U.S. manufacturer General Motors seeks bankruptcy protection
Monday, June 1, 2009
United States automobile manufacturing firm General Motors filed for bankruptcy and Chapter 11 protection from its creditors at 12:00 UTC Monday, in a Manhattan, New York federal bankruptcy court. This was the largest bankruptcy filing for a U.S. manufacturing company, and with declared assets of $82.29 billion and a debt of $172.81 billion, and the fourth largest bankruptcy filing in recent U.S. history — after the bankruptcies of Lehman Brothers ($691.06 billion), Washington Mutual ($327.91 billion), and WorldCom ($103.91 billion).
The filing, expected to be the first of many, was for a New York GM affiliate, Chevrolet-Saturn of Harlem Incorporated. Numbered 09-50026, it named GM as a debtor in possession, and was filed before judge Robert Gerber.
GM is to be represented throughout the filing process by Weil Gotshal & Manges, a New York law firm specializing in bankruptcy.
Restructuring of the company
The chief restructuring officer, named in the filing, is to be Al Koch, a managing director at AlixPartners LLP in New York, who will report directly to Fritz Henderson, the Chief Executive Officer of General Motors.
Who the creditors are
In its bankruptcy petition, GM listed its primary creditors as:
|Name||Amount owed (USD millions)|
|United Auto Workers union (UAW)||20,560|
The amount owed to UAW excludes "approximately $9.4 billion corresponding to the GM Internal VEBA". USD22,760 millions are owed to bondholders.
Effects on the U.S. economy
Analysts have observed that the effect of the bankruptcy filing on the U.S. economy is not expected to be as major as it once would have been. One such voice, Mark Zandy, an economist at Moody's Economy.com, commented that "Bankruptcy now is irrelevant in terms of the economic consequence of what’s happening to GM." Such analysts believe that the economic impact of GM's problems has already been felt, with its effects on parts suppliers and employment. They also believe that GM's programme of accelerated payments, and its participation in a U.S. Treasury program to ensure prompt payments to parts manufacturers, will have cushioned the effect of the bankruptcy itself.
Speaking on Bloomberg Radio, David Cole, chairman of the Center for Automotive Research in Ann Arbor, stated that the fragility of the parts suppliers, the loss of whom would threaten the entire automobile manufacturing industry, was of more immediate concern than the GM bankruptcy.
Also filing for chapter 11 protection today were Saturn LLC and Saturn Distribution Corporation, subsidiary companies of General Motors.
Dow Jones listing removed
As a consequence of the bankruptcy, General Motors Corporation (GM.N) was removed from the Dow Jones Industrial Average, and was replaced by Cisco Systems (CSCO.O), these changes scheduled by Dow Jones & Company to take effect from the opening of trading on June 8.
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