General Motors Files for Bankruptcy

[ElCount]

MARCH 5, 2009, 5:04 P.M. ET
GM More Open to Bankruptcy
Car Maker Wants to Avoid Filing, but Sees Speedy, U.S.-Financed Plan as an Option
By JOHN D. STOLL and NEIL KING JR.

Top General Motors Corp. executives are more open to a speedy bankruptcy reorganization financed by the government, pushing aside earlier concern that such a move would scare away so many customers the company wouldn't survive, said a person familiar with the matter.

While the company still wants to avoid bankruptcy, the new view represents a reversal from GM's position late last year, when it sought a federal bailout. The change in thinking, combined with the disclosure Thursday that GM's auditor has raised "substantial doubt" about the car maker's ability to keep going, appears to move GM closer to the possibility it will file for reorganization.

Both developments come as President Barack Obama's auto task force is trying to decide how much more aid to provide GM. They also come as GM is locked in negotiations with its bondholders to trade debt for equity as a way to cut its cost of operations.

The increased threat of bankruptcy could prod bondholders into making concessions, since these investors are said to believe a bankruptcy reorganization could harm their holdings, according to a person familiar with their thinking.

GM Chief Executive Rick Wagoner told Congress and the White House in November and December that a Chapter 11 reorganization would spark a plunge in revenue from which the company wouldn't recover.

But after months of research, including analysis done by top bankruptcy advisers, the company has come to believe it could emerge from what is known as a prepackaged bankruptcy, said the person familiar with the matter.

Under a prepackaged bankruptcy, the various constituents -- unions, suppliers, bondholders -- would agree in advance to concessions. Prepackaged bankruptcies typically take just a few months to accomplish.

With a prepackaged bankruptcy, said the person familiar with the matter, "We'd have 60 days of havoc and chaos, but the view is, if it was supported by the government and supported by the constituents, included the bondholders, the VEBA [retiree health-care trust] was negotiated, labor was in, that...we would be able to manage it."

A bankruptcy of any sort could be far more effective than the type of out-of-court restructuring GM is undergoing. For instance, the company's entire debt load could be reworked, rather than a majority of it as it currently is trying to do, and the auto maker could circumvent state franchise laws that have long protected its dealers from GM's restructuring knife.

GM spokesman Steven J. Harris said, "We haven't changed our view that bankruptcy is not something that we want to contemplate."

The Treasury Department has been in talks with banks, auto suppliers, lawyers and other experts to get a better grasp of the cost and ramifications of a bankruptcy filing by one or more of the Detroit auto makers. GM's bankruptcy advisers, meanwhile, have been working on a plan to mitigate the impact a bankruptcy filing would have on GM's public image, said people familiar with the matter.


In a "viability" plan filed last month with the Treasury, GM outlined three bankruptcy scenarios, including a prepackaged arrangement.

The other routes through bankruptcy court listed in the plan would be a more aggressive "cram-down" option, which would take a minimum of three months and wouldn't rely on consensual agreements, and a traditional bankruptcy, which could take up to two years. Both routes would more severely damage GM's revenue base due to the length of time the company would be in court, according to GM's thinking.

But even as GM has become more convinced it could emerge from the prepackaged route, executives remain concerned that things might not go as planned. In its analysis of bankruptcy, the company found that only 3% of companies that filed for bankruptcy in the past 14 years emerged in less than 90 days. The companies that did emerge were far less complex than GM.

"These were pretty simple companies," this person said. "We're anything but [simple]."

In an annual report GM filed with the Securities and Exchange Commission on Thursday, the company said auditor Deloitte & Touche had reviewed the company's financial statements and concluded it may not have the resources to continue as a "going concern" -- a term meaning a business that has enough money to stay afloat.

"Our recurring losses from operations, stockholders' deficits and inability to generate sufficient cash flow to meet our obligations and sustain our operations raises substantial doubt about our ability to continue as a going concern," GM said in the filing.

If the company is unable to remain a going concern, it "could potentially be forced to seek relief through a filing under the U.S. Bankruptcy Code," GM said in the filing.

The going-concern warning could put GM in violation of covenants on billions of dollars in debt and allow banks to call back money GM has borrowed.

Members of a GM bondholders committee met Thursday with President Obama's auto task force to discuss potential concessions and whether the Treasury was willing to back a new round of bonds GM would issue as part of its restructuring, said a person familiar with the discussions.

GM's troubles contrast with signs of progress coming from Ford Motor Co., which on Wednesday announced a plan to reduce its debt by $10.4 billion. Ford also has reached cost-savings agreements with the United Auto Workers union.

The auditor's finding could also complicate GM's effort to get additional bailout loans from the U.S. government and other governments around the world. GM so far has borrowed $13.4 billion from the Treasury and has asked for as much as $16.6 billion more. It is also seeking €3.3 billion ($4.2 billion) in loans from the German government.

On Thursday, German Finance Minister Peer Steinbrueck said in an interview with a German radio station that GM still hasn't provided a plan that justifies government help for restructuring Opel, its Germany-based unit.

GM had signaled last week a going-concern warning would be coming when it reported a $30.9 billion loss for 2008. The company barely escaped a bankruptcy filing last year when it received the emergency loans from the federal government and has warned it could still end up in Chapter 11 if more funds aren't forthcoming. To free up that money, GM must persuade the Obama auto team that it has a viable business if restructured.

