DOW JONES NEWSWIRES
General Motors Corp. (GM) said Monday it will cut 21,000 hourly
jobs and eliminate its Pontiac brand by the end of next year as
part of a stepped-up restructuring plan.
The auto maker is also starting an exchange offer for $27
billion of its unsecured public notes as part of its restructuring
plan as the company looks to become viable, saying a successful
exchange offer would allow it to restructure out of bankruptcy
court.
The company is offering to exchange 225 common shares for each
$1,000 principal amount of outstanding notes. The stock closed
Friday at $1.69 a share and shares were recently up 11% at $1.87 in
premarket trading.
The exchange will commence only if 90% of bondholders agree to
the terms. Under the plan, if GM fails to get adequate
participation, it will file for bankruptcy protection.
GM, which is surviving on federal loans, is racing to
restructure by June 1 under close watch of the Obama
administration.
The U.S. Treasury will extend an additional $11.6 billion to GM,
in addition to $15.4 billion in existing loans. The government will
forgive half the debt in exchange for equity in a restructured
GM.
GM, in setting forth unattractive terms for a bond exchange and
requiring almost compete participation, has stepped up the
likelihood for a Chapter 11 filing on June 1 without further
government intervention.
The company said it will focus on four core brands in the U.S. -
Chevrolet, Cadillac, Buick and GMC - as it looks to make fewer
different models and focus on product development programs.
It will also restructure its U.S. dealer organization, reducing
its U.S. dealer count by more than 40% by the end of next year, a
reduction of 500 more dealers four years sooner than its earlier
viability plan.
Chief Executive Fritz Henderson said the company is taking
"tough but necessary actions" that are critical to GM's long-term
viability.
The company added that negotiations regarding contract changes
with the United Auto Workers union are still ongoing.
-By Kerry E. Grace, Dow Jones Newswires; 201-938-5089;
kerry.grace@dowjones.com