The stockholders of General Motors rejected the company’s plan to restructure finances to stay out of bankruptcy. The plan to settle their debt by selling 10% of the shares to creditors owed over $27 billion USD. Neither shareholders nor creditors accepted the plan. It is also possible that the US government may demand as much as a 70% stake in return for filing chapter 11 bankruptcy.

In the United States there are two kinds of bankruptcy that a company can file for - chapter 7 and chapter 11 under the Bankruptcy Code. Chapter 7 consists of selling off company assets to cover debts and closing the entire operation down whilst chapter 11 allows for a massive restructuring under the control of the courts.

GM is the second of the Detroit three to be pushed into considering Chapter 11 bankruptcy in the past month. They have already approved the closure of the Pontiac brand, which will cost upwards of $2 billion USD to complete. Chrysler filed on April 30th which resulted in the European automaker Fiat taking a 20% share in the company. Fiat has plans to reorganize Chrysler into a company that can compete in the smaller car market that exists in North America today.
After a major restructuring earlier in the year, Ford is still floating under its’ own steam, having not accepted any money from the massive bail-out earlier this year.

GM’s board of directors meets soon to decide whether it is worth keeping the company alive, although the return on selling the company off is likely to be minimal in the current economic crisis.

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