GM spokeswoman Julie Gibson played down the going-concern finding, saying it "is not fundamentally a big deal." She said GM's main concern was getting waivers with lenders to avoid having loans recalled.

Pessimism over GM's fate is building in some quarters of Washington. Sen. Bob Corker (R., Tenn.) said the auditor's report emphasized GM's deepening challenges. "It's hard to see a very pleasant outcome," he said in an interview.

House Speaker Nancy Pelosi (D., Calif.) told reporters Thursday that the administration needed to help the auto companies survive. But she cautioned that any federal money had to be seen "as a lifeline, not life support." Additional federal funding, she said, could come only after the companies had proved they were viable. "But this isn't endless," she said.

Administration officials are still weeks away from making a decision on how to assist the struggling auto makers. The negotiations with GM and Chrysler LLC are supposed to conclude by March 31, but with so many issues unresolved, people involved with the talks say the effort could slip into April.

Administration officials who are dissecting GM's 117-page viability plan said they weren't surprised by the starkness of the auditors' assessment. "Knowing the gravity of the situation, these were not unexpected results," said one administration official.

http://online.wsj.com/article/SB123625134434838921.html#mod=testMod

[ElCount]

MARCH 31, 2009
U.S. Considers Bankruptcy for GM, Chrysler
Plan Would Separate 'Bad' and 'Good' Assets of Two Companies; Historic Intervention Carries Big Political Risk for Obama

President Obama, who announced the plans Monday with Treasury Secretary Geithner, said the U.S. would not let the auto industry "simply vanish."

The Obama administration, wading deeply into the U.S. auto business, is weighing a plan to fix General Motors Corp. and Chrysler by dividing their "good" and "bad" assets and plunging them into bankruptcy to purge their biggest problems.

Such a move -- barring 11th-hour concessions from bondholders, unions and others -- would mightily transform two companies that have helped define American industrial power over the past century. They also would represent one of the biggest-ever government incursions into private enterprise, a move fraught with political risk and controversy for the fledgling Obama administration as it becomes clear that government involvement in the operations of GM and Chrysler will dwarf that of any other company receiving U.S. aid.

The government would like to see the "good" GM, comprising brands such as Chevrolet and Cadillac, remain an independent company, according to an administration official. The "good" Chrysler would be sold to Fiat SpA, assuming that proposed deal is completed, this person said.

President Barack Obama on Monday warned GM and Chrysler that they couldn't depend on unending taxpayer loans and gave the companies a brief window to craft plans -- 60 days for GM and 30 for Chrysler -- that would justify fresh government support. But he also pledged to do all he could to save the industry.

Detroit in Crisis
Chrysler Plan Trims Fiat's Stake, Cuts Out CerberusGM Boasts Prized Asian Ventures, Costly European OnesGovernment Incentives Aim to Bring Back BuyersObama Seeks Concessions From UAW RetireesDeal Journal: Meet Fritz HendersonWash Wire: Obama Sees Leadership FailureDetroit in Crisis: News, analysis and moreDiscuss
Vote: Is Obama's action appropriate?
Yes | NoDiscuss: Should Wagoner have resigned?Statements and Documents
U.S.'s Viability Memos: GM | ChryslerU.S. fact Sheet: 'New Path to Viability'Warranty Commitment ProgramObama's remarks Monday on auto-industry restructuringGM CEO Wagoner's statement on his resignationGM's Fritz Henderson's statement on challenges aheadNardelli's remarks on state of proposed Chrysler-Fiat alliance"We cannot, we must not, and we will not let our auto industry simply vanish," Mr. Obama said at the White House.

The remarks came a day after the administration announced the ouster of GM Chief Executive Rick Wagoner and rejected the restructuring plans that GM and Chrysler had hoped would lead to another infusion of government cash. The administration is set to remove the majority of GM's board of directors. One senior administration official said the aim was to start GM "with a clean sheet of paper."

GM's stock fell 25% on the news, down 92 cents to $2.70 in 4 p.m. New York Stock Exchange trading.

The administration's interventions struck a new tone of seriousness amid the recent uproar over executive bonuses at financial companies receiving big government loans. With the auto makers, the government has now laid down stringent terms for new support and raised, in the case of Chrysler, the possibility it could be left to collapse.

At the same time, the administration's new plan is sure to ignite a battle over the government's role in the economy, what sacrifices will be required of labor unions, and whether it makes sense for U.S. taxpayers to assist a foreign company, Fiat, in an alliance with a U.S. company, Chrysler.

As part of their proposed pact, Fiat and Chrysler agreed over the weekend to scale down the Italian auto maker's initial stake in Chrysler to 20% as a condition of the Treasury Department's bailout. Fiat earlier this year struck an agreement to take a 35% stake in Chrysler initially, and up to an additional 20% at a later date.

Many hot-button issues remain unresolved, above all the fortunes of about 140,000 members of the United Auto Workers union and the health-care plan for the group's hundreds of thousands of retirees.

President Obama argued Monday that the U.S. auto industry -- and, by default, its largest component, GM -- was unique in its centrality to the U.S. economy. "This industry is, like no other, an emblem of the American spirit," he said. "It is a pillar of our economy." He went on to insist that the government had no intention of running GM.

