It's Official: GM Bankrupt

Auto Giant Will Ax 21,000 More Jobs, Close 11 More Plants And 2,600 Dealerships

(CBS/AP)  General Motors, the humbled auto giant that has been part of American life for more than 100 years, filed for bankruptcy protection Monday in a deal that will give taxpayers a 60 percent ownership stake and expand the government's reach into big business.

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, much as he did in April when Chrysler sought court protection.

GM president and CEO Fritz Henderson planned to hold a press conference in New York immediately following Mr. Obama's announcement.

Administration officials said late Sunday the federal government would pump $30 billion dollars into GM as it makes its way through bankruptcy court. That's besides the $20 billion in taxpayers' money that the Treasury already lent to the automaker.

Click here for the details of GM's bankruptcy plan (.pdf)

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

For the foreseeable future, General Motors will not be a publicly-held company. As of 9:30 a.m., GM stock will essentially be worthless, reports CBS News business producer Guy Campanile.

The reorganization plan aims to make GM profitable in a U.S. market where it sells 10 million units per year. Currently, it sells about 9 million units in the country every year. At its peak, the U.S. market sold 16 million units, Campanile reports.

Speaking to CBS' The Early Show Monday, Michigan Gov. Jennifer Granholm said if the company was not filing for bankruptcy, "we'd be talking about liquidation."

Time has not been kind to the company. In 1961, GM commanded 51 percent of the U.S. auto market, compared to 21 percent today, reports CBS News correspondent Dean Reynolds. It once employed 618,000 workers (in 1979) but now has fewer than 90,000 on its U.S. payroll - and is heading toward just 60,000 by the end of next year.

"There is a lot of tension. The workers here have been under a lot of stress all hoping and praying that the plant survives," one GM worker in Tennessee told CBS News.

GM once had so many makes and models it was hard to keep track. Today it's trimming them as fast as it can, dumping Hummer and Pontiac among others.

The bankruptcy papers will include a list of 11 plants that will be closed and three that will be idled. 21,000 more jobs will be eliminated. GM will also outline additional dealership cuts that could total 2,600.

The officials, speaking on condition of anonymity in advance of Mr. 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.

"There is still plenty of pain to go around, but I'm confident this is far better than the alternative," Sen. Carl Levin said Sunday after being briefed about the developments by the president. "It's a new beginning, it's a rebirth, it's a new General Motors."

The government's ownership stake and huge financial injection represents yet another remarkable intervention into the American private sector. The Treasury has stepped in to help banks, it has taken majority ownership in insurance conglomerate American International Group and it has guided Chrysler through bankruptcy protection proceedings.

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."

"Our goal is to promote strong and viable companies that can quickly be profitable and contribute to economic growth and jobs without government involvement," a fact sheet issued by the White House and the Treasury Department said.

One senior administration official insisted there "is no plan of any kind for further support beyond this point."

"One never says never," the official added, "but this is it for support of GM.".

There will be a new, humbler, more practical approach at GM and GM management," Ed Lapham, executive editor of automotive news, told Reynolds.

But some analysts say when a government takes over an automaker it can be worse than risky.

"It doesn't work. We saw that in England in the 60s when the government became the biggest shareholder of British Leyland," Lapham said. "You know, within a decade it was gone."

The GM plan will be filed under section 363 of the U.S. bankruptcy code. The 363 filing allows GM to spin a new debt-free company quickly out of bankruptcy. It's basically the "Chrysler Plan."

GM plans to name turnaround executive Al Koch to serve as its chief restructuring officer to help the company through bankruptcy protection, said a person familiar with the matter. 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 bankruptcy 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.

[eightsigma]

" I started saving my money at 14 to buy my own car for so I would have transportation in college. My great purchase turned out to be a piece of garbage.. a cash eating lemon put by one of the factories I drove by every summer to see my Grandma in Pontiac. MI. I started buying Toyotas after college 25 five years ago and have never looked back."
Posted by ekucrew at 5:42 AM : Jun 1, 2009

I had similar experiences. However... the people behind the junk are all long gone and mostly dead. Gerstenberg died in 2002. The last ten years or so have seen a dramatic improvement in quality. The people making these better cars had nothing to do with our bad experiences.

[ekucrew]

Bankrupt or not, GM or no other American company will ever get my money for a vehicle. I was one of the saps that grew up in th1970's that believed in the US auto industry ( I had over a dozen relatives that worked for the different manufacturers in MI).

I started saving my money at 14 to buy my own car for so I would have transportation in college. My great purchase turned out to be a piece of garbage.. a cash eating lemon put by one of the factories I drove by every summer to see my Grandma in Pontiac. MI. I started buying Toyotas after college 25 five years ago and have never looked back.

