Taxpayers to get big stake; process to take 2 or 3 months
WASHINGTON – General Motors, the humbled auto giant that has been part of American life for more than 100 years, will file for bankruptcy protection today in a deal that will give taxpayers a 60 percent ownership stake and expand the government’s reach into big business.
It would be the largest industrial bankruptcy in U.S. history, and the fourth-largest overall.
Underscoring the government’s extraordinary role, President Barack Obama planned to announce his support for GM’s restructuring strategy at a midday appearance at the White House, much as he did in April when Chrysler sought court protection.
GM president and CEO Fritz Henderson planned to hold a news conference in New York immediately following Obama’s announcement.
Administration officials said late Sunday the federal government would pump $30 billion into GM as it makes its way through bankruptcy court. That’s in addition to the $20 billion in taxpayers’ money that the Treasury already lent to the automaker.
The $30 billion is to help GM through the Chapter 11 proceeding and move it through its restructuring plan. It doesn’t have the money to run the business right now. The money would come from what remains of the $700 billion rescue fund.
The officials, speaking on condition of anonymity in advance of Obama’s public remarks, said the administration expects the court process to last 60 to 90 days. If successful, GM will emerge as a leaner company with a smaller work force, fewer plants and a trimmed dealership force. The company will stick with its four core brands – Chevrolet, Cadillac, Buick and GMC – and jettison four others.
The company plans to cut 21,000 employees, about 34 percent of its work force, and reduce the number of dealers by 2,600.
“There is still plenty of pain to go around, but I’m confident this is far better than the alternative,” Sen. Carl Levin, D-Mich., said Sunday after being briefed about the developments. “It’s a new beginning, it’s a rebirth, it’s a new General Motors.”