General Motors Chapter 11 reorganization
Encyclopedia
The General Motors Chapter 11 sale of the assets of automobile manufacturer General Motors
and some of its subsidiaries was implemented through section 363 of Chapter 11, Title 11, United States Code
in the United States Bankruptcy Court
for the Southern District of New York
. The United States government-endorsed sale enabled the NGMCO Inc ("New GM") to purchase the continuing operational assets of the old GM.
Normal operations, including employee compensation, warranties, and other customer service were uninterrupted during the bankruptcy proceedings.
Operations outside of the United States were not included in the court filing.
The company received debtor-in-possession financing
to complete the process. GM filed for Chapter 11 reorganization in the Manhattan New York federal bankruptcy court on June 1, 2009 at approximately 8:00 am EST. June 1, 2009 was the deadline to supply an acceptable viability plan to the U.S. Treasury. The filing reported US$82.29 billion in assets and US$172.81 billion in debt.
After the Chapter 11 filing, effective Monday, June 8, 2009, GM was temporarily removed from the Dow Jones Industrial Average
and replaced by Cisco Systems
. From Tuesday 2 June, old GM stock has traded Over the Counter
(Pink Sheets
/OTCBB), initially under the symbol GMGMQ and currently under the symbol MTLQQ.
On July 10, 2009, a new entity completed the purchase of continuing operations, assets and trademarks of GM as a part of the 'pre-packaged' Chapter 11 reorganization.
As ranked by total assets, GM's bankruptcy marks one of the largest corporate Chapter 11 bankruptcies in U.S. history. The Chapter 11 filing was the fourth-largest in U.S. history, following Lehman Brothers Holdings Inc.
, Washington Mutual
and WorldCom Inc.
A new entity with the backing of the United States Treasury was formed to acquire profitable assets, under section 363 of the Bankruptcy Code, with the new company planning to issue an initial public offering
(IPO) of stock in 2010. The remaining pre-petition creditors claims are paid from the former corporation's assets.
General Motors was financially vulnerable before the automotive industry crisis of 2008-2009. In 2005 the company posted a loss of US$10.6 billion.
In 2006, its attempts to obtain U.S. government financing to support its pension liabilities and also to form commercial alliances with Nissan and Renault
failed. For fiscal year 2007, GM's losses for the year were US$38.7 billion, and sales for the following year dropped by 45%.
On November 7, 2008 General Motors reported it had projected it would run out of cash around mid-2009 without a combination of government funding, a merger, or sales of assets.
Ten days later General Motors representatives, along with executives from Ford
and Chrysler
testified about their need for financial aid at a Congressional hearing in Washington D.C. All three companies were unsuccessful in their attempts to obtain legislation to authorize U.S. government aid, and were invited to draft a new action plan for the sustainability of the industry.
On December 2, 2008, General Motors submitted its "Restructuring Plan for Long-Term Viability" to the Senate Banking Committee and House of Representatives Financial Services Committee. Congress declined to act, but in December 2008 the Bush administration provided a "bridge loan" to General Motors with the requirement of a revised business plan.
It said it needed $4.6 billion in loans within weeks, from the $18 billion it had already requested, and an additional $12 billion in financial support in order to stave off bankruptcy.
On Feb. 26, 2009, General Motors announced that its cash reserves were down to $14 billion at the end of 2008. G.M. lost $30.9 billion, or $53.32 a share, in 2008 and spent $19.2 billion of its cash reserves. Mr. Wagoner met with President Obama’s auto task force, and the company said that it could not survive much longer without additional government loans.
On the March 30, 2009 deadline President Barack Obama
declined to provide financial aid to General Motors, and requested that General Motors produce credible plans, saying that the company's proposals had avoided tough decisions, and that Chapter 11 bankruptcy appeared the most promising way to reduce its debts, by allowing the courts to compel bondholders
and trade union
s into settlements. GM Chairman and CEO Rick Wagoner
was also forced to resign. GM bondholders rejected the government's first offer, but the unions agreed to the preferential terms. A bondholder debt to equity counteroffer was ignored.
United States government officials suggested that, if they were satisfied with the company's plans to restructure, the U.S. government would take at least a 50% equity stake and reserve the right to name board members
.
On 31 May 2009 news broke that the U.S. would initially likely become the largest shareholder of the reorganized GM following a bankruptcy filing and re-emergence from bankruptcy. The U.S. government would invest up to $50 billion and own 60% of the new GM and the Canadian government would own 12.5%.
Some observers also claimed that creditors were encouraged to push GM into bankruptcy protection because it would trigger a credit event, and thus a beneficial financial payout, on credit default swaps held by these creditors. Due to a lack of transparency, there was no way to find out who the CDS protection buyers and protection writers were, and they were subsequently left out of the negotiation process.
On May 27, 2009, the U.S. Treasury, advanced a secured loan of US$ 360.6 million to GM, and GM issued a note to the Treasury for US$ 360.6 million, plus US$ 24.1 million as additional compensation for the warranty advance, pursuant to the terms of the Warranty Agreement dated December 31, 2008 between GM and the U.S. Treasury. The loan funded a separate account established by GM Warranty LLC, a new special purpose subsidiary of GM that was formed to operate the warranty program. GM also on May 29, 2009 contributed $49.2 million to GM Warranty LLC to fund the program.