His auto team's dissection of what ails GM, on the other hand, underscores how deeply the administration plans to plunge into the finer points of the company's business plan. In a five-page analysis of GM's viability, the team critiqued GM's marquee next-generation project, the electric-powered Chevy Volt, as "too expensive to be commercially successful in the short-term." It notes that much work needs to be done to boost the overall fuel-efficiency of GM's fleet of cars and trucks.

With GM, the Obama administration is interested not just in preserving jobs, but in pushing other policy prescriptions, in particular creating a "company of the future" with clean and energy-efficient vehicles, a frequent campaign theme during Mr. Obama's quest for the presidency.

The auto plan came packaged with several new government initiatives whose price tags remain unclear. The government said it would guarantee the warranties for all new GM and Chrysler cars until the two companies return to health. It also plans to speed up government fleet purchases, and to support a congressional bid to offer large tax incentives for new car purchases, with money for the program coming out of the $787 billion stimulus package. Mr. Obama also said that the Internal Revenue Service was creating a new tax benefit for car buyers.

Auto executives and Obama aides said the bankruptcy route isn't preferred or in anyway preordained. The automakers could avoid that outcome if they manage in coming weeks to strike tough bargains with their shareholders, creditors, and the union. But concessions on that front have so far proved largely elusive, giving the bankruptcy option a much higher likelihood of success.

"We have significant challenges ahead of us, and a very tight timeline," said new GM Chief Executive Fritz Henderson. In a conference call with reporters, Mr. Henderson acknowledged that bankruptcy was very much a possibility. "There are ways to do this out of court, but we're getting ready to do in court if necessary," he said.

GM and Chrysler have had bankruptcy attorneys devising plans to split their companies in two for several months. Mr. Obama's task force has told the companies the administration prefers this route as a way to reorganize the two auto makers, rather than the prolonged out-of-court process that has so far frustrated administration officials, people familiar with the discussions said.

GM looks increasingly like it will in fact be forced into filing for bankruptcy protection, sometime in mid-to-late May, and that the surviving "new GM" would retain select brands and some international operations, said several people familiar with the situation. Stakes in this new GM could be given to creditors and UAW members. It is also possible the new company could be sold whole or in parts to investors.

A key ingredient in acting on this plan is getting the UAW to agree to an entirely new labor contract, including major reductions in health-care benefits, according to several people involved in the matter. "That's the No.1 wild card here," one of these people said Monday.


The Journal's John Stoll says that with billions in taxpayer money on the line, the Obama administration needs to work closely with GM to forge a more dramatic restructuring.
More Video
Obama Gives Auto Makers an UltimatumUnder this plan, the "good" GM wouldn't be expected to hold the tens of billions of dollars in retiree and health care obligations that hurt the auto maker in recent decades. Instead, those obligations would be transferred to an "old GM," made up of less-desirable brands such as Hummer and Saturn, and underperforming plants and other assets.

This part of GM would likely sit in bankruptcy much longer while a buyer is sought for the parts or it is wound down. Proceeds from the sale of old GM would go back to pay claims to various creditors, including the GM retirees.

"That is the plan, to the extent it comports with the bankruptcy laws," said one person familiar with the matter.

On the first day in bankruptcy, people familiar with the matter say, GM would transfer the valued assets to new GM. Then it would launch a marketing and advertising campaign to herald the new company, aiming to comfort consumers about warranties on new and existing vehicles, the resale value of their vehicles and the ability to buy replacement parts.

Mr. Wagoner had participated in the plan's development, along with Mr. Henderson, turnaround veteran Jay Alix and prominent bankruptcy attorney Martin Bienenstock. GM also has veteran bankruptcy lawyer Harvey Miller working for it to help the company prepare for a possible bankruptcy filing.

At Chrysler, bankruptcy would be used to force new labor contracts and rework debt deals with secured creditors. People working on Chrysler's behalf say the approach is risky, because the company is still unsure it could survive even a short-term bankruptcy. Bankruptcy might be pursued in order to meet the Obama administration's demand that Chrysler's creditors agree to huge reductions in their expected recoveries on Chrysler debt.

The "new GM" would have a less-burdened balance sheet than GM currently has. But one debt that would stay with new GM is the $20 billion or so the federal government has lent to it, say these people.

Shares in the new GM likely would be held by the old GM. It could sell them in an initial public offering or offer them to large investors, such as private-equity funds. If a new labor agreement can be reached with the UAW, its retiree health-care fund would likely get either some shares or proceeds from the sale of the stock. Other creditors would also get proceeds.

GM and Chrysler's bankruptcy financing, called debtor-in-possession, would have to be funded by the government at a cost of tens of billions of dollars, say people familiar with the matter.

The administration's plans to pay hardball with both companies and to dive deep into GM drew praise from some quarters on Capitol Hill, but also sparked charges of overreach.

Republican Sen. Bob Corker of Tennessee, a frequent critic of the auto companies, said in a statement that the White House will now "be deciding which plants will survive and which won't" -- decisions he said were best left to a bankruptcy court.

Democratic Rep. John Dingell of Michigan praised the package, but voiced one worry: "I have some concern that if these companies get into bankruptcy, how do they get out? I'm an old bankruptcy lawyer, and bankruptcies have a life of their own."

