GM Files For Bankruptcy, Chrysler Sale Approved

In a move that has been talked about and prepared for in the last month, General Motors Corp. officially filed for Chapter 11 bankruptcy.

The official announcement came as no surprise as media reports and comments from the carmaker’s spokespersons and automotive industry analysts have made it well-known that the 100-year-old automaker would likely enter bankruptcy protection in order to quickly restructure and to further secure government assistance.

President Obama’s administration announced it will give the struggling automaker US$30 billion in additional taxpayer funds while taking a nearly 60 per cent stake in the company once it restructures. The plan is to quickly restructure the company and move it out of bankruptcy in some 60-90 days. The government has already given the company some US$19.4 billion in December of last year.

“The General Motors board of directors authorized the filing of a Chapter 11 case with regret that this path proved necessary despite the best efforts of so many,” a company statement said. “Today marks a new beginning for General Motors. The board is confident that this New GM can operate successfully in the intensely competitive U. S. market and around the world.”

The company will close 11 plants and idle three others in an effort further reduce capacity and to clean-up its balance sheet.

In a press conference, President Obama said the bankruptcy “will take a painful toll on many Americans who have relied on G. M.”

“I will not pretend the hard times are over,” the president told assembled reporters, adding the reorganization and the plant closings, while painful, are a necessary sacrifice that needed to be made in order for the company to survive and to move forward in developing and producing high-quality and fuel-efficient cars

In related news, a U. S. bankruptcy judge has approved the sale of nearly all of Chrysler’s assets to a group headed by Fiat. Judge Arthur Gonzalez gave his approval to the US$2 billion sale of assets to a new company that will be 68 per cent controlled by a healthcare trust run by the Untied Auto Workers with Fiat controlling a 20 per cent stake in the company and the Canadian and U. S. governments having control over the remaining 12 per cent. Chrysler filed for bankruptcy protection on April 30.