{slide=editor's note} If GM did not destroy the EV1, the electric car, that they had recalled and ran through metal shredders, they certainly would not be filing for bankruptcy. {/slide}
THE ASSOCIATED PRESS
NEW YORK - General Motors Corp. filed for Chapter 11 bankruptcy
protection Monday as part of the Obama administration's plan to shrink
the automaker to a sustainable size and give a majority ownership stake
to the U.S. government.
GM's
bankruptcy filing is the fourth-largest in U.S. history and the largest
for an industrial company. The company said it has US$172.81 billion in
debt and $82.29 billion in assets.
The fallen
icon of American industrial might will rely on US$30 billion of
additional financial assistance from the Treasury Department as it
reorganizes. That's on top of about $20 billion in taxpayer money GM
already has received in the form of low-interest loans.
A person
familiar with General Motors' plans told The Associated Press that the
automaker will permanently close nine more plants and idle three others
to trim production and labour costs under bankruptcy protection.
In Canada, the company has already shut down its Oshawa, Ont. truck
plant, affecting 2,600 workers, and will close a transmission factory
in Windsor next year, with the loss of another 1,400 jobs.
The GM
bankruptcy is expected to ripple through the auto parts industry on
both sides of the border as companies reel from the loss or orders and
unpaid bills by GM.
In Canada,
No. 2 parts giant Linamar Corp. (TSX:LNR) said it has limited exposure
to GM on both the receivables and sales volume side, with less than
$2.8 million in GM debt owed that's older than 20 days.
"We are of
course disappointed that GM was unable to successfully negotiate with
stakeholders a satisfactory solution to allow them to avoid Chapter 11,
however, we feel that we are in a strong position to weather the
situation given steps we have taken over the past months to minimize
our exposure", said Linda Hasenfratz, CEO of the Guelph, Ont. company,
which has 9,000 employees around the world.
In the
United States, assembly plants in Pontiac, Mich., and Wilmington, Del.
will also close this year, while plants in Spring Hill, Tenn., and
Orion, Mich., will shut down production but remain on standby.
Powertrain
plants in Livonia, Flint and Ypsilanti Township, Mich. will close next
year, along with plants in Parma, Ohio, and Fredericksburg, Va.
Stamping
plants in Indianapolis and Mansfield, Ohio, also will close. A stamping
plant in Pontiac, Mich., will remain on standby.
The person spoke on condition of anonymity because the plans have not been made public.
A union spokesman at the GM plant in Spring Hill confirmed the 2,500 employees there have been told the plant will be idled.
Meanwhile,
the president of the Canadian Auto Workers Union said Monday he expects
some Canadian plants to suspend production while the U.S.-based parent
company files for bankruptcy protection.
CAW
president Ken Lewenza told The Canadian Press he is cautiously
optimistic that GM's Canadian unit may be able to avoid seeking
creditor protection, but concedes it is still a possibility.
"I . . .
would be incredibly surprised if we don't lose some production as a
result of the Chapter 11 in the United States," he said in a telephone
interview. "If it doesn't, that means (GM's Canadian unit) did their
homework much more detailed than one could anticipate."
He wouldn't speculate which Canadian plants might be idled.
The company
plans to streamline its Canadian production to about 6,000 jobs from
20,000 in 2005, but no new plant closures are expected beyond what was
announced last year. Meanwhile, the two car assembly plants in Oshawa
are expected to survive the restructuring.
GM will
follow a similar course taken by Chrysler LLC, which filed for Chapter
11 protection in April and hopes to emerge from its
government-sponsored bankruptcy this week.
The plan is
for the U.S. government to take a 60 per cent ownership stake in the
new GM. The Canadian government would take a 12.5 per cent stake, with
the United Auto Workers getting a 17.5 per cent stake and unsecured
bondholders receiving 10 per cent. Existing GM shareholders are
expected to be wiped out.
Media reports suggest the Ottawa will invest about $9 billion in the restructured company.
U.S.
President Barack Obama is scheduled to publicly discuss GM's future at
midday from Washington, and GM CEO Fritz Henderson is to follow him
with a news conference in New York.
GM's U.S.
filing comes 32 days after a Chapter 11 filing by Chrysler, which also
was hobbled by plunging sales of cars and trucks as the worst recession
since the Great Depression intensified.
The third of
the one-time Big Three, Ford Motor Co., has also been stung hard by the
sales slump, but it avoided bankruptcy by mortgaging all of its assets
in 2006 to borrow roughly $25 billion, giving it a financial cushion GM
and Chrysler lacked.
The
downsized GM's brands will be limited to Chevrolet, Cadillac, GMC and
Buick. Its Pontiac, Saturn, Hummer and Saab operations will be either
sold or closed. GM said it was finalizing a deal to sell Hummer, and
plans for Saturn are expected to be announced within weeks.
GM, whose
headquarters tower over downtown Detroit, said it believed the filing
was not an acknowledgment of failure, but a necessary way to cleanse
itself in an orderly fashion of problems and costs that have dogged it
for decades.
Trading of
GM shares was halted early Monday after they plunged Friday as low as
74 cents, the lowest price in the company's 100-year history. GM will
be kicked out of the Dow Jones industrial average because rules
established by the News Corp. unit that oversees the index prohibit it
from including companies that have filed for bankruptcy.
