General Motors filed for bankruptcy protection today, culminating in the collapse of the automaker that once symbolised American global industrial might. The filing in the same New York court that approved a speedy restructuring for Chrysler aims to allow GM to re-emerge as a new, leaner company within 60 to 90 days. GM listed assets of $82.3 billion (Dh302bn) and debts of $172.8bn. The US industrial icon enters the process with billions in government financing and agreements already in place to cut labour costs and to swap much of its debt for equity and reduce its liabilities by 50 per cent.
Senior US officials pledged to provide $30bn dollars to the "new GM" to emerge from the process, on top of nearly $20bn already loaned to the ailing firm. The deal would give the US government a 60 per cent stake in the auto giant, while the government of Canada, which has several GM factories, will provide an additional $9.5bn dollars in financing and receive a 12 per cent stake. The largest US automaker will close 11 plants and suspend three others as it slashes its operating costs in order to lower its break-even point by 40 per cent in terms of overall US industry sales.
Officials cautioned that the Obama administration had no intention of nationalising General Motors over the long term and will not be participating in its day-to-day operations. "The government has no desire to own equity stakes in companies any longer than necessary, and will actively seek to dispose of its ownership as soon as practicable," senior administration officials said. "The goal is to promote strong viable companies that can become profitable quickly and contribute to economic growth and jobs without government involvement."
Employees will continue to be paid and GM will immediately seek permission to continue to pay suppliers and honour customer warranties. GM will also offer about 40 per cent of its dealers 18 months to wind down their operations and will immediately seek permission to honour incentives offered to its remaining dealers, under a plan to shrink the number of GM sales outlets. *AFP