(Opel
plus Vauxhall
, minus Saab
) assets to a separate company majority-owned by a consortium led by Sberbank
of Russia (35%), Magna International
of Canada (20%), and Opel employees and car dealers (10%). GM was expected to keep a 35% minority stake in the new company. It was announced on November 3, 2009, that the GM board had decided not to sell off Opel.
that is owned by GM itself, filed for bankruptcy protection there, followed in the same court by General Motors Corporation (the main GM in Detroit), GM's subsidiary Saturn LLC, and Saturn LLC's subsidiary Saturn Distribution Corporation. All cases were assigned to Judge Robert Gerber
.
The filing by the dealership declared General Motors to be a debtor in possession
. The dealership's filing allowed General Motors to file its own bankruptcy petition in the Southern District court of Manhattan, New York, its preferred court. Normally for such cases, the company would have filed in the courts located in the state(s) where the company is incorporated, or where it conducts operations, which for Detroit-headquartered General Motors would have been the courts in Michigan
or Delaware
, where it is incorporated. General Motors' attorneys, however, preferred to file in the federal courts in New York, because those courts have a reputation for expertise in bankruptcy.
In a press conference that began four hours and 18 minutes after the filing, the GM Chief Executive Officer, Fritz Henderson, stressed that he intended for the bankruptcy process to move quickly.
In addition to Mr Henderson's press conference, President of the United States
Barack Obama
made a speech from the White House
four hours and three minutes after the court filing.
General Motors Corp.", and was case number 09-50026 in the Southern District, Manhattan, New York.
General Motors was represented by the New York specialist law firm Weil, Gotshal & Manges. The United States Treasury was represented by the United States Attorneys Office for the Southern District of New York and Cadwalader, Wickersham & Taft LLP. An ad hoc group of the bondholders of General Motors Corporation was also represented in court.
One of the first motions filed in court was one to void the leases on the seven corporate jets, and corporate aircraft hangar at Detroit Metropolitan Wayne County Airport, for being no longer valuable to the company's business — a lease that the company had, according to its spokesman, found itself unable to escape in 2008 when it had tried to.
On June 1, 2009, the court gave interim approval to GM's request to borrow US$ 15 billion as debtor-in-possession funding, the company only having US$ 2 billion cash in hand. The United States Treasury argued in court that it was the only source of such debtor in possession funding, and that without the money from the loan General Motors would have no option but liquidation
. Other motions in the first-day hearing included motions to approve payments to key suppliers and to employees and distributors who are in possession of goods manufactured for General Motors. All motions passed in court without substantial objection.
The case schedule laid out by the court is as follows:
and provincial government of Ontario
with a 12% stake, the United
and Canadian Auto Workers
unions with a 17.5% stake, and the unsecured bondholders of General Motors with a 10% stake. The selling company is called Motors Liquidation Company
(see below).
A creditor meeting, at the New York Hilton Hotel
, held by the United States Trustee Program
, was scheduled for June 3, 2009.
brand would be discontinued.
On October 9, they reached an agreement to sell their entire stake in the Hummer brand to China
-based Sichuan Tengzhong Heavy Industrial Machinery Company
Ltd. and a group of private investors (Mr. Suolang Duoji, a private entrepreneur with holdings that include the Hong Kong-listed thenardite producer Lumena, would have held the remaining 20 percent stake.) The sale would have net GM around $150 million. The deal would have included manufacturing to continue in the two plants that GM already uses to produce the Hummer trucks through June 2011, with a possible extension until 2012.
On February 24, 2010, GM announced that the sale could not be completed with Sichuan Tengzhong and that they would discontinue the brand. They were approached by several other companies interested in purchasing the Hummer
brand and began reviewing potential buyers. However, in the end no sale could be finalised and Hummer was declared defunct on 24th May 2010.
. GM was to continue to build the Aura
, Outlook
and Vue
for Penske for two years, however, as of September 30, 2009, the deal had fallen through. Penske had asked GM to extend the time it was to build Saturns until it could reach a deal with the Renault Group for vehicle replacements in 2012, but since that deal fell through Penske cancelled the planned sale. GM has said that the Saturn brand will be phased out by the end of the 2009 model year, and the brand was declared defunct on 31st October 2010.
and a group of Norwegian investors planned to acquire the Saab
brand from General Motors
. GM would have continued to supply architecture and powertrain technology for an unspecified amount of time. On November 24, 2009 it was announced that the sale of Saab to the Koenigsegg Group had collapsed.
"We're obviously very disappointed with the decision to pull out of the Saab purchase," said GM CEO Fritz Henderson in a statement. "Given the sudden change in direction, we will take the next several days to assess the situation and will advise on the next steps next week."
On February 23, 2010 GM sold Saab to Spyker Cars
, later renamed Swedish Automobile.
with the new company planning to issue an initial public offering
(IPO) of stock in 2010.
