GM files for bankruptcy in USA new chapter in the 101-year history of General Motors was has started today (Monday, June 1) following the company’s decision to file for Chapter 11 bankruptcy protection in the United States.
In a statement GM said: “Pending approvals, the ‘New GM’ is expected to launch in about 60 to 90 days as a separate and independent company from the ‘current GM’ with two distinct advantages: it will be built from only GM’s best brands and operations, and it will be supported by a stronger balance sheet due to a significantly lower debt burden and operating cost structure than before.”
US President Barack Obama is due to make a statement explaining why the American government was supporting the move.
The decision to file for bankruptcy protection makes GM, until last year the world’s largest carmaker, the largest bankruptcy of an industrial business in history and the third largest corporate failure in US history.
Chapter 11 bankruptcy protects GM from its creditors, while it restructures the business.
The announcement will trigger a shutdown at GM’s 47 plants across North America and the factories will remain closed until the company is able to emerge from the Chapter 11 process.
As part of GM’s bankruptcy package, the US government is expected to offer the company a further $30 billion of new loans.
The restructuring is likely to see more than a dozen North American plans close, relations severed with around 40 per cent of GM’s current dealers and four of GM’s eight brands - Pontiac, Saturn, Hummer and Saab - sold or disappear.
If all goes to plan, the ‘new’ GM will emerge within two to three months and include four brands - Chevrolet, Cadillac, Buick and GMC - as well as operations in Latin America and Asia. The unwanted businesses - mostly plants and properties - will remain in Chapter 11 to be sold or wound down.
In the ‘new’ GM it is expected that the US Treasury and the Canadian government will together hold 72.5 per cent, the United Auto Workers union will have a 17.5 per cent stake, leaving 10 per cent for unsecured bondholders. (GM: June 1/National newspapers: June 1/May 31).
Vauxhall cars to be badged Opel?Vauxhall cars in Britain will be rebranded under the Opel name in an effort to appeal to the Russian car market, according to the former managing director of Rover.
Professor Kevin Morley, who is now director of business studies at the University of Warwick, said the involvement of Russian companies in the deal to save Opel and Vauxhall would lead to thousands of cars being imported into Russia under the Opel brand.
“No one in Russia knows what a Vauxhall is,” he said. “I’m sure we’ll see Vauxhall the brand disappear soon after the deal. Vauxhalls in the UK will sell here as Opels.” (The Times Online: June 1).
‘New’ Chrysler could emerge within 48 hoursA ‘new’ Chrysler could emerge from bankruptcy protection on Wednesday (June 3) after a judge today (Monday, June 1) ruled in favour of the sale of the slimmed down company.
The bankruptcy court approved the sale of most of Chrysler’s assets to Fiat, the US and Canadian governments and the United Auto Workers union for a $2 billion cash payment to senior lenders.
Under the terms of the deal, Fiat will control 20 per cent of Chrysler, while 68 per cent will be owned by a union trust, and the two governments will share 12 per cent. The two governments have agreed to provide about $8bn in loans to the new Chrysler.
Bankruptcy judge Arthur Gonzalez said in his written ruling that the only alternative to the sale would have been the ‘immediate liquidation’ of Chrysler. (BBC.co.uk/Financial Times: June 1).
