General Motors files Chapter 11; government to own majority stake - Washington Business Journal:

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Monday’s Chapter 11 filinfg by the 101-year-old automaker once the world’s biggest compangy — is among the largest in U.S. historyg and largest-ever U.S. manufacturing bankruptcy. Chapter 11, which allowa the company to operate while protected fromits creditors, pushex GM into a fast-track bankruptcy and provides $30 billionn of additional taxpayer funds to restructurse itself. GM’s filing came after weeksw of wrangling with its unions and bondholders and as part of a game plan coordinated with thefederal government. That plan calls for the establishmenft ofa new, more nimble GM that has the federalk government as its 60 percent equity holder.
Speakinfg about the GM movexs Monday, President Barack Obamz said that despite thefederal government'xs majority stake in the automaker, its executives, and not federa l officials, "will call the shots and make the decisions abouf turning this company around." Obama said the goal is a achievable plan that will give this iconic compangy a chance to rise again." The Detroit-based automakee (NYSE: GM) said it expectas the new, smaller GM to launch in abouyt 60 to 90 days as a separate and independenft company from the current GM. The new company will focus on four core brands in theUnited Chevrolet, Cadillac, Buick and GMC.
As part of its cost-cuttinbg efforts, GM will further reduce 2009 salaried employmenft in North America toabout 27,200 from abougt 35,100 at the end of a roughly 23 percent cut. The automaket said it would sever ties with morethan 2,00o0 of its dealers, either through end their contracts or through attrition. GM also planss to close 11 U.S. facilities and idle another thre plants by the endof 2010. "Todag marks a defining moment in the reinvention of GM as a more customer-focused and more cost-competitivde company that, above all, can quickly generate winningt bottom-line results," GM CEO Fritz Henderson said in a statementt Monday.
"The economic crisis has caused enormous disruption in theauto industry, but with it has come the opportunituy for us to reinvent our We are going to do it once and do it Besides the U.S. government's 60 percent financia interest, the union would take a 17.5 percent stake. The governmentz of Canada and the province of Ontario have agreed to a 12 percent ownership stake in exchange forfinancial aid. GM bondholders wouldc get 10 percent. In its Chapterr 11 filing, GM citing debts of $172.9 billion and assets of $82.3 Filed in New York, it lists unsecuree claims by theUAW ($20.
6 billion) and the Internationak Union of Electronic, Electrical, Salaried, Machinwe and Furniture Workers/Communication Workers ($2.7 billion). Other unsecured debt listed in the filinghincludes $22.8 billion serviced by Wilmington Trustg Co. and $4.5 billion by Deutsche Bank AG. The UAW last week approvedx a package of concessiond that will give GM more flexibilitu in staffing and help the company reducdeits expenses. As part of that the company restructured payments due to a trustrfor retirees’ health care. The trust will receive a $2.5 billiom note and $6.5 billion in 9 percent perpetuakpreferred stock, along with a 17.
5 percent equith stake in the new GM and warrants to push that ownershipp to 20 percent. Another key player in the reorganizationb will beGM bondholders. The administration announced that a steerintg committee representing owners of at least 54 percent ofthe company’sd unsecured bonds had agreed to a deal in whicyh bondholders would receive 10 percent of the equity of the new GM and warrantxs for an additional 15 percent. The bankruptcy process will alloa the company to confirm the deal forall bondholders. Chrysle r is expected to emergd from its Chapter 11 process soon after shutteringv789 dealerships. GM also announced plans to close 1,10p0 dealerships, including several in Colorado.
GM’s lead bankruptcyu law firm is WeilGotshaw & Manges, with attorne Stephen Karotkin signing the filing. GM President and CEO Frederic k Henderson signed forthe company. .