The carmaking giant, which at its peak in 1979 was the world’s biggest company employing 850,000 people, is expected to enter Chapter 11 bankruptcy protection today. But only a last-minute deal involving billions of dollars of state aid and the combined efforts of GM’s bondholders, the US and Canadian Government and the UAW auto union prevented an even more gruesome finale - one which would have seen GM broken up and its assets flogged piecemeal to the highest bidders.
Instead, what remains of the firm is now expected to emerge from Chapter 11 in a few days, and thence follow a 90 day schedule to restructure and reorganise. What’s left will be a Government-owned shadow of its former self for sure, but still a going concern at least.
The road to Chapter 11 was opened on Friday, when the bondholders responsible for GM’s corporate debt finally agreed to a debt/equity deal which will give them 10% of the restructured company. The US government – which has already ploughed $20bn into GM, and is expected to announce another $30bn of aid – will own 60%, while the UAW and the Canadian Government will take 17.5% and 12% apiece. It’s a measure of the depths to which the once-mighty US car industry has sunk that what amounts to a government rescue now looks like much the best of the available options.
Not that it is going to be an easy ride, either for employees or investors. GM is going to close 11 plants and leave another three idle, with the predicted loss of at least 20,000 jobs. The Obama administration has also made it quite clear that it expects a radical clear-out of GM’s existing board and senior management, which rather gives the lie to its apparent wish to be hands-off and avoid backseat driver syndrome. And GM shareholders are likely to be so angered by the deal that a serious legal challenge may well be on the cards. Something which could turn the whole situation into even more of a car crash than it is already.
Meanwhile, back here in what our American cousins refer to so quaintly as Yerp, what of the fate of GM’s European arm? Canadian parts business Magna has agreed to take on both Opel in Germany and Vauxhall in the UK, so they have been spared bankruptcy at least. A question mark still hangs over what will happen to Saab, however. Perhaps a consortium of dentists and schoolteachers could club together and buy the firm, given they seem to be only the people who buy the cars? (along with our esteemed editor, of course)
Jobs are under threat all the same, with fears that the brunt may be borne by Vauxhall here in the UK, despite Lord Mandelson’s repeated assurances to the contrary. After all, you don’t have to be Einstein to work out that the German government is going to want to see German jobs protected in return for the billions of Euros they have put into Opel - or that it’s always been much cheaper to make people redundant over here in the UK than it is over there. There's a rocky road ahead for the 5,500 employees at Vauxhall's Ellesmere Port and Luton factories.
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