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Factbox: GM's bankruptcy

2009-06-02 10:02
Detroit - General Motors Corp filed for bankruptcy on Monday in New York after concessions from the United Auto Workers union and bondholders cleared the way for a smooth reorganisation of the largest US carmaker.

Following are highlights of GM's bankruptcy process.

Creation of a "New GM"

- GM bankruptcy "to clear away the remaining impediments to its successful relaunch."

- A "new" GM will acquire substantially all of the assets from "old" GM needed to implement its business plan and the government will relinquish the majority of its loans to GM.

- Treasury will provide about $30.1 billion to support GM through an expedited Chapter 11 bankruptcy. Treasury does not anticipate providing additional assistance to GM.

- The US government will receive about $8.8 billion in debt and preferred stock in the new GM and about 60 percent of the equity of the reorganised company.

- The governments of Canada and Ontario will lend $9.5 billion to GM and new GM, receiving $1.7 billion of debt and preferred stock and about 12% of equity in the new GM. The Canadian government will have the right to select one initial director.

- "New" GM will establish a Voluntary Employee Beneficiary Association trust (VEBA) that provides healthcare benefits for United Auto Workers retirees. The VEBA will receive 17.5% of new GM's equity and warrants to acquire an additional 2.5%.

- The VEBA will be funded by a note of $2.5 billion payable in three installments ending in 2017 and $6.5 billion in 9% perpetual preferred stock.

- The UAW healthcare trust will select one director to serve in a passive role with no voting rights.

- Treasury will have the right to appoint the initial directors other than those selected by the VEBA trust and the Canadian government.

- Pensions of hourly and salaried workers are to be transferred to the "new" GM.

- Restructuring intended to make GM break-even with US car industry annual sales of 10 million vehicles, from its current break-even point of 16 million units. US car industry sales are running at a 9.5 million annualised rate in 2009.

During bankruptcy process

- Employee salary, wages and ordinary benefits to be paid during the bankruptcy process.

- GM will seek authority at its first day hearing to continue to pay suppliers. The Treasury supplier aid programme will continue to operate, and GM suppliers benefiting from the program will continue to receive that support.

- GM will seek authority to honour customer warranties, dealer incentives for those dealers who are expected to continue to be part of GM's distribution network.

- GM expects to offer an agreement to dealers it plans to terminate for an orderly wind-down of their operations over the next 18 months.

US principles for managing ownership stake

- The US government intends to limit its role as a "reluctant equity owner but careful steward of taxpayer resources."

- The government will seek to dispose of its ownership interests as soon as practicable.

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