GM files for bankruptcy

The United States Government has taken a majority stake in General Motors as the 100 year old company filed for Chapter 11 bankruptcy in New York earlier today. It is hoped 'New GM' will emerge from the proceedings in 60 to 90 days as a leaner and profitable entity that will allow the company to not only survive but become competitive again.

The remaining ownership will be split between the United Auto Workers union (17.5 per cent), the Canadian Government (12 per cent) -- which will provide US$9.5billion in aid -- and Bondholders (10 per cent). New GM will focus on four key brands -- Chevrolet, Cadillac, Buick and GMC -- in an effort to reduce running costs and debt burdens.

"GM and its stakeholders have produced a viable, achievable plan that will give this iconic American company a chance to rise again," said US President Barack Obama. "It's a plan tailored to the realities of today's auto market, a plan that positions GM to move towards profitability even if it takes longer than expected for our economy to fully recover."

Recently installed GM President and CEO, Fritz Henderson tried to put a positive spin on the decision despite it representing the third largest company to file for bankruptcy in US history, and the largest manufacturing firm to do so.

"Today marks a defining moment in the reinvention of GM as a leaner, more customer-focused, and more cost-competitive company that, above all, can quickly generate winning bottom line results," Henderson said at a press conference in New York.

"The economic crisis has caused enormous disruption in the auto industry, but with it has come the opportunity for us to reinvent our business. We are going to do it once and do it right. The court-supervised process we are pursuing provides us with powerful tools to accelerate and complete our reinvention, as well as strong safeguards for our customers and our business. We are focused on the job at hand, for the benefit of our customers, employees, dealers, suppliers, retirees, taxpayers, investors and other stakeholders.

"We recognize the sacrifices that so many have been asked to make as we have worked to reinvent GM and the automobile," Henderson added. "GM deeply appreciates the support and the demonstration of confidence in our future by President Obama, the Presidential Task Force on Autos, the Canadian and Ontario governments, American and Canadian taxpayers, the unsecured bondholders who are supporting the proposed sale transaction, the UAW and CAW and their leadership, and the men and women of GM, including our retirees. You have enabled us to carry out this vital transformation for the good of GM, our customers and the economy, and we are working to validate your trust each day.

"From day one, the New GM will be well-positioned to capitalize on the award-winning vehicles we have developed and launched during the past few years, and on our investments in exciting new technologies like the Chevy Volt, so that we can build and return value to our customers and to the millions who will have a stake in our success. The New GM will play a critical role in the future of the automobile, and assure that the U.S. has a strong stake in this rapidly changing global manufacturing industry," Henderson said.

Under the plan New GM will be able to turn a profit if the US new car market reaches 10 million units per year. That is instead of the current situation that requires 16 million units just to break even.

The news isn't good for workers with GM announcing it will close a further nine plants between July this year and December 2011. It will include assembly plants in Michigan and Delaware, stamping plants in Indiana and Ohio and powertrain facilities in Michigan, Ohio and Virginia.

In the wake of a backlash from dumped Chrysler dealers GM announced that dealers will be given an 18 month grace period before the company ends its franchise agreements with thousands of US dealers.

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