* GM files third-largest U.S. bankruptcy ever
* U.S. government would own 60 percent of New GM
* GM out of the Dow; "no longer suitable" for NYSE listing
* Judge clears sale of Chrysler assets to Fiat-led group
(For Reuters coverage on autos, click [ID:nCARS1])
(Recasts with Obama administration first paragraph, adds
quotes, updates detail on delisting)
By Kevin Krolicki and John Crawley
DETROIT/WASHINGTON, June 1 (Reuters) - General Motors Corp
filed for bankruptcy on Monday, as the Obama
administration took the first steps in court to try to revive a
failed icon of American industry by extended unprecedented
funding and oversight.
The bankruptcy filing was the third-largest in U.S. history
and the largest ever in U.S. manufacturing. [ID:nN31435926]
The decision to push GM into a fast-track bankruptcy and
provide $30 billion of additional taxpayer funds to restructure
the automaker is a huge gamble for the Obama administration.
But in a sign of progress in the government's high-stakes
effort, a bankruptcy judge approved the sale of substantially
all of U.S. automaker Chrysler's assets to a group led by
Italy's Fiat SpA
In the wake of its widely anticipated bankruptcy filing, GM
stock -- once considered a rock-solid blue chip -- was being
removed from the Dow Jones industrial average
delisted by the New York Stock Exchange.
"This is proof that GM has failed," said automotive
historian Bob Elton. "They have been failing for years but have
covered it up. Now they've come to the end of the line."
Chrysler's bankruptcy, also financed by the U.S. Treasury,
has been widely seen as a test run for the much bigger and more
complex reorganization of GM.
President Barack Obama said on Monday he was confident GM
could emerge quickly from bankruptcy, saying the government had
been thrust into a reluctant position as controlling
"Our goal is to get GM back on its feet, take a hands off
approach and get out quickly," Obama said. [ID:nN01474860]
The administration's ambitious plan for GM is for a quick
sale process that would allow a much smaller company to emerge
from court protection in as little as 60 to 90 days.
In bankruptcy, GM will be divided in two: a leaner "New GM"
and "Old GM" -- which will include excess plants and equipment
that will eventually be liquidated under court protection.
GM said in a legal filing on Monday that the transaction to
create the reorganized company would have to be quick to keep
the automaker from losing its best chance to restructure.
"The vicious cycle of frozen credit markets, growing
supplier uncertainty and lack of consumer confidence has the
potential to unravel the automotive industry and short-circuit
the creation of New GM," Chief Executive Fritz Henderson said
in a court filing.
On the first day in bankruptcy court, lawyers for GM said
they would ask Judge Robert Gerber to approve its proposed sale
of its strongest assets in just 30 days. [ID:nN01464220]
Since the start of the year, GM has been kept alive by U.S.
government funding as a White House-appointed task force vetted
plans for a sweeping reorganization that will be undertaken
with $50 billion in federal financing.
By taking a 60 percent stake in a reorganized GM, the Obama
administration is gambling that the automaker can compete with
the likes of Toyota after its debt is cut by half and its labor
costs are slashed.
The federal government of Canada as well as the province of
Ontario agreed to provide another $9.5 billion to GM in a late
addition to the plans for the bankruptcy. [ID:nN31418487]
GM plans to close 11 U.S. facilities and idle another three
plants. It has not provided an updated target for job cuts but
had been looking to cut 21,000 factory jobs from the 54,000
unionized workers it now employs in the United States.
The GM plant closings will cut between 18,000 and 20,000
UAW workers in the United States. [ID:nN01474335]
"The GM that many of you knew, the GM that let too many of
you down, is history," said Henderson at a news conference in
New York. "Today marks the beginning of what will be a new
company, a new GM dedicated to building the very best cars and
trucks, highly fuel-efficient, world-class quality, green
The UAW would have a 17.5 percent stake in the New GM. The
Canadian government would own 12 percent and GM bondholders
would receive 10 percent. In its filing, GM also provided an
updated list of its major trade creditors including Starcom
Mediavest Group and Delphi Corp. [ID:nN01454108]
Kent Kresa, who became GM chairman at the end of March,
said he was already interviewing candidates to be directors for
the new board at GM and was in contact with Steve Rattner, who
heads the White House's autos task force, as part of that
Officials involved in the planning for GM said the White
House was a "reluctant investor" in GM, but had to prevent a
liquidation that analysts say would have cost tens of thousands
of jobs at a time when the economy is mired in recession.
GM alone employs 92,000 in the United States and is
indirectly responsible for 500,000 retirees.
U.S. officials said there was no plan to provide any
further funding for GM and insisted that all of the Detroit
Three could survive. Ford Motor Co
has not sought
emergency federal aid.
In the case of GM, the goal of restructuring is to allow it
to return to profitability if U.S. industrywide auto sales
recover even slightly to near 10 million units annually.
Until now, to stop losing money, GM had counted on a
recovery to the 16 million mark the industry last saw in 2007,
GM's bankruptcy, which was approved by the automaker's
board after a weekend of deliberations, is the most carefully
orchestrated Chapter 11 filing in the history of American
The automaker's final descent started with an emergency aid
announcement by the administration of President George W. Bush
on Dec. 19. It accelerated in late March when the new Obama
government gave the company 60 days to restructure.
While New GM is expected to emerge quickly from court
protection, its shuttered plants, stranded equipment and other
spurned assets would be left to liquidation in bankruptcy.
Al Koch, a managing director at advisory firm AlixPartners
LLP, will be appointed chief restructuring officer in charge of
liquidating those GM assets. [ID:nN31395352]
A veteran restructuring adviser, Koch has had prominent
roles in Kmart Corp's restructuring and other turnarounds.
Over the weekend, GM won support for the government's plan
from investors representing 54 percent of the company's $27
billion in bondholder debt. [ID:nN31329833]
Bondholders could take up to 25 percent of GM if it
recovers to be worth what it was in 2004.
Founded in 1908, GM rose to dominate the U.S. and global
auto industries under the stewardship of pioneering Chief
Executive Alfred Sloan, who famously pledged that the automaker
would deliver "a car for every purse and purpose."
By the mid-1950s, at the peak of its success, GM had some
514,000 employees. It accounted for about half of U.S. car
production and its sales were twice as large as the No. 2
corporation, Standard Oil.
Technology bellwether Cisco Systems
GM on the Dow. Insurer Travelers Co will replace
Citigroup Inc . Dow Jones said the changes will be
effective as of June 8. GM's stock fell to a low of 48 cents on
Monday, a level last seen during the Great Depression.
The bankruptcy case is In re: General Motors Corp, U.S.
Bankruptcy Court, Southern District of New York, No. 09-50026.
(Additional reporting by David Bailey, Soyoung Kim, David
Lawder, John Crawley, Leah Schnurr, Poornima Gupta, Walden Siew
and Tom Hals; Editing by Patrick Fitzgibbons, Maureen Bavdek,
Matthew Lewis, Gary Hill)