GM Files for Bankruptcy
June 10th, 2009 at 2:02 pm - by Lindsay Amantea
After failing to restructure the company from within, General Motors filed for Chapter 11 bankruptcy on June 1st, 2009. The company currently has approximately $82 billion in assets and more than $172 billion in debt, making this the 4th largest bankruptcy filing in the history of the United States.
The industry giant will add $30 billion of aid from the US and $9.5 billion from Canada to the $20 billion it received in January of 2009. In exchange the US government will now own 60% of the company, the Canadian government will hold 12.5%, and the United Auto Workers Union will receive 17.5% of the shares. This leaves only 10% for the previous stockholders, who will probably be forced out of the picture by the restructuring. The governments will sell off their portion of the shares over the next several years.
GM has promised that in this time all operations will continue to run, including warranty coverage, services, manufacturing and customer service. All employees and suppliers will continue to be paid, and the pension plans for the workers are in no danger.
However, they have stated that 9 plants will be closed and 3 more will be mothballed for the time being. Only 4 brands will survive with the new company - Chevrolet, Cadillac, Buick and GMC. The sale of Hummer has already been finalized and Saturn is expected to come soon as well. The downsizing will cut the workforce employed by the company by more than a third.
The impact on markets can been seen clearly, as shareholders try to sell before they are wiped out completely. One year ago the stocks were work almost $20 a piece. The shares fell as low as $1.07, but rebounded to $2.65 after the bankruptcy filings were made.
As GM moves through bankruptcy court, it is uncertain if the company will even survive the amount of restructuring that needs to be done. If it does, that does not necessarily mean that it will ever be the industry heavyweight it once was. If GM takes its time through court, it may push many of its suppliers over the edge and crumble the entire industry.
June 10, 2009 at 5:41 PM
The US has gone bonkers. Helping companies worth one billion with 80 billion, paying people to get rid of a clunker and sign up for debt on a new one, bankrupt GM buying other bankrupt company, neither on has any money, is nutts. Giving a car company along with our tax money to FIAT,(they are gonna cream the good parts and dump the rest back on taxpayers) Alot of STUPID things going on. Please someone wakeup, we are gonna loose alot of money and be in big trouble. PLEASE!!! Stop this idiot bailout mess now. Oh did I say this is STUPID move by our goverment.