What's next for GM - WDRB 41 Louisville News

What's next for GM

GM's filing comes 32 days after a Chapter 11 filing by Chrysler, which also was hobbled by plunging sales of cars and trucks as the worst recession since the Great Depression intensified.

The sale to Fiat means Chrysler could be out of bankruptcy within the government's original timeframe of 30 to 60 days. Chrysler's plan gives a 55 percent stake of the new company to a union-run trust for retirees. Fiat gets a 20 percent stake that can ultimately grow to 35 percent. The U.S. and Canadian governments get smaller pieces.

The third of the one-time Big Three, Ford Motor Co., has also been stung hard by the sales slump, but it avoided bankruptcy by mortgaging all of its assets in 2006 to borrow roughly $25 billion, giving it a financial cushion GM and Chrysler lacked.

GM will move forward with four core brands -- Chevrolet, Cadillac, Buick and GMC -- and cut four others. The company plans to cut 21,000 employees, about 34 percent of its work force, and reduce the number of dealers by 2,600. GM said it was finalizing a deal to sell Hummer, and plans for Saturn are expected to be announced within weeks.

"There is still plenty of pain to go around, but I'm confident this is far better than the alternative," said Sen. Carl Levin, D-Mich. "It's a new beginning, it's a rebirth, it's a new General Motors."

GM, whose headquarters tower over downtown Detroit, said it believed the filing was not an acknowledgment of failure, but a necessary way to cleanse itself in an orderly fashion of problems and costs that have dogged it for decades.

Trading of GM shares was halted early Monday after they plunged Friday as low as 74 cents, the lowest price in the company's 100-year history. The News Corp. unit that oversees the Dow Jones industrial average said GM will be kicked out of the index on June 8, along with Citigroup Inc. They will be replaced by Travelers Cos. and Cisco Systems Inc. The index's rules prohibit it from including companies that have filed for bankruptcy.

The bankruptcy filing represents a dramatic downfall for GM, which was founded in 1908 by William C. Durant, who brought several car companies under one roof and developed a strategy of "a car for every purse and purpose." Longtime leader Alfred P. Sloan built the global automaker into a corporate icon.

GM first sought help from the Bush administration and Congress last year as it was in the midst of being staggered by $30.9 billion in losses and seeing its cash resources shrink by more than $19 billion.

Consumers, worried about the economy and the future of GM, shied away from the company's cars and trucks this year even after President George W. Bush promised loans and Obama followed through with billions more in assistance -- plus a stiff set of new requirements GM was ordered to meet.

When GM failed to do so by a March 31 deadline, Obama forced out CEO Rick Wagoner and replaced him with Henderson.  Wagoner served at the helm since 2000 and was the face of GM when he first flew on the company jet to ask Congress for aid.

After a firestorm of negative publicity, Wagoner rode in a hybrid Chevrolet Malibu from Detroit to Washington for a second set of withering questions before lawmakers.  But that amounted to only a sideshow as the automaker's financial position worsened. Its revenues plunged almost 50 percent in the quarter ended March 30 and it racked up another $6 billion in losses.

The Henderson-led GM faced a government-imposed June 1 deadline to restructure, slash costs and modify contracts with its union and dealers. But meeting most of those demands, plus a late agreement by many bondholders to swap portions of the $27 billion in debt they are owed for shares in a new GM, were not enough to prevent the court filing.

In fact, it was an all-out sprint to Monday's filing, as GM quickly sought to nail down deals with its union, bondholders and sell off brands and along with most of its Opel operations in Europe in an effort to appear in court with a near-complete plan to quickly emerge as a leaner company with a chance to become profitable.

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