—Monica Langley contributed to this article.

http://online.wsj.com/article/SB123845591244871499.html

[OneMic15]

ah shiiiiiiiiiiiiiiiiiiiiiiiiiiiiiittt

[Zaleel Larka]

im in the market for a new car for my sister.....ummm

[ElCount]

PRIL 14, 2009, 4:05 P.M. ET
GM Chairman Says Bankruptcy Looms
By SHARON TERLEP

DETROIT -- The interim chairman of General Motors Corp. acknowledged Tuesday that the auto maker is running out of time to reach a deal with stakeholders and the federal government to restructure outside of bankruptcy.

Kent Kresa said the GM board remains convinced that an out-of-court restructuring is the preferred option, but several looming deadlines could impinge on that goal.

"The times are very, very short," Mr. Kresa said in an interview.

Mr. Kresa was installed at the end of March after Chairman and Chief Executive Rick Wagoner was ousted by the White House, which also handed GM a June 1 deadline to revise its restructuring plan or face bankruptcy.

"This is a very difficult thing to do," added Mr. Kresa. "We have some deadlines rapidly approaching and the probabilities are decreasing we can do outside of bankruptcy."

GM faces a Friday deadline to launch a debt-for-equity swap with bondholders that would eliminate much of the company's debt. A deal with bondholders would be needed by then to have the swap under way in time for an impending bond payment.

The government also is pressing for a resolution to talks involving bankrupt car-parts maker Delphi Corp., a former unit of GM that may be forced to liquidate if it can't secure more funding to continue functioning in Chapter 11 bankruptcy, Mr. Kresa said.

GM is surviving on $13.4 billion in U.S. government loans, and Mr. Kresa said GM will need another infusion "very shortly."

The chairman said GM would welcome the government's willingness to let the car maker pay off some of the loans with GM stock. "Certainly, that would be helpful," he said. But any plan that would leave the U.S. government with an ownership stake in GM could be controversial.

The company was able to delay a request for more U.S. funding in March, but continues to burn cash as car sales globally remain weak.

Mr. Kresa said talks this week in Detroit with the White House auto task force have focused on seeking an agreement on what market assumptions GM should use in its revitalization plan. GM believes the assumptions it laid out Feb. 17 will hold up, but is still working to make that case to the task force, Mr. Kresa said.

President Barack Obama on March 30 shot down GM's restructuring plan as too slow and small in scope. The auto maker is working on a new plan but also is crafting a bankruptcy option should its revamping efforts fail. The White House said it would provide GM with enough funding to continue operating until June 1.

Along with cutting a deal with bondholders to swap billions in debt for shares, GM is required by the Obama auto team to reach deep concessions from the United Auto Workers. Talks with the bondholders and union have stalled as each side demands more sacrifice from the other.

GM's preferred bankruptcy plan would break the company into two parts. One would include the company's stronger assets, such as its Chevrolet brand, that would be quickly restructured. The other would be a grouping of GM's failing assets and obligations that could be liquidated over several years in bankruptcy court.

Mr. Kresa said a large team of lawyers and bankruptcy experts is working to develop GM's bankruptcy plan as the company simultaneously works on a new out-of-court scenario.

"Time is not on our side on trying to get things done out of bankruptcy," Mr. Kresa said.

Write to Sharon Terlep at sharon.terlep@dowjones.com

http://online.wsj.com/article/SB123972054506117179.html#articleTabs%3Darticle

[OneMic15]

so banks get 100+ billions and the car company can't even get 15 bill? aint this some bullllllshit

[ElCount]

Yeah there is huge controversy over this because of the special treatment the banksters get.

The argument made is that the collapse of one company in the financial sector, will affect the entire financial sector because the banks are so interconnected. Even insurers like AIG require $170 billion in TARP money in order to be propped up.

Now I don't agree at all with the bailouts of banks or auto makers, but there is a class divide here. Bank employees are considered higher up in the class system where as GM employees are mainly blue collar workers.

[OneMic15]

yeah but GM has sooooo many loyal employees, between my brother, uncle, and my grandfather they have over 70 years of work at GM.


GM fucked up and payed too much however. My brother had a summer job at the Saturn plant here in DE, he got paid $25 an hour, he worked the night shift but still, 25 god damnnnnnn...

[ElCount]

Yeah honestly, between pension liabilities, employees' benefits (such as Healthcare), the company was bound to go bankrupt at some point in time. Although some of the labor rights that were fought through are very beneficial to employees, they're only sustainable during the boom years (which for us was after WW2). Once the competition takes over like Japan right now, the business model turns into a quasi-ponzi scheme. I'm hoping they'll go bankrupt right now, they're just delaying the pain by propping it up.

P.S. Sup with your sig lol?

[lightsout]

does this mean the prices are gonna go down?

[ElCount]

They'd be down if it weren't for the government propping up a failing company right now.

But under bankruptcy the brands /divisions would just go to other healthy companies.

Hopefully because of the recession, demand for cars will continue to call which means prices will fall, which is terrific for me since I need to buy a car.

Although I'm probably going to keep shopping on craigslist anyway.

P.P.S. Off-topic: Has anyone ever been to a car auction and how is it?

[ElCount]

APRIL 14, 2009, 10:50 P.M. ET
U.S. May Take Stake in GM to Pay Off Loans
By JEFFREY MCCRACKEN and SHARON TERLEP

The U.S. government is considering swapping some of the $13.4 billion it lent General Motors Corp. for ownership in a stripped-down version of the auto maker, a move it hopes will push the United Auto Workers union and bondholders to accept similar concessions, said people familiar with the matter.

