Make us your home page
Instagram

General Motors to file for bankruptcy Monday

WASHINGTON — General Motors, the humbled auto giant that has been part of American life for more than 100 years, will file for bankruptcy protection today in a deal that will give taxpayers a 60 percent ownership stake and expand the government's reach into big business.

It will be the biggest industrial bankruptcy in U.S. history.

Only a decade ago, GM was the world's largest company. Now, it joins Chrysler as the bankrupt duo of Detroit's once-formidable Big Three.

Underscoring the government's extraordinary role, President Barack Obama planned to announce his support for GM's restructuring strategy at a midday appearance at the White House. GM president and CEO Fritz Henderson planned to hold a press conference in New York following Obama's announcement.

Administration officials said late Sunday that the federal government would pump $30 billion into GM as it makes its way through bankruptcy court. That's in addition to the $20 billion the Treasury already lent to the automaker, making GM the second-largest recipient of bailout money, behind insurance giant American International Group.

The money would come from what remains of the $700 billion rescue fund for the financial sector.

Following that infusion, "the U.S. Treasury does not believe or anticipate that any additional assistance to GM will be required," a senior administration official said Sunday night, calling the restructuring a "permanent" solution.

Under the proposed restructuring, about 60 percent of the new GM would be owned by the United States, and about 12 percent by the governments of Canada and Ontario. A union health trust would own 17.5 percent, and the company's current bondholders would get 10 percent.

The officials, speaking on condition of anonymity in advance of Obama's public remarks, said the administration expects the court process to last 60 to 90 days. If successful, GM will emerge as a leaner company with a smaller work force, fewer plants and a trimmed dealership force. The company will stick with its four core brands — Chevrolet, Cadillac, Buick and GMC.

As part of the bankruptcy, GM will spell out 14 plant closings expected to affect 21,000 jobs, and additional cuts among salaried workers.

"There is still plenty of pain to go around, but I'm confident this is far better than the alternative," Sen. Carl Levin, D-Mich., said Sunday.

Despite its sizable ownership, administration officials said the government intends to stay out of day-to-day management decisions. It says it intends to shed its ownership stakes "as soon as practicable."

GM plans to name turnaround executive Al Koch to be its chief restructuring officer to help the company through bankruptcy protection, a person familiar with the matter told the Associated Press. The person, who spoke on condition of anonymity, was not authorized to speak about the appointment publicly.

Koch, a managing director with AlixPartners LLP, is a veteran turnaround specialist who helped Kmart Corp. through its Chapter 11 reorganization. He will lead the separation of the automaker's assets into a "New GM" and the remaining parts of the company that will form "Old GM." Koch will lead the management team that winds down the "Old GM" company once the automaker emerges from bankruptcy.

A majority of the Detroit automaker's unsecured bondholders have accepted a deal viewed as crucial to reorganization, and Germany agreed to loan $2 billion to GM's German unit, Opel, as part of its acquisition by a Canadian auto parts supplier.

On Sunday a group of large, institutional bondholders, representing 54 percent of GM bondholders, agreed to exchange their unsecured bonds for a 10 percent stake in a newly restructured company, plus warrants to purchase a greater share later. They had balked at an earlier offer that gave them 10 percent of the company without the warrants.

GM's fate and the federal government's intervention was the topic on several Sunday morning talk shows.

"I think the government auto bailout was a big mistake," said Sen. Mitch McConnell, R-Ky., on CNN's State of the Union. He said the company could have been allowed to go into the bankruptcy process much earlier, without additional government money, "and ended up in the same place."

Information from the Washington Post, Los Angeles Times and Detroit Free Press was used in this report.

General Motors to file for bankruptcy Monday 05/31/09 [Last modified: Sunday, May 31, 2009 11:13pm]
Photo reprints | Article reprints

© 2017 Tampa Bay Times

    

Join the discussion: Click to view comments, add yours

Loading...
  1. Good news: Tampa Bay no longer a major foreclosure capital of the country

    Real Estate

    Once in the top five nationally for foreclosure filings, the Tampa Bay area no longer ranks even in the top 25.

    A few short years ago, Tampa Bay was a national hub for foreclosures. Not any more. [Getty Images/iStockphoto]
  2. Tampa-based start-up takes on Airbnb by promoting inclusion, diversity

    Tourism

    NEW TAMPA — Last May, Rohan Gilkes attempted to book a property in Idaho on the home-sharing platform Airbnb. After two failed attempts, the African-American entrepreneur asked a white friend to try, and she was "instantly" approved for the same property and dates.

    Rohan Gilkes poses for a portrait at his home and business headquarters in Tampa. 

Innclusive, a Tampa-based start-up, is a home-sharing platform that focuses on providing a positive traveling experience for minorities. Rohan Gilkes, the founder, said he created the organization after several negative experiences with Airbnb.
[CHARLIE KAIJO   |   Times]

  3. McMansions, state sewage order on tap at St. Petersburg City Council

    Local Government

    ST. PETERSBURG — The City Council is set Thursday to vote on two major issues: controversial zoning changes aimed at curbing big McMansion-style homes and a consent order with the state that will require St. Petersburg to fix its ailing sewage system.

    Two big, blocky homes on the 2300 block of Dartmouth, Ave N under construction in April. Several new homes under construction.
in St. Petersburg's Historic Kenwood Neighborhood are too big, residents complain. The St. Petersburg City Council on Thursday is set to consider ordinances aimed at curbing the construction of big "McMansions." [LARA CERRI   |   Times]
  4. Tom James and wife, Mary, talk about their James Museum of Western and Wildlife Art

    Human Interest

    ST. PETERSBURG — As a child, businessman and philanthropist Tom James loved cowboy movies, an affinity that would later play out in a vast collection of Western art amassed over the years with his wife, Mary.

    Tom and Mary James at the site of the Tom and Mary James Museum of Western and Wildlife Art.
Photo courtesy of Raymond James
  5. A reliable Rick Scott ally, Pete Antonacci, named CEO of Enterprise Florida

    State Roundup

    Pete Antonacci, who last week made headlines when he advised scientists to stay in their lane rather than criticize his water agency's work on Everglades restoration, is getting a new job.

    Pete Antonacci, an attorney seen here in 2009, has served many roles for Gov. Rick Scott: general counsel, executive director of the South Florida Water Management District and now, CEO of Enterprise Florida.  [
COLIN HACKLEY | Special to the Times]