New start for GM as it exits bankruptcyJuly 11th, 2009 - 1:06 am ICT by IANS
New York, July 10 (DPA) Troubled US carmaker General Motors was given a new lease of life Friday, exiting a 40-day bankruptcy process.
GM signed the deal that would transfer its best assets to a new company majority-owned by the US Treasury. The sale clears GM to leave bankruptcy after becoming the largest US industrial firm ever to seek protection from its creditors.
“It’s an exciting day for General Motors,” chief executive Fritz Henderson said at a press conference at GM’s headquarters in Detroit. “Today marks the beginning of a new company.”
The near-unprecedented government takeover - the price of some $50 billion in emergency loans - comes after a New York judge approved GM’s plan on Sunday and blocked appeals in the following days. Obama set an ultimatum of Friday for the deal to go through.
GM’s speedy bankruptcy has surprised most analysts. Even the White House originally predicted a two to three month process when GM first filed for insolvency June 1.
“Today, we take the intensity, decisiveness and speed of the past several months and transfer it from the triage of the bankruptcy process to the creation and operation of a new General Motors,” Henderson said.
The world’s largest carmaker until last year, GM will emerge from the process a much smaller company. The Detroit manufacturer will leave behind a series of brands that are being sold or discarded, including Pontiac, Saturn, Hummer, Opel and Saab.
Car sales have plummeted more than 35 percent since October, as the financial crisis plunged the wider US economy into its worst recession since the Great Depression of the 1930s.
GM’s exit follows that of its smaller rival Chrysler, which left bankruptcy in June under the control of Italian maker Fiat.
Henderson said the streamlined GM hopes to make a profit by 2011 by shifting to the kinds of smaller, greener cars that have helped foreign carmakers steal market share in the United States over the last decades.
The company is cutting another 27,000 jobs this year and closing 14 plants by 2012. GM’s ultimate plan is to become competitive in a US market of only 10 million vehicles - down from about 16 million sold in the first seven years of this decade.
“Business as usual is over at General Motors,” Henderson said. “Everybody in this company must realize this and be prepared to change, fast.”
The Treasury is set to get a 60-percent stake in the “new” GM in exchange for some $50 billion in loans. The Canadian government, which has also provided billions of dollars, will get 12 percent. A union health care trust will take 17.5 percent and previous bondholders will get the remaining 10 percent to forego their debt.
GM’s reorganization plan had been challenged by some bondholders, dealerships and labour unions that hoped for a better deal through liquidation. But all were blocked by bankruptcy Judge Robert Gerber, who warned Sunday that GM’s collapse would be a “disastrous result” for the entire automotive community.
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