 90 days, US government officials told the media last month.

GREEN BET

When the GM was preparing for a pre-packing bankruptcy, it was also preparing for a shift in product mix in a bid to grab back market share in the United States.

In line with the Obama administration's enthusiasm for green energy and sustainability, the GM introduced Chevrolet Volt, an all-electric plug-in compact car, which is called the company's "new DNA" that "represents a fundamental reinvention of the American automobile industry."

The GM has confirmed the production of low-emission Ecotec engines at its joint venture in China, which will be mounted on the newly launched Chevelet Cruze compact sedan, another fuel-efficient car.

The GM will boost its sales and production of small cars in the United States.

It announced a plan to utilize an idled US assembly line to manufacture small cars on Friday.

And it plans to sell about 17,300 China-made compact cars in the United States in 2011 and to triple that to about 51,500 in 2014, according to a document the GM circulated among US lawmakers.