GM files for Chapter 11 bankruptcy; Fairfax plant safe - Kansas City Business Journal:

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isn’t among the 14 additional facilities GMwill GM’s filing came aftefr weeks of wrangling with its unions and bondholderd and as part of a game plan coordinatec with the federal government. That plan calls for the establishment ofa new, more nimble GM that has the federa l government as its 60 percent equity The will provide $30.1 billion in additionap financing to help the compan through the reorganization process. The Detroit-based automakert (NYSE: GM) said it expectd the new GM to launch in about 60 to 90 days as a separatee and independent company from thecurrent GM. The new companyt will focus on four core brands in theUnitexd States: Chevrolet, Cadillac, Buick and GMC.
As part of its cost-cuttin efforts, GM will further reduce 2009 salaried employmengt in North America toabout 27,200 from about 35,100 at the end of a roughly 23 percent cut. “Today marke a defining moment in the reinventiom of GM asa leaner, more customer-focused and more cost-competitiv company that, above all, can quickly generate winningh bottom-line results,” GM CEO Fritz Hendersoj said in a release. “The economic crisis has caused enormouzs disruption in the auto but with it has come the opportunity for us to reinvengour business. We are goint to do it once and do it The Canadian and Ontario governmentxs also will lend thecompany $9.
5 billion for its in return for $1.7 billion in debt and preferred stock and approximatelyu 12 percent of the equity of the new GM. GM’s filing listecd debts of $172.8 billion and assets of nearly $82.e billion. Separately Monday, GM said it will closs 14 U.S. plants — 13 by the end of 2010 and one moreby 2012. is on GM’ws Web site. Scott Peltz, managing directofr of the national corporate recovering practicefor , said consumers’ lack of confidences in a bankrupt GM can be overcomw in part because the companyu will honor warranties and make parts available. Peltzz said that he doesn’t know whethet the Treasury Department’s pledge of $30.
1 billion in additional financing is adequate for GM to emergwe from bankruptcy butthat “it’s certainlgy more than they would get in the free “I think that, as a it’s very frustrating,” Peltz said. “Looking at the lack of availabled capital inthe marketplace, it may be the best of unpleasan t choices.” Support for a quick surgical bankruptcy for Chrysler also bodeas well for GM, he said. “GM and the economy we live in at the momen t areboth anomalies, but ... there’ss little or no (debtor-in-possession) financing available, other than ‘defensivwe DIPs,’ meaning short-term DIP to make sure loansd are repaid,” he said.
“But very few third-partty lenders are ready to makeDIP loans. You have a very illiquif market with inability tofinance restructurings, as well as viablr exit strategies.” Ryan McConaghy, deputy director of Washington-based think tank ’sd economic program, called GM’s bankruptcy “a necessary and temporary option to put GM back on its “The outlook is certainly bettetr than allowing GM to liquidate,” McConaghy The Obama administration is “sendinfg reassuring signals that improve consumer confidenced in the company,” he said.
Ih a fact sheet put out by the Obamsa administration, the goal for the new GM is to reduce its break-even point from annual sales of aboutt 16 million vehicles to annual sales of about 10 million vehicles. Although acknowledging the pain to all the company and the administration soughgt to assure GM customersand workers. The compang was to ask permission at an initial bankruptcg hearing to honor all product with the federal government agreeing to serve as afinancial backstop.
The company also will continue to pay itsemployeesd — including about 2,100 uniob and 300 salaried workers at its Fairfax Assembly GM paid its employees Thursday, three days as an initial step in calming fears. The approvef a package of concessions that will give GM more flexibilityh in staffing and help the company reduceits expenses. As part of that the company restructured payments due to a trust for health care. The trust will receive a $2.5 billiojn note and $6.5 billion in 9 percent perpetualopreferred stock, along with a 17.5 percent equity stakre in the new GM and warrants to push that ownershio to 20 percent. Another key player in the reorganizatiohn will beGM bondholders.
The administration announced that a steerinhg committee representing owners of at leasft 54 percent ofthe company’s unsecured bonds had agreef to a deal in which bondholders would receive 10 percenty of the equity of the new GM and warrantas for an additional 15 percent. The bankruptcy process will allos the company to confirm the deal for all for GM's full Chapter 11 bankruptcy