GM set to file for bankruptcy
The automaker is likely to declare bankruptcy later today in the biggest industrial failure in US history
The company failed to come up with a viable plan ahead of the June 1st deadline and so will enter chapter 11 protection while its future is decided. The failure will be the third-biggest in US history behind the Lehman Brothers and Worldcom collapses and comes after the company failed to move away from its traditional gas-guzzlers in time.
It is believed that most GM bondholders have agreed to a plan giving them a minimum 10 per cent stake in a restructured company. The government would receive at least 60 per cent of the new entity which would be launched within three months.
Key to the plan is the agreement of US unions, who will see up to twenty thousand workers lose their jobs in the new slimmed-down GM.
A number of factories will need to be closed and brands like Pontiac, Saturn and Saab sold off in a process not without its pitfalls. 2,600 dealerships are also at risk as the company enters a process which could see it become a publicly-listed concern again in six to eighteen months.
The first signs of success in the restructuring process are already evident, with its Hummer brand having found a new, as yet undisclosed, owner. And the European Opel and Vauxhall operations are set to be acquired by Canadian auto-parts manufacturer Magna International.
Business secretary Lord Mandelson was positive on the outlook for the UK’s Vauxhall employees. However the rescue could mean the loss of business for the company's van plant in Luton. Nissan Renault builds its Traffic van there but according to its contract it can change the details of the agreement or remove production entirely if ownership of the factory changes.
WHAT THEY ARE SAYING
Kevin Helliker, Neil King Jr and John D Stoll, Wall Street Journal: "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 per cent since January, to an annual rate of fewer than 9.5m a year. At that level, even Toyota Motor Corp, the world's biggest car maker, is losing money."
Graham Ruddick and James Quinn, Daily Telegraph: "With businesses collapsing due to falls in sales, this will make the rise of the East and emerging markets all the more likely. Car sales in China have overtaken the US for the first time this year, while Beijing Automotive Industry Corporation even made a late bid for GM Europe. The threat of insolvency has been avoided for Vauxhall, but the company and its workforce still face a prolonged period of uncertainty. The corporate empire of GM faces a ruthless break up and the end of some famous brands. A move from Detroit to Chongqing is beginning."