Interim GM Chairman Kent Kresa said the company would welcome the government's willingness to let it pay off some of the loans with stock. "Certainly that would be helpful," he said in an interview Tuesday.

But the move also could leave the federal government a direct shareholder in the car maker for years to come, a position certain to be controversial.

The government is considering the step because it hasn't had success finding outside private investors for a revamped GM, said a person close to the situation. The government and GM advisers are "creating a new GM on the fly," said this person. The U.S. wants GM's revamping plan to be set by June 1.

The government hasn't said how much of its loans it is willing to swap for GM equity, but doesn't seem to be opposed to swapping all the debt, said this person.

The plan would further enmesh the federal government in a private U.S. company and raise questions about how much a management role the government would take and how long it would own the GM shares.

"If [Obama auto task force head Steve] Rattner acts like the distressed-debt investor he is, then he will hold it for as long as he can and ride it back up before he sells," said one person involved in the process. The Treasury Department didn't return a call seeking comment.

The Treasury is in line to be paid off before GM bondholders or the UAW, which is owed billions of dollars in retiree health-care funds. If the Treasury agrees to convert its debt to equity in a cleaned-up GM -- either outside or inside bankruptcy -- that will put pressure on the other parties to do the same, strengthening the revamped GM, said two people familiar with the situation.

The Obama administration decided a few weeks ago that bankruptcy is the most likely outcome for GM.

Mr. Kresa -- installed in his job by the government at the end of March -- said the car maker is running out of time to restructure outside of bankruptcy. He said GM's board remains convinced that an out-of-court restructuring is preferred, but added that "time is not on our side on trying to get things done out of bankruptcy."

GM is looking to launch a debt-for-equity swap with bondholders by Friday. A deal would be needed by then for the company to shrink its obligations by the time $1 billion in outstanding debt comes due June 1.

The U.S. also is pressing to resolve talks involving car-parts maker Delphi Corp., a former GM unit that may be forced to liquidate if it can't secure funding, Mr. Kresa said. GM shares rose 4% to $1.78 Wednesday on the New York Stock Exchange.

Write to Jeffrey McCracken at jeff.mccracken@wsj.com and Sharon Terlep at sharon.terlep@dowjones.com

http://online.wsj.com/article/SB123972054506117179.html#mod=testMod

[ElCount]

MAY 31, 2009, 8:48 P.M. ET
GM Filing Expected 8 a.m. Monday; Koch to be Named Restructuring Chief
By JEFFREY MCCRACKEN and MIKE SPECTOR

General Motors Corp. is expected to name turnaround executive Al Koch as its new chief restructuring officer to guide the auto maker's trip through Chapter 11 bankruptcy protection, according to people familiar with the matter.

Mr. Koch, a managing director at the advisory firm AlixPartners LLP, will be named to the post when GM files its bankruptcy papers at 8 a.m. Monday at the U.S. Bankruptcy Court in New York's Southern District, these people said. He will be the highest-ranking outsider in GM's management ranks and oversee about 60 Alix employees working for the auto maker.

A veteran turnaround specialist who worked on high-profile bankruptcies such as Kmart Corp., Mr. Koch will oversee a break-up of the company into a government-sponsored "New GM" and a remaining firm that will be left behind and liquidated.

Mr. Koch will report to GM's Chief Executive Frederick "Fritz" Henderson but will also report directly to the company's board of directors.

Assuming a New GM emerges from Chapter 11, Mr. Koch will then sit atop a new, separate management team winding down the "Old GM" that remains in bankruptcy court. In this role, he'll likely report directly to Old GM's board, which will be different from the New GM board.

As the steward of the Old GM, Mr. Koch will help negotiate contracts between the New GM and Old GM for certain services. He'll also lead efforts to spin-off or liquidate Old GM's assets, including the Saturn, Hummer, Saab and Pontiac brands, and as many as 20 factories.

Since December, Mr. Koch has been in regular meetings with GM's top management. He helped develop the auto maker's viability plans requested by the Obama administration, negotiated with the company's shareholders and lenders and readied the Chapter 11 sale of GM's "good" assets to a New GM owned largely by the government. As Alix's main adviser to GM, he also prepared an analysis outlining likely recovery by creditors in the event the auto maker liquidated.

That analysis found "no recovery for unsecured creditors," said a person familiar with the finding. The U.S. Treasury recovery would have been "significantly impaired," said this person, estimating it at less than 50 cents on the dollar.

Other top Alix managing directors on Mr. Koch's team will include Ted Stenger, who worked on Kmart and the collapse of auto-supplier Dana Automotive; Stefano Aversa, president of Alix's European operations and John Hoffecker, an auto industry specialist.

Sixty-seven year old Mr. Koch served as interim chief financial officer of Kmart when it became the largest retailer to seek Chapter 11 protection in 2002. Kmart emerged in 2003, earning Mr. Koch accolades. Kmart merged with Sears in 2005, creating Sears Holdings Corp.

In addition, Mr. Koch served as chairman and chief executive of Champion Enterprises, where he led a turnaround for that manufactured-home builder that avoided bankruptcy.

Mr. Koch "seems like a solid guy with excellent industry experience. And he works for a top firm, so … he'll have good support," said Edward Altman, a New York University professor who focuses on bankruptcies. "Certainly Kmart was a great success in the several years subsequent to its filing, and was the darling of Wall Street in terms of when a company emerges and does well."