As part of a reorganization plan agreed to with the U.S., Canadian and Ontario governments, and the company's unions, General Motors filed for Chapter 11 Bankruptcy protection in a Manhattan court in New York on June 1, 2009, at approximately 8:00 am. The case was assigned to U.S. Bankruptcy Judge Robert Gerber
. Gerber presided over the bankruptcy of Adelphia Communications Corp.
Shortly after the Chapter 11 filing, it was announced that as of Monday, June 8, 2009, GM would be removed from the Dow Jones Industrial Average
, to be replaced by Cisco Systems
. This coincided with the announcement that Citigroup Financial would also be removed and replaced by insurer, Travelers Co. Beginning June 2, GM stock traded on the Pink Sheets
under the symbol GMGMQ. On July 15, the stock symbol was changed to MTLQQ.
General Motors filed for a government-assisted Chapter 11 bankruptcy protection
on June 1, 2009, with a plan to re-emerge as a less debt-burdened organization.
The chapter 11 petition was filed in the federal court in Manhattan, New York. The filing reported US$82.29 billion in assets.
The company expressed optimism in the future success of the "New GM." As ranked by total assets, the Chapter 11 reorganization is one of the largest successful corporate reorganizations in U.S. history, and the fourth-largest bankruptcy in U.S. history by total assets, following Lehman Brothers Holdings Inc.
, Washington Mutual
and WorldCom Inc.
The "new GM," is formed from the purchase of the desirable assets of "old GM" by an entity called "NGMCO Inc." via the bankruptcy process. NGMCO Inc. was renamed to "General Motors Company" upon purchase of the assets and trade name from "old GM," with the claims of former stakeholders to be handled by the "Motors Liquidation Company
." The purchase was supported by $50 billion in U.S. Treasury loans, giving the U.S. government a 60.8% stake. The Queen of Canada, in right of both Canada
and Ontario
, holds 11.7% and the United Auto Workers
, through its health-care trust (VEBA
), holds a further 17.5%. The remaining 10% is held by unsecured creditor
s.
On July 10, 2009, GM reported 88,000 U.S. employees, and announced plans to reduce its U.S. workforce to 68,000 by the end of 2009 after filing for bankruptcy.
On July 10, 2009, a new entity, NGMCO Inc. purchased the ongoing operations and trademarks from GM.
The purchasing company in turn changed its name from NGMCO Inc. to General Motors Company, marking the emergence of a new operation from the "pre-packaged" Chapter 11 reorganization.
Under the reorganization process, termed a 363 sale (for Section 363 which is located in Title 11
, Chapter 3, Subchapter IV of the United States Code
, a part of the Bankruptcy Code), the purchaser of the assets of a company in bankruptcy proceedings is able to obtain approval for the purchase from the court prior to the submission of a re-organization plan, free of liens and other claims. It’s used in most Chapter 11 cases that involve a sale of property or other assets. This process is typical of large organizations with complex branding and intellectual property rights issues upon exiting bankruptcy.
The new company plans to issue an initial public offering
(IPO) of stock in 2010.
The remaining pre-petition creditors claims are paid from assets of the Motors Liquidation Company
(stock symbol MTLQQ), the new name of the former General Motors Corporation. The directors of Motors Liquidation Company have stated that they believe shares in the company (the "old" GM) will have no value since the company has far more debts than assets.
On July 23, 2009 GM announced its new Board of Directors: Daniel Akerson
(of the Carlyle Group
), David Bonderman
(of TPG Capital), Robert D. Krebs (a former railroad executive), Patricia F. Russo (the former CEO of Alcatel-Lucent
), Ed Whitacre
(GM Chairman) and Fritz Henderson
(GM CEO).
The U.S. Treasury financed a new company to purchase the operating assets of the old GM company in bankruptcy proceedings in the 'pre-packaged' Chapter 11 reorganization in July 2009.
and has adopted a new corporate identity. The practice of putting the "GM Mark of Excellence" on every car, no matter what the brand, was discontinued in August, 2009. The company has moved from a corporate-endorsed hybrid brand architecture structure, where GM underpinned every brand to a multiple brand corporate invisible brand architecture structure. The company's familiar square blue "badge" has been removed from the Web site and advertising, in favor of a new, subtle all-text logo treatment.
for Chrysler LLC
, potentially merging two of Detroit's "Big Three" automakers. Acquisition talks involving Chrysler were cancelled, however, before November 7, 2008, as part of a broader response to the increasing urgency of GM's own cash flow problems. That was a result of Chrysler's senior bank debt currently trading at less than 50 cents on the dollar and because Chrysler's other owner – Daimler, formerly DaimlerChrysler – recently revalued its 19.9% Chrysler stake down to zero, which may or may not reflect its value in a potential sale.
December 12, 2008: General Motors stated that it was nearly out of cash, and may not survive past 2009. The U.S. Senate voted and strongly opposed any source of government assistance through a bailout bridge loan (originally worth $14 billion in emergency aid) which was aimed toward helping the struggling Big Three
automakers financially, despite strong support from President George W. Bush
and President-elect Barack Obama
, along with some mild support from the Democratic and Republican political parties.
Prior to the U.S. Senate's announcement, General Motors announced that it had hired several lawyers to discuss the possibility of filing for bankruptcy
, with Chapter 11 bankruptcy being one of the options discussed. GM stated that "all options are on the table" for the company. Chrysler LLC, which is owned by Cerberus Capital Management
, in a similar financial situation, warned that it, too, was nearly out of cash and might not survive much longer.
