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6:08 AM
General Motors files for bankruptcy
Rafay Ansar
General Motors, the largest U.S. automaker and one of the industrial icons that helped define the nation’s economic growth and prosperity for most of the 20th century, filed for bankruptcy Monday morning in New York.
Some of the proceedings are expected to be relatively swift, with the sale of GM’s “good” assets to an entity owned by the U.S. Treasury Department, the UAW, bondholders and the Canadian government within two to three months. That would pave the way for a restructured company to emerge while old assets such as dealerships, brands, factories and other legacy costs remain under court supervision to be sold or closed.
GM listed assets of $82.29 billion and liabilities of $172.81 billion in court papers.
GM will be backed by $30.1 billion in federal funding to help it through bankruptcy, and the U.S. government will be able to select most of the company’s board of directors. It will own 61 percent of the reorganized company. The governments of Canada and Ontario collectively will get 12 percent of the new GM in return for $9.5 billion in funds. The filing only applies to the automaker’s U.S. operations.
"GM and its stakeholders have provided a viable and achievable plan for this American icon to rise again," President Barack Obama said in an address Monday morning from the White House.
The bankruptcy filing is being pitched as a new beginning for the Detroit company, which just months ago still laid claim to the title of world’s largest automaker, a perch it had held since the Great Depression. In the past two months, chairman and CEO Rick Wagoner was ousted by the Obama administration, and the company is surviving on government loans.
The filing is a culmination of decades of declining sales and heavy structural costs, which came to a head last fall, when the combination of a dramatic downturn in auto sales and the global credit crunch began to cripple GM. The company was kept alive by federal aid in the waning days of the Bush administration, before being forced to ask for more loans this year.
"Today marks a defining moment in the reinvention of GM as a leaner, more customer-focused and more cost-competitive company that, above all, can quickly generate winning bottom-line results," Fritz Henderson, GM president and CEO said in a statement. "The economic crisis has caused enormous disruption in the auto industry, but with it has come the opportunity for us to reinvent our business. We are going to do it once and do it right.
"The court-supervised process we are pursuing provides us with powerful tools to accelerate and complete our reinvention, as well as strong safeguards for our customers and our business. We are focused on the job at hand, for the benefit of our customers, employees, dealers, suppliers, retirees, taxpayers, investors and other stakeholders."
GM will close 11 plants and idle three more as part of its restructuring. Pontiac, Saab and Saturn are expected to be closed or sold. Opel, GM’s German unit and the linchpin of its European operations since 1929, has been sold--though the company will retain a stake in it--and the sale of Hummer is reportedly imminent.
Though usually defined by its sheer size--at its peak, it was one of the largest companies in the world--GM has given the industry scores of innovations dating to its infancy. It made Cadillac the brand of chrome and fins, made enthusiasts lust for the Corvette and engineered some of the most durable trucks and SUVs on the road. The 1957 Chevrolet remains an icon of American culture, and GM hopes to get the extended-range electric car, the Chevy Volt, on the road by the end of 2010.
“I recognize that today’s news carries particular prominence because it’s not just any company--it’s GM,” Obama said.
In the last few days, GM announced agreements with the UAW and the majority of its bondholders, which are expected to help smooth bankruptcy proceedings. Like Chrysler, which received approval of the sale of most of its assets to a Fiat-led entity early Monday, GM hopes to avoid a long and complicated court case by ironing out much of its restructuring ahead of time. The Chapter 11 filing is expected to help the company shore up the rest of its debts and emerge with a clean balance sheet, in the hopes of being successful when the struggling new-car market recovers.
Henderson said later on Monday that the company expects a quick bankruptcy--and that it needs one for the process to be successful.
“We need to move fast--speed is of the essence,” the GM chief executive said. “We have gotten ourselves prepared to move fast . . . not with a sense of urgency--I’m talking pure, unadulterated speed.”
The appointment of a restructuring officer, Al Koch, was announced. He is a former Kmart executive. Though the government will have a controlling interest in GM, it will take a hands-off approach and leave the company’s executives to make important decisions.
Sensing the historical moment of sending one of America’s flagship corporations in Chapter 11, Obama concluded his address with a tone of optimism for the outcome of GM’s restructuring.
“When that happens, we can truly say that what is good for General Motors, is good for the United States of America,” the president said.
Automotive News contributed to this report.
Statement from Kent Kresa, GM chairman:
“The General Motors Board of Directors authorized the filing of a Chapter 11 case with regret that this path proved necessary despite the best efforts of so many. Today marks a new beginning for General Motors. A court-supervised process and transfer of assets will enable a New GM to emerge as a stronger, healthier, more focused and nimbler company with a determination not to just survive but to excel. The board concluded that the proposed transformation will maximize the value of the enterprise, and the return to the many stakeholders who have been involved with GM over the years.
