JOIN USA whirlwind 40-day bankruptcy for GM concluded with the closing of a deal that sold key operations and core brands, including Chevrolet and Cadillac, to a new company that will be majority owned by the US Treasury.
The deal was signed between the government and GM executives at the law firm of Weil, Gotshal & Manges, the company’s chief bankruptcy counsel, a source familiar with the company said.
Positive development
Industry analysts viewed the brevity of the bankruptcy as a positive development.
The automaker’s US sales dropped 36 per cent during June when it was mired in bankruptcy, and executives said the relaunch of the company had offered a chance to try to break that negative association for consumers.
Chief Executive Fritz Henderson, who took over as CEO when predecessor Rick Wagoner was ousted by the Obama administration at the end of March, has already detailed plans for a faster-moving and less-bureaucratic company with thinner executive ranks.
GM is cutting its white-collar work force by more than 20 percent by eliminating 6,000 jobs by October. The reduction in executive ranks will slice deeper, with 35 per cent planned.
That bid to shake up GM’s long-criticised corporate culture will be a key issue for Henderson as the 100-year-old automaker seeks to relaunch itself.
New technologies
Another pillar of the plan is GM’s commitment to launch more fuel-efficient cars and to focus its resources on fewer brands, models and dealerships. GM has burned through $40 billion over the past four years and posted losses of more than $80 billion.
The close of court-approved sale marks the completion of an unprecedented effort by the US administration to save GM and Chrysler from liquidation by slashing debt, labor costs and dealerships.
The White House has also disbursed almost $80 billion to shore up the auto industry, including $5 billion in support for auto parts suppliers.
Of the total, $50 billion has been earmarked for GM, emergency financing that will give the US government a more than 60 per cent stake in the new GM. Chrysler exited bankruptcy a month ago after blazing a precedent-setting trail for GM by following an asset sale plan that gave operational control of the smaller automaker to Italy’s Fiat SpA.
New labour contract
The new GM will have slashed its debt and healthcare obligations by $48 billion, dropped almost 40 per cent of the dealers from an unprofitable network and moved to cut loose laggard brands such as Saab, Saturn and Hummer.
The new GM will also take advantage of a new labour contract with the UAW that the company says will put its hourly operating costs on par with Japanese competitors.