GM bankruptcy factfile
The once mighty US automaker General Motors is set to file for bankruptcy on Monday and undergo a massive reorganization effort at the behest of President Barack Obama's administration.autos Updated: Jun 01, 2009 09:33 IST
The once mighty US automaker General Motors is set to file for bankruptcy on Monday and undergo a massive reorganization effort at the behest of President Barack Obama's administration.
Here are the facts of the White House's "Restructuring Initiative":
In late March, Obama laid out framework for GM to achieve viability. The automaker secured commitments for sacrifice from its stakeholders to cut cost and streamline production.
The administration subsequently said it approved of GM's relaunch plan, and is making available 30 billion dollars of additional federal assistance to support restructuring through its bankruptcy.
What will change for GM?
To return to profitability, GM will lower its break-even point from 16 million annual car sales to 10 million cars per year. To downsize its footprint, the once sprawling company will also reduce its plant operations. On Sunday GM announced it would close 11 facilities and idle three others.
What impact for the workers?
The United Auto Workers union made drastic concessions on compensation and retiree health plans, in a bid to keep down costs and save jobs for active employees.
The new GM will establish an independent trust to provide health care for the company's retirees. The "VEBA" trust will receive 17.5 percent of the equity of the new company and warrants to purchase an additional 2.5 percent of the company.
What about its backers?
In a deal struck Saturday, GM bondholders representing 54 percent of the company's unsecured bonds agreed to exchange their portion of the company's 27.1 billion dollars of unsecured debt for 10 percent of the equity of new GM, plus warrants for an additional 15 percent of the new company.
Where's the money?
The US Treasury is set to pump in some 30 billion dollars to support GM through bankruptcy, and does not anticipate providing any more. GM has already received over 20 billion dollars in federal aid in recent months to stay afloat.
In exchange, the US government is set to receive some 8.8 billion dollars in debt and preferred stock in the new GM, and approximately 60 percent of new GM equity. The US Treasury will also have the right to appoint the initial directors.