But Mr. Altman cautioned that the economy plays a major role in the success of corporate restructurings emerging from Chapter 11, which could work against GM.

Write to Jeffrey McCracken at jeff.mccracken@wsj.com and Mike Spector at mike.spector@wsj.com

http://online.wsj.com/article/SB124380079212769963.html#articleTabs%3Darticle

[ElCount]

GM prepares for bankruptcy protection announcement

General Motors to file Monday for bankruptcy protection, will name Al Koch restructuring chief

Kimberly S. Johnson and Tom Krisher, AP Auto Writers
On Sunday May 31, 2009, 8:18 pm EDT

DETROIT (AP) -- With the clock ticking on a June 1 government deadline to restructure, General Motors Corp. worked feverishly Sunday to shore up its global businesses to clear the way for a speedy reorganization in bankruptcy court.

GM, part of American life for more than 100 years and once the country's largest employer, is expected to file for Chapter 11 bankruptcy protection at 8 a.m. EDT Monday, according to people familiar with the company's plans. They declined to be identified because the plans haven't been officially announced.

GM plans to name turnaround executive Al Koch to serve as its chief restructuring officer to help the company through bankruptcy protection, said a person familiar with the matter. The person, who spoke on condition of anonymity, was not authorized to speak about the appointment publicly.

Koch, a managing director with AlixPartners LLP, is a veteran turnaround specialist who helped Kmart Corp. through its Chapter 11 reorganization. He will lead the separation of the automaker's assets into a "New GM" and the remaining parts of the company that will form "Old GM." Koch will lead the management team that winds down the "Old GM" company once the automaker emerges from bankruptcy.

A majority of the Detroit automaker's unsecured bondholders have accepted a deal viewed as crucial to reorganization, and Germany agreed to loan $2 billion to GM's German unit, Opel, as part of its acquisition by a Canadian auto parts supplier.

The moves don't change much for GM, but better prepare it for a bankruptcy protection filing, said Rebecca Lindland, an auto analyst for the consulting firm IHS Global Insight.

"The more agreements GM has with its interests, the better the bankruptcy is going to go," she said. "It's not a game changer at all."

It would be the largest industrial bankruptcy in U.S. history, and the fourth-largest overall. In addition, a GM bankruptcy would be unprecedented as the federal government would pump billions more into the company, and take a 72.5 percent interest in the automaker.

On Sunday a group of large, institutional bondholders, representing 54 percent of GM bondholders, agreed to exchange their unsecured bonds for a 10 percent stake in a newly restructured company, plus warrants to purchase a greater share later. They had balked at an earlier offer, that gave them 10 percent of the company without the warrants.

The Treasury, which has been guiding the Detroit automaker toward a rescue plan, notified the company Sunday the response was sufficient to move forward with a pre-packaged bankruptcy filing. In a previous exchange offer, the Treasury demanded participation of 90 percent of bondholders, representing unsecured debt of $24 billion.

President Barack Obama is expected to give a speech addressing the Detroit automaker's future just before noon Monday. GM Chief Executive Fritz Henderson has scheduled a news conference in New York to directly follow the president's remarks at 12:15 p.m. EDT.

GM already has received about $20 billion in government loans and could get $30 billion more to make it through what is expected to be a 60- to 90-day reorganization in bankruptcy court.

Beyond the bankruptcy announcement Monday, GM is expected to reveal 14 plants it intends to close and name the buyer of its Hummer division.

In Germany on Sunday, the government agreed to loan GM's Opel unit $2.1 billion, a move necessary for Magna International Inc. to acquire the company.

The Canadian auto parts supplier Magna will take a 20 percent stake in Opel and Russian-owned Sberbank will take a 35 percent, giving the two businesses a majority. GM retains 35 percent of Opel, with the remaining 10 percent going to employees.

The German funds are available to Opel immediately, as it attempts to shield itself from cuts if GM files for bankruptcy protection. Opel employs 25,000 people in Germany, nearly half of GM Europe's work force. Under the deal, four factories in Germany would stay open saving jobs.

But jobs in other European countries may not be safe, Lindland said.

"As those (German) jobs are becoming protected, other jobs in other parts of Europe are put at risk," she said.

Treasury Secretary Timothy Geithner, who was traveling to China, followed the developments closely. The Treasury on Thursday offered bondholders 10 percent of a newly formed GM's stock, plus warrants to buy 15 percent more to erase the debt. Last week, GM withdrew an offer of 10 percent equity after only 15 percent of the thousands of bondholders signed up.

The current 54 percent acceptance represents only $14.6 billion, but by lining up support in advance of a bankruptcy protection filing, GM is likely to find it easier to persuade a judge to apply terms of the sweetened offer to the rest of its unsecured debt.

It could also help the automaker get through the court process more quickly, said Robert Gordon, head of the corporate restructuring and bankruptcy group at Clark Hill PLC in Detroit.

"The more consensus you have, the more likely it is you'll be able to move through the bankruptcy process in an expeditious fashion with less resistance," Gordon said.

The company made a huge stride toward restructuring Friday when the United Auto Workers union agreed to a cost-cutting deal.

GM's fate and the federal government's intervention was scrutinized on several Sunday morning talk shows.

