GM begins a new chapter as bankruptcy filed

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As expected, General Motors, despite all its best efforts and the government’s best efforts, was forced to file to bankruptcy today after it missed the US government deadline. With $82.3 billion in assets and $172.8 billion in debt GM had no option but to file for Chapter 11 proceedings, which it did with a court New York.

GM has more than 100,000 debtors and it hopes some of its unsecured debtors will also recover some of their debts. It is the largest manufacturer to file for bankruptcy, bigger than Chrysler LLC.

However, all is not lost as GM plans to launch a new company in 60 to 90 days, armed with vehicles from its Cadillac, Chevrolet, Buick and GMC units for the U.S. market. The court will supervise the sale or liquidation of unprofitable brands, such as Saturn and Hummer, and at least 11 unwanted factories.

Among GM’s top creditors are the Wilmington Trust Co., representing bondholders owed $22.8 billion; International Union, the United Automobile, Aerospace and Agricultural Implement Workers of America, owed $20.6 billion; and Deutsche Bank AG, representing bondholders owed $4.44 billion.

All saleable assets of GM will be sold, liabilities got rid off and all debt restructured to enable GM to restart operations within 2 to 3 months. It will cancel its franchise agreements, eliminate 1,100 or more dealers and cut jobs. Those employees whose jobs are unsecured will be out and those who are in unions will get some protection.

The iconic automaker has already received $20.57 billion in US treasury loans, and expects to get $30 billion more from the US government as also $9.5 billion from the Canadian government. Taxpayers will get a 60% stake in the company; the union, its creditors and federal and provincial governments in Canada owning the remainder of the company. However, President Obama hopes that the massive aid will help put the company back on its feet.

With the bankruptcy news finally out, shares and bonds of the company actually rose slightly. However shareholders and investors as usual have borne the brunt of the losses as their investments have fallen to a fraction of their original price.

All this leaves Ford as the only independent US Motor company of any note.