GM Expected To Soon Announce Exit From Chapter 11
July 09 2009 - 3:20PM
Dow Jones News
General Motors Corp. (GMGMQ) is expected to leave bankruptcy
protection early Friday after a stay expired on court approval for
the sale of most of its assets to a new entity.
Chief Executive Fritz Henderson will host a press conference at
9 a.m. EDT Friday, joined by Edward Whitacre, who will serve as
chairman of the post-bankruptcy GM, to be called General Motors
Co.
The company is hammering out final details to close the sale
quickly so GM can formally exit Chapter 11, said spokeswoman Julie
Gibson.
The expected move comes after one of the most dramatic federal
interventions in U.S. industrial history, culminating in the
effective privatization of the world's second-largest auto
maker.
GM filed for bankruptcy protection on June 1, and its exit comes
much earlier than many observers expected, amid concerns that a
lengthy process could spill over into the distressed auto-supplier
sector.
GM had estimated the bankruptcy would take 60 to 90 days, though
the process is in on track to be complete in closer to 40. Earlier
this year, GM had warned that the process could take many months,
if not years.
The "new GM" will be dramatically smaller, leaner and less
encumbered by debt than the 100-year-old auto giant being left
behind. As part of the sale, GM's toxic assets will be left behind
as a separate company to be liquidated in a sale expected to last
several years.
The restructuring is expected to wipe out nearly 70% of GM's
crushing debt load. GM entered Chapter 11 with $176 billion in
liabilities to retirees and a legion of lenders, including the U.S.
government, and warranties. A bankruptcy judge said Wednesday the
company will exit with $48 billion in debt. GM's U.S. work force
will shrink dramatically as well, to 68,500 employees by the end of
2009, from 91,000 heading into the year. Also going away are four
of GM's eight U.S. brands, nearly one-third of its nameplates and
hundreds of dealerships.
The U.S. government, keeping GM afloat since December with
billions in federal funds, will be majority owner of the newly
restructured company. Canadian governments, the United Auto Workers
and bondholders in the old GM will hold the remaining stakes.
Amid the change, a familiar face will remain with the new
company. GM Vice Chairman and former product chief Bob Lutz will
stay with GM indefinitely, according to people familiar with the
matter. Lutz stepped down as product czar earlier this year and was
expected to retire fully by the end of 2009.
Lutz, widely credited with breathing new life into GM's flagging
product lineup, asked that he be allowed to remain with the new
company and was allowed to do so, the people familiar said.
In early May, Lutz said in an interview that he would consider
staying if offered a position. "No one has asked me to stay," he
said.
When asked if Lutz might be offered a position at the new GM,
Henderson in late May said that he intended to make use of Lutz's
"invaluable" expertise during his remaining months at the
company.
But Henderson gave no indication that Lutz might be asked to
stay. He said, "We're in the midst of a very orderly transition,
from Bob to Tom (Stephens). Tom has the same commitment to product
quality, the same passion for product, that Bob has. Tom
understands the power of design and the importance of power train
and fuel efficiency."
-By Sharon Terlep, Dow Jones Newswires; 248-204-5532;
sharon.terlep@dowjones.com