"I think the government auto bailout was a big mistake," said Sen. Mitch McConnell, R-Ky., on CNN's "State of the Union" program. "We could have let these companies go through the bankruptcy process much earlier...without all of the additional government money, and ended up in the same place."

In a typical Chapter 11 bankruptcy case, the company files a plan of reorganization that must be voted on by creditors. In each class of creditors, the plan would have to be approved by holders of two-thirds of the claims and a majority of the number of individual creditors who vote.

But the GM case is anything but ordinary, and it appears the company will sell some or all of its assets to a new entity that would become the new GM, rather than submit a plan to reorganize the old company.

Under a so-called Section 363 sale, the prospective buyer and seller present a fully negotiated asset purchase agreement for approval by the court.

Creditors still can lodge objections, but GM could avoid the drawn-out fights between competing creditors, such as bondholders and workers, that often occur.

Chrysler LLC, which filed for bankruptcy protection April 30, chose a similar path. A judge heard three days of testimony and arguments last week over the sale of most of Chrysler's assets to Italian carmaker Fiat Group SpA.

U.S. Judge Arthur Gonzalez is expected to approve the sale Monday, pushing Chrysler closer to its goal of a speedy exit from bankruptcy protection. But an appeal is likely from three Indiana state pension and construction funds, which invested in Chrysler debt and say the deal isn't fair. That may force Chrysler to further postpone the deal's closing.

GM's stock tumbled to the lowest price in the company's 100-year history on Friday, closing at just 75 cents after trading as low as 74 cents. In a Chapter 11 bankruptcy reorganization, the shares would become virtually worthless.

AP Business Writer Harry R. Weber in Atlanta and Associated Press Writer Ken Thomas in Washington contributed to this report.

http://finance.yahoo.com/news/GM-prepares-for-bankruptcy-apf-15393591.html?sec=topStories&pos=main&asset=&ccode=

[Wil Munny]

Lol, i am staying out this one. I have no problem with any action that is being used to stop the economic bleeding right now. The car industry unlike the banks dont have anyone to blame but themselves. Go red wings!

[BRAND NEW BEGINNING]

I herd Chrysler offered to buy them out.

[ElCount]

JUNE 1, 2009
GM Files for Bankruptcy Protection
By KEVIN HELLIKER, NEIL KING JR. and JOHN D. STOLL

DETROIT -- General Motors Corp. filed for Chapter 11 bankruptcy early Monday, marking the humbling of an American icon that once dominated the global car industry and setting up a high-stakes gamble for U.S. taxpayers. (See the Chapter 11 filing.)

The bankruptcy filing, made in the U.S. Bankruptcy Court in Manhattan, marks the climax of a lengthy debate over the auto maker's future after it sought a bailout from the U.S. government in December to stay alive. In the end, GM couldn't complete its restructuring out of court and filed for bankruptcy-court protection to get billions more in aid from U.S. taxpayers.

The question now facing 56,000 auto workers, 3,600 GM dealers and the Obama administration: Will it work?

The U.S. government has agreed to provide GM with another $30 billion in aid, in addition to the $20 billion the auto maker has already borrowed, to see it through its restructuring and exit from bankruptcy protection. In return, the government will get a controlling stake in the company. The Canadian and Ontario governments are putting in $9.5 billion for a 12.5% stake.

The reorganization faces myriad risks, ranging from legal challenges to the uncertainty of when consumer demand for new cars will rebound. In becoming GM's new owner, the government is also entering largely unexplored terrain filled with political minefields, notably the possibility of meddling by Congress in the company's daily operations and business plans.

In bankruptcy, the auto maker will split apart into two companies: a leaner new GM and a so-called old GM, which will include the pieces that will be wound down. GM intends to accomplish the split through a Section 363 sale, which would transfer the new GM assets to an entity owned by the U.S. and Canadian governments, the United Auto Workers union and the company's unsecured creditors.

Even if a new GM emerges swiftly from bankruptcy, the administration will face a thicket of challenges, including closing more than a dozen factories and shedding the Pontiac, Saturn, Saab and Hummer brands. Shepherding these unwanted parts of GM -- the so-called Old GM -- through liquidation in court could take years, with potential extra costs to taxpayers if the process bogs down.

Monday, GM said it will shutter 17 factories and parts centers by the end of 2011, including seven factories in Michigan and plants in Ohio, Indiana and Tennessee. Two of the closures had been previously announced, including a castings factory in Massena, N.Y., which closed May 1. Three of the facilities to close are parts centers and three factories could reopen if market demand rebounds.

GM's restructuring has been carefully planned by the company itself and the Treasury Department, but it faces some uncertainty now that its fate is in the hands of a bankruptcy judge. The judge chosen to handle the case will have a major impact on the outcome of the case, especially if dissident bondholders mount a legal challenge to the restructuring. There's also the risk that consumers will be scared off by the company's Chapter 11 filing, causing sales to fall even further.

And unknown is how the cost of restructuring both GM and Chrysler LLC would have compared with the cost of letting both companies fail in terms of lost wages, disruptions among car-parts makers and the broader economic fallout. Chrysler, which could emerge from bankruptcy as soon as Monday, will be controlled by Italy's Fiat SpA under its own risky revamping.

Bankruptcy should allow GM to pull off one of the most expedient downsizings in the industry's 120-year history. Long hampered by laws, union strife and management practices that kept it from fast action to fix problems, GM plans to eliminate almost all of its debt, halve its U.S. brands, shutter 2,600 dealers and rewrite labor contracts almost overnight.

