US auto major GM to file for bankruptcy on MondayJune 1st, 2009 - 3:04 pm ICT by ANI
Washington, June 1 (ANI): President Barack Obama will push General Motors into bankruptcy protection on Monday.
The bankruptcy, to be filed in New York, is a significant turning point for an industry that was once at the heart of the American economy. It culminates a remarkable four months of confrontation between Washington and Detroit that is expected to result in a drastic downsizing of the company, the New York Times reports.
It also places the government in uncharted territory as a business owner, as it takes a majority ownership stake in the company during its restructuring.
In his remarks on Monday, Obama will spell out a strategy in which a shrunken GM can make money even if new car sales remain at a sluggish 10 million a year in the United States and even if GM, once the giant of the industry, drops below its current 20 percent market share in this country.
But to get there, American taxpayers will invest an additional 30 billion dollars in the company, atop 20 billion dollars already spent just to keep it solvent.
Reflecting the government’s extraordinary intervention in industry, aides say Obama plans to tell the nation on Monday that he believes GM can be brought back from the brink of insolvency, even if the company looks almost nothing like the titan of old.
Administration officials briefed reporters on the GM plans Sunday night, as President Obama began to inform members of Congress.
The White House insisted that the aides who talked to reporters could not be named.
The company will have to shed 21,000 union workers and close 12 to 20 factories, steps that most analysts thought could never be pushed through by a Democratic president allied with organized labor.
Forty percent of the company’s 6,000 dealers will close, the workers’ union will be forced to finance half of its 20 billion dollar health care fund with stock of uncertain value in the restructured G.M., and bondholders, including many retirees, will be forced to take stock worth 10 cents for every dollar they lent the company.
The company’s last steps toward bankruptcy took place over the weekend as a majority of G.M. bondholders agreed not to challenge the filing in court and to exchange their debt for stock at about 10 cents of equity for every dollar owed by the company.
The G.M. bankruptcy will ripple across several states where hundreds of parts suppliers and car dealerships face imminent closings. (ANI)
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Tags: administration officials, american economy, american taxpayers, bankruptcy protection, barack obama, bondholders, democratic president, dollar health, downsizing, gm plans, health care fund, insolvency, majority ownership, members of congress, new car sales, old administration, organized labor, ownership stake, uncharted territory, workers union