December 18, 2008: President Bush announced that an "orderly" bankruptcy was one option being considered for both General Motors and Cerberus
-owned Chrysler LLC. Sources said that setting up this type of "orderly" bankruptcy would be complicated because it would not only involve talks with the automakers, but also the unions and other stakeholders would have to be involved.
December 19, 2008: President Bush approved a bailout plan and gave General Motors and Chrysler $13.4 billion in financing from TARP (Troubled Assets Relief Program
) funds, as well as $4 billion to be "withdrawn later."
As of February 14, 2009: General Motors was considering filing for Chapter 11 bankruptcy
under a plan that would assemble all of their viable assets, including some U.S.
brands and international operations, into a new company. Less than a week later, its Saab subsidiary filed for bankruptcy protection in Sweden.
March 5, 2009: GM's independent public accounting firm (Deloitte & Touche) issued a qualified opinion as part of GM's 2008 annual report that stated "[these conditions] raise substantial doubt about its ability to continue as a going concern
." A qualified going concern audit letter like this is only issued by the auditors when the company is in extreme financial distress and it is likely that it may file for bankruptcy protection.
March 12, 2009: GM's CFO Ray Young said that it would not need the requested $2B in March noting that the cost-cutting measures are starting to take hold.
March 29, 2009: GM's Chairman and CEO, Rick Wagoner
, agreed to immediately resign his position as part of an Obama administration automotive restructuring plan. Wagoner was replaced by Fritz Henderson. In announcing that plan, on March 30, 2009, President Obama stated that both GM and Chrysler
may need to use "our bankruptcy code
as a mechanism to help them restructure quickly and emerge stronger." He also announced that the warranties on cars made by these companies would be guaranteed by the U.S. Government.
March 31, 2009: President Barack Obama
announced that he would give GM 60 additional days to try and restructure their company and prove their viability. If they succeeded, Washington would provide General Motors with additional bridge loans. However, if GM could meet the requirements set by the White House, a prepackaged bankruptcy is probable. President Obama reiterated that GM will be part of the future even if bankruptcy is necessary.
April 22, 2009: GM stated that it will not be able to make their June 1, 2009 debt payment.
April 24, 2009: GM announced that they will be scrapping the Pontiac brand in an effort to invest more money into their major brands (Buick, Cadillac, Chevrolet, and GMC).
May 4, 2009: German Economy Minister Karl-Theodor zu Guttenberg said Fiat
(among others) might be interested in the GM European unit.
June 1, 2009: GM filed for Chapter 11 Bankruptcy
, the fourth largest filing in the United States
history after Lehman Brothers
, Washington Mutual
, and Worldcom.
July 10, 2009: A new company financed by the United States Treasury, "NGMCO Inc" purchased the most of the assets, and the trademarks of the General Motors Corporation. Vehicle Acquisition Holdings LLC then changed its name to "General Motors Company". The General Motors Corporation (old GM) in turn changed its name to "Motors Liquidation Company" and it continued in bankruptcy proceedings to settle with its bondholders, and on other liabilities. The new GM company, after the purchase of most of the assets of "old GM" is not a participant in the continuing bankruptcy proceedings of Motors Liquidation Company (Old GM). The "new GM" is mostly owned by the United States Government.
. It continued its bankruptcy court proceedings which will ultimately lead to settling liability claims.
Motors Liquidation Company announced on July 10, 2009 in relation to its equity and debt investors:
Motors Liquidation Company's stock symbol was changed from GMGMQ to MTLQQ, effective July 15, 2009.
The domain name
gm.com attracted at least 7 million visitors annually by 2008.
Some congressmen were critical of the statement that GM had repaid the loan from TARP calling it a "lie to the American people". At issue is the money for the loan repayment came from other bailout funds housed in an escrow account belonging to the company. In a letter from Rep. Darrell Issa and Rep. Jim Jordan to Ed Whitacre, it is called an "attempt to disguise what is merely the exchange of one pool of taxpayer money for another pool of taxpayer money as 'real progress'". Senator Charles E. Grassley, Republican of Iowa called it a government-enabled “TARP money shuffle.”
The Competitive Enterprise Institute said it filed a false-advertising complaint with the Federal Trade Commission.
General Motors
General Motors Company , commonly known as GM, formerly incorporated as General Motors Corporation, is an American multinational automotive corporation headquartered in Detroit, Michigan and the world's second-largest automaker in 2010...
and some of its subsidiaries was implemented through section 363 of Chapter 11, Title 11, United States Code
Chapter 11, Title 11, United States Code
Chapter 11 is a chapter of the United States Bankruptcy Code, which permits reorganization under the bankruptcy laws of the United States. Chapter 11 bankruptcy is available to every business, whether organized as a corporation or sole proprietorship, and to individuals, although it is most...
in the United States Bankruptcy Court
United States bankruptcy court
United States bankruptcy courts are courts created under Article I of the United States Constitution. They function as units of the district courts and have subject-matter jurisdiction over bankruptcy cases. The federal district courts have original and exclusive jurisdiction over all cases arising...
for the Southern District of New York
United States District Court for the Southern District of New York
The United States District Court for the Southern District of New York is a federal district court. Appeals from the Southern District of New York are taken to the United States Court of Appeals for the Second Circuit The United States District Court for the Southern District of New York (in case...