"We are appreciative of the support from the U.S. Treasury, the President’s Task Force on Autos, the UAW and its members, salaried employees and retirees, concurring bondholders, and very importantly, the American taxpayers. The board is confident that this New GM can operate successfully in the intensely competitive U.S. market and around the world. The board stands behind the people of GM in embracing this unique opportunity to create value and a new company that will design, engineer, build and market the best cars and trucks in world.”
PLANTS IMPACTED (with timing for idling or closure)
Assembly
--Orion, Mich., Standby Capacity – September 2009
--Pontiac, Mich., Close – October 2009
--Spring Hill, Tenn., Standby Capacity – November 2009
--Wilmington, Del., Close – July 2009
Stamping
--Grand Rapids, Mich., Close – June 2009 (previously announced)
--Indianapolis, Ind., Close – December 2011
--Mansfield, Ohio, Close – June 2010
--Pontiac, Mich., Standby Capacity – December 2010
Powertrain
--Livonia Engine, Mich., Close – June 2010
--Flint North Components, Mich., Close – December 2010
--Willow Run Site, Mich., Close – December 2010
--Parma Components, Ohio, Close – December 2010
--Fredericksburg Components, Va., Close – December 2010
--Massena Castings, N.Y., Closed – May 1, 2009 (previously announced)
Service & Parts Operations (SPO)
Warehousing & Parts Distribution Centers
--Boston, Mass., Close – Dec. 31, 2009
--Jacksonville, Fla., Close – Dec. 31, 2009
--Columbus, Ohio, Close – Dec. 31, 2009
Ford's Reaction
Ford, the only U.S. automaker not in bankruptcy, released the following statement in reaction to GM's filing:
"Today's announcement that GM is filing for Chapter 11 bankruptcy is another important development during this unprecedented period for the auto industry and the global economy.
"The Ford team continues to monitor the industry environment and plan for all contingencies to ensure our transformation plan remains on track. At this time, we do not expect any major disruptions to our operations as a result of today's news.
"We share President Obama's hope that GM's bankruptcy will be controlled and orderly, and we continue to believe it is important that our governmental leaders and the U.S. Automotive Task Force remain focused on the stability of the supply chain and on ensuring that a healthy U.S. auto industry emerges from this difficult economic period. We look forward to working with the Obama administration to ensure that the government's majority ownership of GM will not change the industry's competitive dynamics and that a level playing field will be maintained.
"Ford remains absolutely committed to continuing to make progress on our transformation plan without accessing emergency taxpayer assistance from the U.S. government. We have been executing our plan for several years and now, gaining market share and new customers with an unprecedented number of new high-quality, fuel-efficient vehicles."
Some of the proceedings are expected to be relatively swift, with the sale of GM’s “good” assets to an entity owned by the U.S. Treasury Department, the UAW, bondholders and the Canadian government within two to three months. That would pave the way for a restructured company to emerge while old assets such as dealerships, brands, factories and other legacy costs remain under court supervision to be sold or closed.
GM listed assets of $82.29 billion and liabilities of $172.81 billion in court papers.
GM will be backed by $30.1 billion in federal funding to help it through bankruptcy, and the U.S. government will be able to select most of the company’s board of directors. It will own 61 percent of the reorganized company. The governments of Canada and Ontario collectively will get 12 percent of the new GM in return for $9.5 billion in funds. The filing only applies to the automaker’s U.S. operations.
"GM and its stakeholders have provided a viable and achievable plan for this American icon to rise again," President Barack Obama said in an address Monday morning from the White House.
The bankruptcy filing is being pitched as a new beginning for the Detroit company, which just months ago still laid claim to the title of world’s largest automaker, a perch it had held since the Great Depression. In the past two months, chairman and CEO Rick Wagoner was ousted by the Obama administration, and the company is surviving on government loans.
The filing is a culmination of decades of declining sales and heavy structural costs, which came to a head last fall, when the combination of a dramatic downturn in auto sales and the global credit crunch began to cripple GM. The company was kept alive by federal aid in the waning days of the Bush administration, before being forced to ask for more loans this year.
"Today marks a defining moment in the reinvention of GM as a leaner, more customer-focused and more cost-competitive company that, above all, can quickly generate winning bottom-line results," Fritz Henderson, GM president and CEO said in a statement. "The economic crisis has caused enormous disruption in the auto industry, but with it has come the opportunity for us to reinvent our business. We are going to do it once and do it right.
"The court-supervised process we are pursuing provides us with powerful tools to accelerate and complete our reinvention, as well as strong safeguards for our customers and our business. We are focused on the job at hand, for the benefit of our customers, employees, dealers, suppliers, retirees, taxpayers, investors and other stakeholders."
GM will close 11 plants and idle three more as part of its restructuring. Pontiac, Saab and Saturn are expected to be closed or sold. Opel, GM’s German unit and the linchpin of its European operations since 1929, has been sold--though the company will retain a stake in it--and the sale of Hummer is reportedly imminent.
