At 7:57 a.m. this morning, a court clerk in New York accepted a Chapter 11 bankruptcy petition that launches what many analysts are calling the most complex bankruptcy case in U.S. history.
In the filing, the New York Times reports, "G.M. said it had $82.3 billion in assets and $172.8 billion in debts." The filing "culminates a remarkable four months of confrontation between Washington and Detroit that is expected to result in a drastic downsizing of the company. It also places the government in uncharted territory as a business owner, as it takes a majority ownership stake in the company during its restructuring."
The Los Angeles Times notes that GM, in its 100th year, "only a decade ago was the world's largest company." Now, the company has succumbed "to years of bad management, questionable quality, changing consumer tastes and a historic collapse of global auto sales."
The Detroit News explains, "GM will remain privately held and under government control for at least six to 18 months." The company will essentially be split in two. "The Treasury Department plans to buy the automaker's ‘good assets' and provide GM with an additional $30.1 billion to operate while in bankruptcy." The remaining "bad assets" will be liquidated by the bankruptcy court, under the direction of Al Koch, a corporate bankruptcy and restructuring expert from Michigan named as "Chief Restructuring Officer" in the filing. The company that emerges will be joint-owned by the U.S. government, the Canadian government, the United Auto Workers union and a collection of smaller creditors. "The Treasury will hold an initial stake of 60 percent in GM, while the Canadian and Ontario governments will hold 12 percent in exchange for $9.5 billion in Canadian financing for GM." A heath care trust fund operated by the United Auto Workers Union will own 17.5 percent. Other creditors will hold 10 percent, with warrants allowing them to acquire up to 15 percent more.
The Los Angeles Times reports that the filing "will leave the federal government in the unusual -- and potentially uncomfortable -- position of holding a majority stake in GM, which is the top carmaker in the U.S. by volume and No. 2 globally. Administration officials said they hoped to shed the investment as soon as possible and, in the meantime, pledged to keep their hands off day-to-day operations."
The company that emerges will likely be much smaller, and more efficient. The Washington Post reports, "The plan cuts GM's 47 U.S. facilities down to 33 by 2012." The automaker plans to shed more than 40 percent of its dealership network, and trim its lineup from eight domestic auto brands to four.
Fox News explains, "The downsized GM 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 finalizing a deal to sell Hummer, and plans for Saturn are expected to be announced within weeks."
Administration officials took pains to reassure those currently shopping for a car that they are protected if they should choose to buy a GM vehicle during the bankruptcy process. According to the Washington Post, "They note, for example, that the government has taken steps to protect customers who hold GM warranties, pledging to stand behind those agreements, as well as providing assurances to the company's suppliers."