General Motors files for bankruptcy protection

NEW YORK – General Motors filed for bankruptcy protection yesterday as part of the Obama administration’s plan to shrink the automaker 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.
The fallen icon of American industrial might will rely on US$30 billion of additional financial assistance from the Treasury Department as it reorganises. 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 Chrysler LLC, which filed for bankruptcy protection in April and hopes to emerge from its government-sponsored bankruptcy this week.
The plan is for the federal government to take a 60 per cent ownership stake in the new GM. The Canadian government would take a 12,5 per cent stake, with the United Auto Workers getting a 17,5 per cent stake and unsecured bondholders receiving 10 per cent. Existing GM shareholders are expected to be wiped out.
President Barack Obama was scheduled to address the nation about GM’s future at midday yesterday from Washington, and GM CEO Fritz Henderson is to follow him with a news conference in New York.
Beyond the bankruptcy announcement yesterday, GM is expected to reveal 14 plants it intends to close. One of those plants, however, will be retooled to build a small car.
GM’s filing comes 32 days after a filing by Chrysler, which also was hobbled by plunging sales of cars and trucks as the worst recession since the Great Depression intensified.
The third of the one-time Big Three, Ford Motor Co., has also been stung hard by the sales slump, but it avoided bankruptcy by mortgaging all of its assets in 2006 to borrow roughly US$25 billion, giving it a financial cushion GM and Chrysler lacked.
The downsized GM’s brands will be limited to Chevrolet, Cadillac, GMC and Buick. Its Pontiac, Saturn, Hummer and Saab operations will be either sold or closed. GM said it was finalising a deal to sell Hummer, and plans for Saturn are expected to be announced within weeks.
GM, whose headquarters tower over downtown Detroit, said it believed the filing was not an acknowledgement of failure, but a necessary way to cleanse itself in an orderly fashion of problems and costs that have dogged it for decades.
Trading of GM shares was halted early yesterday after they plunged Friday as low as 74 cents, the lowest price in the company’s 100-year history.
GM will be kicked out of the Dow Jones industrial average because rules established by the News Corp. unit that oversees the index prohibit it from including companies that have filed for bankruptcy. -Nampa-AP