Emerging sometime this summer would be a GM with a cleaner balance sheet and slimmer operations than the company that has posted deep losses since 2005. GM has burned through $33.6 billion in cash the past four years.

GM's liquidity has plunged below $10 billion, a person familiar with the situation said Monday. The auto maker's cash levels are now well below how much it would need to operate on its own.

At the end of March, GM had $11.6 billion in liquidity that was largely offset by federal loans. GM had more than $24 billion in liquidity at the end of the first quarter a year ago, as the company's non-U.S. operations helped offset multibillion dollar losses in North America.

GM's restructuring plans, as dictated by the Obama administration, calls for slashing the auto maker's debt to $17 billion from $74 billion. As part of the plan, GM's secured lenders would get par recovery, or face value. The company isn't anticipating tension from the lenders, the person familiar said.

The Obama administration, for its part, has navigated the GM rescue so far with notable speed, clearing away many of the biggest obstacles in just months with less drama than many expected. In six to 18 months, GM could be a publicly traded company again, administration officials said.

Over the weekend, owners of a majority of $27 billion in GM unsecured bonds agreed to a sweetened offer to trade their investment for stock. Days earlier, the UAW signed off on a range of concessions.

GM at the last minute also found buyers for some unwanted subsidiaries, including German-based Opel, which is being acquired by a consortium led by Canadian auto-parts supplier Magna International Inc., and the Hummer brand, whose buyer remained undisclosed.

Long-term success for the company depends on a critical question: When will consumer demand for new cars rebound, and with what force? New-vehicle sales in the U.S. have dropped nearly 40% since January, to an annual rate of fewer than 9.5 million a year. At that level, even Toyota Motor Corp., the world's biggest car maker, is losing money.

Under the restructuring plan, the surviving New GM would break even when the rate of all new-vehicle sales in America reaches 10 million a year. In the view of many analysts, economic recovery should unleash pent-up demand, pushing U.S. sales far past GM's break-even point, though probably not within reach of the historic peak of more than 17 million sales back in 2000.

Yet some worry the New GM will emerge under the same management as its predecessor, minus longtime Chief Executive Rick Wagoner. After pushing out Mr. Wagoner in March, the Obama car task force gave the top job at GM to Frederick "Fritz" Henderson, a 25-year veteran whose father worked at the company.

In an interview Thursday, Mr. Henderson said he understands that federal officials want results. "They're expecting that we'll get the job done," he said.

GM won't prosper without halting the lengthy slide in its U.S. market share, to 22% in 2008 from 45% in 1980. It faces the old perception of poor quality that turned swaths of the American market toward foreign-brand models.

"I won't buy another GM," said Dennis Brown, a banker in Cypress, Calif., whose 1980s-vintage Pontiac Fiero and Chevy Chevette suffered a litany of mechanical problems. Current GM models have fared better in quality rankings.

Beyond quality, trendsetters typically shun Detroit-brand cars, a problem that is especially prevalent among highly educated buyers who also tend to purchase higher-margin vehicles. Car buyers who are college graduates account for 70% of European-brand car sales in the U.S. and 55% of Asian brands -- but only 39% of Detroit-brand car sales, according to J.D. Power & Associates.

GM hopes to counter its image as a maker of gas guzzlers with the 2010 introduction of the electric-powered Chevrolet Volt. Administration officials have played down the market potential of the Volt because of its expected $40,000 price tag, compared with less than $25,000 for the popular Toyota Prius, a hybrid gas-electric. Even at $40,000, moreover, the Volt will struggle to break even because of the cost of its technology.

GM's new deal with the UAW, meantime, promises to deliver considerable cash savings, and has been billed as capable of putting GM's labor costs on a level playing field with key rivals such as Toyota and Honda Motor Co. GM cut hourly costs, such as overtime provisions, supplemental unemployment and entry-level pay rates, by at least $1.5 billion annually.

But the car maker won't be entirely out of the woods. It faces heavy retiree-related costs that will cut into profits on every car and truck it builds.

Because of the way the UAW health-care agreement is set up, GM will still be sending about $600 million to the union annually in the form of preferred stock dividends. Even if GM builds two million vehicles a year in the U.S., a stretch in the current 10-million annual market, it will spend $300 in retiree health-care costs per vehicle it builds in the U.S.

GM faces another challenge related to pension obligations. Once flush thanks to strong investments, GM's pension funds, covering nearly 500,000 Americans, have been drained by the decline in the stock market and by a move by the company to increase pension payments to offset falling health-care benefits and entice older workers to retire early.

As of Dec. 31, GM estimated its U.S. pension funds were underfunded by $12 billion to $13 billion, and would need "significant contributions" as early as 2013.

— (Marie Beaudette, Sharon Terlep and Eric Morath contributed to this story.)
Write to Kevin Helliker at kevin.helliker@wsj.com, Neil King Jr. at neil.king@wsj.com and John D. Stoll at john.stoll@wsj.com

http://online.wsj.com/article/SB124385428627671889.html

[ElCount]

I herd Chrysler offered to buy them out.

Chrysler filed for bankruptcy a month ago.

[Q.F.]

Who drives american cars anyway ???? 2 years on the road them shits is done......one of my professors used to joke that American automobile companies are failing because the ceos all went to business school lol....leave car manufacturing to the germans and japs