Though usually defined by its sheer size--at its peak, it was one of the largest companies in the world--GM has given the industry scores of innovations dating to its infancy. It made Cadillac the brand of chrome and fins, made enthusiasts lust for the Corvette and engineered some of the most durable trucks and SUVs on the road. The 1957 Chevrolet remains an icon of American culture, and GM hopes to get the extended-range electric car, the Chevy Volt, on the road by the end of 2010.
“I recognize that today’s news carries particular prominence because it’s not just any company--it’s GM,” Obama said.
In the last few days, GM announced agreements with the UAW and the majority of its bondholders, which are expected to help smooth bankruptcy proceedings. Like Chrysler, which received approval of the sale of most of its assets to a Fiat-led entity early Monday, GM hopes to avoid a long and complicated court case by ironing out much of its restructuring ahead of time. The Chapter 11 filing is expected to help the company shore up the rest of its debts and emerge with a clean balance sheet, in the hopes of being successful when the struggling new-car market recovers.
Henderson said later on Monday that the company expects a quick bankruptcy--and that it needs one for the process to be successful.
“We need to move fast--speed is of the essence,” the GM chief executive said. “We have gotten ourselves prepared to move fast . . . not with a sense of urgency--I’m talking pure, unadulterated speed.”
The appointment of a restructuring officer, Al Koch, was announced. He is a former Kmart executive. Though the government will have a controlling interest in GM, it will take a hands-off approach and leave the company’s executives to make important decisions.
Sensing the historical moment of sending one of America’s flagship corporations in Chapter 11, Obama concluded his address with a tone of optimism for the outcome of GM’s restructuring.
“When that happens, we can truly say that what is good for General Motors, is good for the United States of America,” the president said.
Automotive News contributed to this report.
Statement from Kent Kresa, GM chairman:
“The General Motors Board of Directors authorized the filing of a Chapter 11 case with regret that this path proved necessary despite the best efforts of so many. Today marks a new beginning for General Motors. A court-supervised process and transfer of assets will enable a New GM to emerge as a stronger, healthier, more focused and nimbler company with a determination not to just survive but to excel. The board concluded that the proposed transformation will maximize the value of the enterprise, and the return to the many stakeholders who have been involved with GM over the years.
"We are appreciative of the support from the U.S. Treasury, the President’s Task Force on Autos, the UAW and its members, salaried employees and retirees, concurring bondholders, and very importantly, the American taxpayers. The board is confident that this New GM can operate successfully in the intensely competitive U.S. market and around the world. The board stands behind the people of GM in embracing this unique opportunity to create value and a new company that will design, engineer, build and market the best cars and trucks in world.”
PLANTS IMPACTED (with timing for idling or closure)
Assembly
--Orion, Mich., Standby Capacity – September 2009
--Pontiac, Mich., Close – October 2009
--Spring Hill, Tenn., Standby Capacity – November 2009
--Wilmington, Del., Close – July 2009
Stamping
--Grand Rapids, Mich., Close – June 2009 (previously announced)
--Indianapolis, Ind., Close – December 2011
--Mansfield, Ohio, Close – June 2010
--Pontiac, Mich., Standby Capacity – December 2010
Powertrain
--Livonia Engine, Mich., Close – June 2010
--Flint North Components, Mich., Close – December 2010
--Willow Run Site, Mich., Close – December 2010
--Parma Components, Ohio, Close – December 2010
--Fredericksburg Components, Va., Close – December 2010
--Massena Castings, N.Y., Closed – May 1, 2009 (previously announced)
Service & Parts Operations (SPO)
Warehousing & Parts Distribution Centers
--Boston, Mass., Close – Dec. 31, 2009
--Jacksonville, Fla., Close – Dec. 31, 2009
--Columbus, Ohio, Close – Dec. 31, 2009
Ford's Reaction
Ford, the only U.S. automaker not in bankruptcy, released the following statement in reaction to GM's filing:
"Today's announcement that GM is filing for Chapter 11 bankruptcy is another important development during this unprecedented period for the auto industry and the global economy.
"The Ford team continues to monitor the industry environment and plan for all contingencies to ensure our transformation plan remains on track. At this time, we do not expect any major disruptions to our operations as a result of today's news.
"We share President Obama's hope that GM's bankruptcy will be controlled and orderly, and we continue to believe it is important that our governmental leaders and the U.S. Automotive Task Force remain focused on the stability of the supply chain and on ensuring that a healthy U.S. auto industry emerges from this difficult economic period. We look forward to working with the Obama administration to ensure that the government's majority ownership of GM will not change the industry's competitive dynamics and that a level playing field will be maintained.
"Ford remains absolutely committed to continuing to make progress on our transformation plan without accessing emergency taxpayer assistance from the U.S. government. We have been executing our plan for several years and now, gaining market share and new customers with an unprecedented number of new high-quality, fuel-efficient vehicles."