. The United States government-endorsed sale enabled the NGMCO Inc ("New GM") to purchase the continuing operational assets of the old GM.
Normal operations, including employee compensation, warranties, and other customer service were uninterrupted during the bankruptcy proceedings.
Operations outside of the United States were not included in the court filing.
The company received debtor-in-possession financing
Debtor-in-possession financing
Debtor-in-possession financing or DIP financing is a special form of financing provided for companies in financial distress or under Chapter 11 bankruptcy process. Usually, this security is more senior than debt, equity, and any other securities issued by a company...
to complete the process. GM filed for Chapter 11 reorganization in the Manhattan New York federal bankruptcy court on June 1, 2009 at approximately 8:00 am EST. June 1, 2009 was the deadline to supply an acceptable viability plan to the U.S. Treasury. The filing reported US$82.29 billion in assets and US$172.81 billion in debt.
After the Chapter 11 filing, effective Monday, June 8, 2009, GM was temporarily removed from the Dow Jones Industrial Average
Dow Jones Industrial Average
The Dow Jones Industrial Average , also called the Industrial Average, the Dow Jones, the Dow 30, or simply the Dow, is a stock market index, and one of several indices created by Wall Street Journal editor and Dow Jones & Company co-founder Charles Dow...
and replaced by Cisco Systems
Cisco Systems
Cisco Systems, Inc. is an American multinational corporation headquartered in San Jose, California, United States, that designs and sells consumer electronics, networking, voice, and communications technology and services. Cisco has more than 70,000 employees and annual revenue of US$...
. From Tuesday 2 June, old GM stock has traded Over the Counter
Over-the-counter (finance)
Within the derivatives markets, many products are traded through exchanges. An exchange has the benefit of facilitating liquidity and also mitigates all credit risk concerning the default of a member of the exchange. Products traded on the exchange must be well standardised to transparent trading....
(Pink Sheets
Pink Sheets
OTC Markets Group, Inc., informally known as "Pink Sheets", is a private company that provides services to the U.S. over-the-counter securities market including electronic quotations, trading, messaging, and information platforms. According to the U.S. Securities and Exchange Commission, OTC...
/OTCBB), initially under the symbol GMGMQ and currently under the symbol MTLQQ.
On July 10, 2009, a new entity completed the purchase of continuing operations, assets and trademarks of GM as a part of the 'pre-packaged' Chapter 11 reorganization.
As ranked by total assets, GM's bankruptcy marks one of the largest corporate Chapter 11 bankruptcies in U.S. history. The Chapter 11 filing was the fourth-largest in U.S. history, following Lehman Brothers Holdings Inc.
Lehman Brothers
Lehman Brothers Holdings Inc. was a global financial services firm. Before declaring bankruptcy in 2008, Lehman was the fourth largest investment bank in the USA , doing business in investment banking, equity and fixed-income sales and trading Lehman Brothers Holdings Inc. (former NYSE ticker...
, Washington Mutual
Washington Mutual
Washington Mutual, Inc. , abbreviated to WaMu, was a savings bank holding company and the former owner of Washington Mutual Bank, which was the United States' largest savings and loan association until its collapse in 2008....
and WorldCom Inc.
MCI Inc.
MCI, Inc. is an American telecommunications subsidiary of Verizon Communications that is headquartered in Ashburn, Virginia...
A new entity with the backing of the United States Treasury was formed to acquire profitable assets, under section 363 of the Bankruptcy Code, with the new company planning to issue an initial public offering
Initial public offering
An initial public offering or stock market launch, is the first sale of stock by a private company to the public. It can be used by either small or large companies to raise expansion capital and become publicly traded enterprises...
(IPO) of stock in 2010. The remaining pre-petition creditors claims are paid from the former corporation's assets.
