UPDATE:New GM Plan Would See US Hold Majority Stake
27 April 2009 - 5:12PM
Dow Jones News
General Motors Corp. (GM) outlined a revamped survival plan
Monday that would leave the U.S. government as its majority owner
in return for an extra $11.6 billion in federal aid.
The plan includes an ambitious debt-swap offer that moves the
auto maker closer to restructuring through the bankruptcy
court.
GM plans to cut an additional staff, halve its dealer network
and kill its Pontiac brand in an effort to secure government
support after its existing proposal was rejected in March.
The company launched an offer for $27 billion in unsecured
public notes that it said would keep it out of court. But Chief
Executive Fritz Henderson said sufficient acceptance of the offer
is far from certain and a Chapter 11 filing is now "more
likely."
GM is surviving on U.S. federal loans and needs to secure deals
with employees, creditors and the U.S. auto task force by a June 1
deadline.
The new plan envisages the U.S. Treasury extending 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. The auto maker expects to get the additional
aid.
Henderson said earlier this month the White House had demanded
"faster, deeper" cost cutting. Under the latest plan, the company
will idle one additional factory and look to eliminate 500
additional dealers.
The hourly job cuts will reduce GM's U.S. work force by 7,000
more workers than outlined in the February viability plan, from
61,000 to 40,000 by 2010. Salaried staff are also expected to be
cut further.
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.
Production of the Pontiac brand will end by next year.
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.
Under the exchange program, 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.
Monday's bond exchange filing represents an important step in
GM's effort to restructure its company, President Barack Obama's
automotive task force said in a statement.
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.
The company added that negotiations regarding contract changes
with the United Auto Workers union are still ongoing.
-By Sharon Terlep, Dow Jones Newswires; 248-204-55329;
sharon.terlep@dowjones.com