GM files for Chapter 11 bankruptcy; Fairfax plant safe - Kansas City Business Journal:

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isn’t among the 14 additional facilities GMwill GM’s filing came after weeks of wranglinb with its unions and bondholders and as part of a game plan coordinates with the federal government. That plan calle for the establishment ofa new, more nimbles GM that has the federal governmentt as its 60 percent equity holder. The will providew $30.1 billion in additionak financing to help the company through the reorganization The Detroit-based automaker (NYSE: GM) said it expectd the new GM to launcyh in about 60 to 90 days as a separate and independentg company from the current GM. The new company will focuzs on four core brands in theUnitede States: Chevrolet, Cadillac, Buick and GMC.
As part of its cost-cuttingg efforts, GM will further reduce 2009 salariedr employment in North America toabout 27,20 from about 35,100 at the end of 2008, a roughlyg 23 percent cut. “Today marks a defining momentr in the reinvention of GM asa leaner, more customer-focused and more cost-competitivse company that, above all, can quickl y generate winning bottom-line results,” GM CEO Fritsz Henderson said in a release. “The economic crisisd has caused enormous disruption in theauto industry, but with it has come the opportunityg for us to reinvent our business. We are goinb to do it once and do it The Canadian and Ontario governments also will lend thecompany $9.
5 billio n for its transition, in return for $1.7 billion in debt and preferredx stock and approximately 12 percent of the equitty of the new GM. GM’s filing listed debts of $172.8 billioj and assets of nearly $82.3 Separately Monday, GM said it will close 14 U.S. plants — 13 by the end of 2010 and one moreby 2012. is on GM’sd Web site. Scott Peltz, managing director of the national corporatde recovering practicefor , said lack of confidence in a bankrupt GM can be overcomde in part because the companhy will honor warranties and make partws available. Peltz said that he doesn’t know whetherd the Treasury Department’s pledge of $30.
1 billion in additionapl financing is adequate for GM to emergde from bankruptcy butthat “it’s certainly more than they woulde get in the free “I think that, as a it’s very frustrating,” Peltz said. “Looking at the lack of availablw capital inthe marketplace, it may be the best of unpleasant choices.” Support for a quick surgical bankruptch for Chrysler also bodes well for GM, he “GM and the economy we live in at the momentr are both anomalies, but ... there’s little or no financing available, other than ‘defensive meaning short-term DIP to make sure loans are he said.
“But very few third-party lendere are ready to makeDIP loans. You have a very illiquix market with inability tofinance restructurings, as well as viable exit Ryan McConaghy, deputy director of Washington-based thinkm tank ’s economic program, callef GM’s bankruptcy “a necessary and temporaryu option to put GM back on its feet.” “Thee outlook is certainly better than allowinh GM to liquidate,” McConaghy The Obama administration is “sendingb reassuring signals that improve consumer confidence in the he said.
In a fact sheet put out by the Obamqa administration, the goal for the new GM is to reduce its break-evej point from annual sales of about 16 million vehicle s to annual sales of abou 10 million vehicles. Although acknowledgint the pain toall parties, the company and the administratiob sought to assure GM customers and The company was to ask permissio at an initial bankruptcu hearing to honor all product warranties, with the federal governmentt agreeing to serve as a financial backstop. The companyy also will continue to pay itsemployeesx — including about 2,100 union and 300 salariedf workers at its Fairfax Assembly Plant.
GM paid its employeez Thursday, three days early, as an initial step in calmingb fears. The approved a package of concessionws that will give GM more flexibility in staffing and help the companyu reduceits expenses. As part of that the company restructured payments due to a trusgfor retirees’ health care. The trustr will receive a $2.5 billion note and $6.5 billiojn in 9 percent perpetual preferred along witha 17.5 percent equit y stake in the new GM and warrants to push that ownershipo to 20 percent. Another key player in the reorganizationj will beGM bondholders.
The administration announced that a steering committee representing owners of at leasgt 54 percent ofthe company’ss unsecured bonds had agreed to a deal in which bondholders would receive 10 percent of the equity of the new GM and warrantw for an additional 15 percent. The bankruptcy process will allow the company to confirm the deal for all for GM's full Chapter 11 bankruptcuy filing.