Background
| Old GM (before July 10, 2009) | New GM (after July 10, 2009) | |
|---|---|---|
|
Brands |
Buick Buick is a premium brand of General Motors . Buick models are sold in the United States, Canada, Mexico, China, Taiwan, and Israel, with China being its largest market. Buick holds the distinction as the oldest active American make... Cadillac Cadillac is an American luxury vehicle marque owned by General Motors . Cadillac vehicles are sold in over 50 countries and territories, but mostly in North America. Cadillac is currently the second oldest American automobile manufacturer behind fellow GM marque Buick and is among the oldest... Chevrolet Chevrolet , also known as Chevy , is a brand of vehicle produced by General Motors Company . Founded by Louis Chevrolet and ousted GM founder William C. Durant on November 3, 1911, General Motors acquired Chevrolet in 1918... GM Daewoo GM Korea Company is South Korea's second largest automobile manufacturer and is a division of the General Motors Company. GM Korea's roots go back to the former Daewoo which was split from its parent company, Daewoo Group, in 2001... (70.1%) GMC GMC may refer to:* Ganglion mother cell, a cell in the developing nervous system that divides once to produce two neurons* General motion control, a field of motion control concerned with single- and multi-axis motion controllers, intelligent drives, servo and stepper motors* Generalized Method of... Holden GM Holden Ltd is an automaker that operates in Australia, based in Port Melbourne, Victoria. The company was founded in 1856 as a saddlery manufacturer. In 1908 it moved into the automotive field, before becoming a subsidiary of the U.S.-based General Motors in 1931... Opel Adam Opel AG, generally shortened to Opel, is a German automobile company founded by Adam Opel in 1862. Opel has been building automobiles since 1899, and became an Aktiengesellschaft in 1929... Vauxhall Motors Vauxhall Motors is a British automotive company owned by General Motors and headquartered in Luton. It was founded in 1857 as a pump and marine engine manufacturer, began manufacturing cars in 1903 and was acquired by GM in 1925. It has been the second-largest selling car brand in the UK for... |
| 5,900 | US Dealerships | 5,000 |
| Common shareholders, bondholders and secured creditors | Ownership | The United States Treasury United States Department of the Treasury The Department of the Treasury is an executive department and the treasury of the United States federal government. It was established by an Act of Congress in 1789 to manage government revenue... , the Canada Development Investment Corporation Canada Development Investment Corporation The Canada Development Investment Corporation is a Canadian Crown corporation assigned with management of investments and corporate interests of the Crown, making purchases and sales of assets on behalf of the Queen-in-Council... , Government of Ontario Government of Ontario The Government of Ontario refers to the provincial government of the province of Ontario, Canada. Its powers and structure are set out in the Constitution Act, 1867.... , Old GM bondholders, and UAW and CAW Canadian Auto Workers The Canadian Auto Workers is one of Canada's largest and highest profile social unions. While rooted in Ontario's large auto plants of Windsor, Brampton, Oakville, St... unions |
| 47 | US Plants | 34 |
| US $94.7 B | Debt | US $17 B |
| 91,000 | US employees | 68,500 |
General Motors was financially vulnerable before the automotive industry crisis of 2008-2009. In 2005 the company posted a loss of US$10.6 billion.
In 2006, its attempts to obtain U.S. government financing to support its pension liabilities and also to form commercial alliances with Nissan and Renault
Renault
Renault S.A. is a French automaker producing cars, vans, and in the past, autorail vehicles, trucks, tractors, vans and also buses/coaches. Its alliance with Nissan makes it the world's third largest automaker...
failed. For fiscal year 2007, GM's losses for the year were US$38.7 billion, and sales for the following year dropped by 45%.
On November 7, 2008 General Motors reported it had projected it would run out of cash around mid-2009 without a combination of government funding, a merger, or sales of assets.
Ten days later General Motors representatives, along with executives from Ford
Ford Motor Company
Ford Motor Company is an American multinational automaker based in Dearborn, Michigan, a suburb of Detroit. The automaker was founded by Henry Ford and incorporated on June 16, 1903. In addition to the Ford and Lincoln brands, Ford also owns a small stake in Mazda in Japan and Aston Martin in the UK...
and Chrysler
Chrysler
Chrysler Group LLC is a multinational automaker headquartered in Auburn Hills, Michigan, USA. Chrysler was first organized as the Chrysler Corporation in 1925....
testified about their need for financial aid at a Congressional hearing in Washington D.C. All three companies were unsuccessful in their attempts to obtain legislation to authorize U.S. government aid, and were invited to draft a new action plan for the sustainability of the industry.
On December 2, 2008, General Motors submitted its "Restructuring Plan for Long-Term Viability" to the Senate Banking Committee and House of Representatives Financial Services Committee. Congress declined to act, but in December 2008 the Bush administration provided a "bridge loan" to General Motors with the requirement of a revised business plan.
It said it needed $4.6 billion in loans within weeks, from the $18 billion it had already requested, and an additional $12 billion in financial support in order to stave off bankruptcy.
On Feb. 26, 2009, General Motors announced that its cash reserves were down to $14 billion at the end of 2008. G.M. lost $30.9 billion, or $53.32 a share, in 2008 and spent $19.2 billion of its cash reserves. Mr. Wagoner met with President Obama’s auto task force, and the company said that it could not survive much longer without additional government loans.
On the March 30, 2009 deadline President Barack Obama
Barack Obama
Barack Hussein Obama II is the 44th and current President of the United States. He is the first African American to hold the office. Obama previously served as a United States Senator from Illinois, from January 2005 until he resigned following his victory in the 2008 presidential election.Born in...
declined to provide financial aid to General Motors, and requested that General Motors produce credible plans, saying that the company's proposals had avoided tough decisions, and that Chapter 11 bankruptcy appeared the most promising way to reduce its debts, by allowing the courts to compel bondholders
Bond (finance)
In finance, a bond is a debt security, in which the authorized issuer owes the holders a debt and, depending on the terms of the bond, is obliged to pay interest to use and/or to repay the principal at a later date, termed maturity...
and trade union
Trade union
A trade union, trades union or labor union is an organization of workers that have banded together to achieve common goals such as better working conditions. The trade union, through its leadership, bargains with the employer on behalf of union members and negotiates labour contracts with...
s into settlements. GM Chairman and CEO Rick Wagoner
Rick Wagoner
George Richard "Rick" Wagoner, Jr. is an American businessman and former Chairman and Chief Executive Officer of General Motors. Wagoner resigned as Chairman and CEO at General Motors on March 29, 2009, at the request of the White House...
was also forced to resign. GM bondholders rejected the government's first offer, but the unions agreed to the preferential terms. A bondholder debt to equity counteroffer was ignored.
