To enjoy the full Mail & Guardian online experience: please upgrade your browser
11 Jul 2009 07:27
General Motors is poised to emerge as a new company later on Saturday after only 40 days in bankruptcy.
When GM filed for bankruptcy at the beginning of June, the process had been expected to take as long as three months. But the carmaker is set to re-emerge even faster than rival Chrysler, which came out of bankruptcy on 10 June after 42 days.
GM chief executive Fritz Henderson is holding a news conference in Detroit at 9am local time to announce the completion of the sale of most of the company’s assets to a new concern that is majority-owned by the US government.
He will also outline his plans to make the company profitable again.
The plans include massive cost reductions aimed at streamlining GM’s bureaucratic management structure.
Once the world’s largest carmaker, the company has been hit by the worst slump in US car sales in 26 years. It will emerge cleansed of debts and troubled contracts that nearly dragged it to collapse and liquidation.
It joined rival Chrysler to ask for $37-billion of government funding earlier this year. But this did not save both firms from falling into bankruptcy after bondholders balked at having their loans wiped out.
On June 1, General Motors officially declared itself bankrupt—the largest bankruptcy filing by a US manufacturing company.
The 101-year old carmaker sought legal protection—known as Chapter 11—from its creditors after running up losses of $81-billion over four years.
A bankruptcy order went into effect on Friday allowing GM to sell most of its assets to a new company that is 61%-owned by the US government.
Some of GM’s creditors said the government should have let the carmaker fail. But US bankruptcy judge Robert Gerber wrote in a July 7 ruling that a liquidation would be “staggering” to the public.
The case “raises the spectre of systemic failure throughout the North American car industry, and grievous damage to all of the communities in which GM operates,” the judge wrote.
The new General Motors is set to focus on four key brands—Chevrolet, Cadillac, Buick and GMC. It is in the middle of selling Saturn, Saab, Hummer and Opel, and will discontinue Pontiac by the end of the year.
“It is the smaller, leaner, tougher, better cost-focused GM,” said George Magliano, a car manufacturing analyst with the consulting firm IHS Global Insight. “But they still have to deal with the problems they faced longer-term.” - guardian.co.uk
Create Account | Lost Your Password?