[quapawsix]

The last time I checked this whole bail out thing was started on G.W. Bushes watch, so I guess that's OK with the Extreme Right if you bail out the rich banker elite at the expense of the tax payers. I think it's funny that the Right Wing Party is really having a problem dealing with the fact that they lost and the real majority in this country stood up and said enough is enough.I blame both parties, It was the fault of both parties for not taking care of the business of responsible regulation's which would make the playing field fair for the workforce, consumers and business. Starting with Reagen's deregulation policies of the 80's and trickle down economics, and we are going to let the privet sector take care of its self is what created the Corporate system gone wild. The banking system with the help of Chris Dodd and Wienie Boy Franks have caused this melt down in the housing market and the right wing cry babies had a chance to do something about it when they controlled Washington and they did nothing. Washington the Banker elite and corporate system have ruined this country, and enslaved the nations future and it's descendants. Way to go boy's we may not live next to you in your gated community but we are still your neighbors and you just screwed us.
Where's my kiss?

[Mad-as-Hell]

Thanks to President Obama I'll never buy a General Motors car or truck again in my life time as well our family members. I'll buy a Ford since they didn't take bailout money or maybe a Honda.It also cost President Obama 50 votes in his Re-election since we are Democrats

[eightsigma]

" As usual the propaganda system pushed the big lie."
Posted by babooph at 5:26 AM : Jun 1, 2009

It's time to start thinking about pushing the globalization genie back into the bottle.

[babooph]

All those incompetent ,crooked CEO guys "outsourcing" labor to China & India bankrupt or greatly damaged their companies & ran with the $$-WE SHOULD HAVE BEEN OUTSOURCING MANAGEMENT!!!As usual the propaganda system pushed the big lie.

[eightsigma]

" eightsigma- Unemploymeny is at almost 10%. Companies are still closing. The housing market still is in the toilet. Bailout money is gone. You think this is good? Wow... Now I've heard it all."
Posted by Guyinpa49 at 5:19 AM : Jun 1, 2009

You asked how it was working for me. I gave you an honest answer.
Other businesses are having a harder time of it, but in general, the leading indicators are looking up. Employment is a trailing indicator.

[eightsigma]

" eightsigma- huh? What have you been looking at?"
Posted by Guyinpa49 at 5:15 AM : Jun 1, 2009

My business's quarterly results.

[eightsigma]

" It's official GM is now Government Motors. No more GM cars for me until the government and the union are gone. I'll bide my time"
Posted by tbbaot at 5:09 AM : Jun 1, 2009

Many of us here will step in to take your place.

[eightsigma]

" How's that Bailout plan working for you liberals so far?"
Posted by Guyinpa49 at 5:02 AM : Jun 1, 2009

It's working well. Business is ok. Employment is stable. Shopping and spending are rolling along. More rough water ahead but the program is working.

[tbbaot]

It's official GM is now Government Motors. No more GM cars for me until the government and the union are gone. I'll bide my time

[quapawsix]

It's time for a non violent revolution refuse to buy new cars no matter who makes them and watch how fast the prices on new cars drop. This should helps the car dealers be more profitable they make more selling used cars than they do selling New cars. And a used car is already road tested.

[quapawsix]

The right wing party seem to be acting like children you lost so deal with it. And not just GM but all of the so called big corporate giants got themselves into this mess by over inflating their prices then shipping the good middle income jobs to their good buddies in China and every third world **** hole because they did not want to have to pay the price of labor and they did not want to care if they damaged the ecology. Now they are the first in line for the tax payers to give them a well fare stake. Do you not now see that this has all been nothing more than the greedy rich wanting to line their pockets with free tax payer's money. Neither the Republican Party nor the Democratic Party have the balls to stand up and admit that this sleeping with Corporate System is whats killing this country. it's time for America to vote the entire lot out of office.

This is and should be what happens when you build crap...period!

[golfered2]

I'll bet 21,000 UAW workers who jobs are lost will still get at least 80% of their pay from GM!!!! If that is true that means we taxpayers pay for these bums to stay home and golf or fish everyday!!!!!

[ajjaxtheleast]

Anonymous government spokesman:

"I PROMISE YOU THE GOVERNMENT WILL LEAVE
THE NEW GM COMPANY WHEN WE LEAVE IRAQ."

[rhs648]

By the way, went to a few GM dealers recently looking for a good deal, with the bankrupcty and 2 BAILOUTS by myself and my fellow taxpayers, and they are NOT interested in moving vehicles off the floor.
Posted by SteelersWinAgain

Not if it means giving them away. Businesses are not in business to lose money. Apparently it still costs money to build cars and the object is to make a profit. Otherwise, look for government assistment programs.

[golfered2]

GM and Chrysler cannot survive as long as UAW workers are at both companies. I hate to see jobs go overseas but it's the only way these 2 companies can survive. Take a look at any foreign car made in either the US or overseas and the quality is excellant. Buy a car made by the UAW and all you get are recalls UAW Workers could care less about the quality of the product or its customers. TIME TO GET RID OF UNIONS!!!!!!!

[u-r-right]

These job cuts should beign at the top.

[stn_sage]

Posted by stn_sage at 11:28 PM : May 31, 2009
====================================
Yeah. That 68% approval rating will be the death of him, alright........
Posted by formrusmcsgt at 1:45 AM : Jun 1, 2009
====================================

Very funny! But, at the rate he's losing voters---he won't be at 68%---if he's there now---IN THREE AND A HALF MORE YEARS! You're smart enough to know that!

What? Bush was at 88-90% after 911---the last three years of his term he couldn't crack the 38% level! Yes, friend---don't expect him to stay up there---he won't!