Earlier restructuring efforts
Efforts to sell General Motors' European operations ran into difficulties, as the corporation was expected to file for bankruptcy protection by June 1, 2009.United States government officials suggested that, if they were satisfied with the company's plans to restructure, the U.S. government would take at least a 50% equity stake and reserve the right to name board members
Board of directors
A board of directors is a body of elected or appointed members who jointly oversee the activities of a company or organization. Other names include board of governors, board of managers, board of regents, board of trustees, and board of visitors...
.
On 31 May 2009 news broke that the U.S. would initially likely become the largest shareholder of the reorganized GM following a bankruptcy filing and re-emergence from bankruptcy. The U.S. government would invest up to $50 billion and own 60% of the new GM and the Canadian government would own 12.5%.
Some observers also claimed that creditors were encouraged to push GM into bankruptcy protection because it would trigger a credit event, and thus a beneficial financial payout, on credit default swaps held by these creditors. Due to a lack of transparency, there was no way to find out who the CDS protection buyers and protection writers were, and they were subsequently left out of the negotiation process.
U.S. government-backed guarantee of warranties
On March 29, 2009 The U.S Treasury committed to fund a government guarantee of General Motors' warranty liabilities, up to US$ 360.6 million.On May 27, 2009, the U.S. Treasury, advanced a secured loan of US$ 360.6 million to GM, and GM issued a note to the Treasury for US$ 360.6 million, plus US$ 24.1 million as additional compensation for the warranty advance, pursuant to the terms of the Warranty Agreement dated December 31, 2008 between GM and the U.S. Treasury. The loan funded a separate account established by GM Warranty LLC, a new special purpose subsidiary of GM that was formed to operate the warranty program. GM also on May 29, 2009 contributed $49.2 million to GM Warranty LLC to fund the program.
Proposed sale of Opel and Vauxhall
On 30 May 2009, it was announced that a deal had been reached to transfer New OpelOpel
Adam Opel AG, generally shortened to Opel, is a German automobile company founded by Adam Opel in 1862. Opel has been building automobiles since 1899, and became an Aktiengesellschaft in 1929...
(Opel
Opel
Adam Opel AG, generally shortened to Opel, is a German automobile company founded by Adam Opel in 1862. Opel has been building automobiles since 1899, and became an Aktiengesellschaft in 1929...
plus Vauxhall
Vauxhall Motors
Vauxhall Motors is a British automotive company owned by General Motors and headquartered in Luton. It was founded in 1857 as a pump and marine engine manufacturer, began manufacturing cars in 1903 and was acquired by GM in 1925. It has been the second-largest selling car brand in the UK for...
, minus Saab
Saab Automobile
Saab Automobile AB, better known as Saab , is a Swedish car manufacturer owned by Dutch automobile manufacturer Swedish Automobile NV, formerly Spyker Cars NV. It is the exclusive automobile Royal Warrant holder as appointed by the King of Sweden...
) assets to a separate company majority-owned by a consortium led by Sberbank
Sberbank
Sberbank Rossii is the largest bank in Russia and Eastern Europe. The company's headquarters are in Moscow and its history goes back to Cancrin's financial reform of 1841...
of Russia (35%), Magna International
Magna International
Magna International Inc. , is an automotive supplier headquartered in Aurora, Ontario, Canada. It is Canada's largest automobile parts manufacturer, and one of the country's largest companies. It owns the Magna Steyr automobile production company of Austria....
of Canada (20%), and Opel employees and car dealers (10%). GM was expected to keep a 35% minority stake in the new company. It was announced on November 3, 2009, that the GM board had decided not to sell off Opel.
Filing
On the morning of 1 June 2009, Chevrolet-Saturn of Harlem, a dealership in ManhattanManhattan
Manhattan is the oldest and the most densely populated of the five boroughs of New York City. Located primarily on the island of Manhattan at the mouth of the Hudson River, the boundaries of the borough are identical to those of New York County, an original county of the state of New York...
that is owned by GM itself, filed for bankruptcy protection there, followed in the same court by General Motors Corporation (the main GM in Detroit), GM's subsidiary Saturn LLC, and Saturn LLC's subsidiary Saturn Distribution Corporation. All cases were assigned to Judge Robert Gerber
Robert Gerber
Robert Gerber is the United States Bankruptcy Court Judge from the Southern District of New York, presiding over the General Motors bankruptcy of June 2009...
.
The filing by the dealership declared General Motors to be a debtor in possession
Debtor in possession
A debtor in possession in United States bankruptcy law is a person or corporation who has filed a bankruptcy petition, but remains in possession of property upon which a creditor has a lien or similar security interest...
. The dealership's filing allowed General Motors to file its own bankruptcy petition in the Southern District court of Manhattan, New York, its preferred court. Normally for such cases, the company would have filed in the courts located in the state(s) where the company is incorporated, or where it conducts operations, which for Detroit-headquartered General Motors would have been the courts in Michigan
Michigan
Michigan is a U.S. state located in the Great Lakes Region of the United States of America. The name Michigan is the French form of the Ojibwa word mishigamaa, meaning "large water" or "large lake"....
or Delaware
Delaware
Delaware is a U.S. state located on the Atlantic Coast in the Mid-Atlantic region of the United States. It is bordered to the south and west by Maryland, and to the north by Pennsylvania...
, where it is incorporated. General Motors' attorneys, however, preferred to file in the federal courts in New York, because those courts have a reputation for expertise in bankruptcy.
In a press conference that began four hours and 18 minutes after the filing, the GM Chief Executive Officer, Fritz Henderson, stressed that he intended for the bankruptcy process to move quickly.
In addition to Mr Henderson's press conference, President of the United States
President of the United States
The President of the United States of America is the head of state and head of government of the United States. The president leads the executive branch of the federal government and is the commander-in-chief of the United States Armed Forces....
Barack Obama
Barack Obama
Barack Hussein Obama II is the 44th and current President of the United States. He is the first African American to hold the office. Obama previously served as a United States Senator from Illinois, from January 2005 until he resigned following his victory in the 2008 presidential election.Born in...
made a speech from the White House
White House
The White House is the official residence and principal workplace of the president of the United States. Located at 1600 Pennsylvania Avenue NW in Washington, D.C., the house was designed by Irish-born James Hoban, and built between 1792 and 1800 of white-painted Aquia sandstone in the Neoclassical...
four hours and three minutes after the court filing.
Court schedule and motions
The General Motors Chapter 11 filing formally was entitled "In reIn re
In re, Latin for "in the matter [of]", is a term with several different, but related meanings.In correspondence, the phrase in re: refers to the subject of a letter, memorandum, or electronic mail message...
General Motors Corp.", and was case number 09-50026 in the Southern District, Manhattan, New York.
General Motors was represented by the New York specialist law firm Weil, Gotshal & Manges. The United States Treasury was represented by the United States Attorneys Office for the Southern District of New York and Cadwalader, Wickersham & Taft LLP. An ad hoc group of the bondholders of General Motors Corporation was also represented in court.
One of the first motions filed in court was one to void the leases on the seven corporate jets, and corporate aircraft hangar at Detroit Metropolitan Wayne County Airport, for being no longer valuable to the company's business — a lease that the company had, according to its spokesman, found itself unable to escape in 2008 when it had tried to.
On June 1, 2009, the court gave interim approval to GM's request to borrow US$ 15 billion as debtor-in-possession funding, the company only having US$ 2 billion cash in hand. The United States Treasury argued in court that it was the only source of such debtor in possession funding, and that without the money from the loan General Motors would have no option but liquidation
Liquidation
In law, liquidation is the process by which a company is brought to an end, and the assets and property of the company redistributed. Liquidation is also sometimes referred to as winding-up or dissolution, although dissolution technically refers to the last stage of liquidation...
. Other motions in the first-day hearing included motions to approve payments to key suppliers and to employees and distributors who are in possession of goods manufactured for General Motors. All motions passed in court without substantial objection.
The case schedule laid out by the court is as follows:
- 2009-06-19: Deadline for filing all objections to the sale of General Motors.
- 2009-06-22: Deadline for making competing bids in the auction of General Motors' assets.
- 2009-06-25: Final hearing on the bankruptcy loan.
- 2009-07-10: Deadline for completion of the sale, requested by the U.S. Treasury and General Motors.
Planned sale
The plan for General Motors' bankruptcy is to auction off the company's assets in a section 363 sale. Because the price that these assets are expected to sell for is very high, there is expected to be only one bidder in the auction, a new company NGMCO Inc. This company is formed by the United States government with a 60% stake, the federal government of CanadaGovernment of Canada
The Government of Canada, formally Her Majesty's Government, is the system whereby the federation of Canada is administered by a common authority; in Canadian English, the term can mean either the collective set of institutions or specifically the Queen-in-Council...
and provincial government of Ontario
Government of Ontario
The Government of Ontario refers to the provincial government of the province of Ontario, Canada. Its powers and structure are set out in the Constitution Act, 1867....
with a 12% stake, the United
United Auto Workers
The International Union, United Automobile, Aerospace and Agricultural Implement Workers of America, better known as the United Auto Workers , is a labor union which represents workers in the United States and Puerto Rico, and formerly in Canada. Founded as part of the Congress of Industrial...
and Canadian Auto Workers
Canadian Auto Workers
The Canadian Auto Workers is one of Canada's largest and highest profile social unions. While rooted in Ontario's large auto plants of Windsor, Brampton, Oakville, St...
unions with a 17.5% stake, and the unsecured bondholders of General Motors with a 10% stake. The selling company is called Motors Liquidation Company
Motors Liquidation Company
Motors Liquidation Company , formerly MTLQQ on OTC Pink, was the company left to settle past liability claims from General Motors Chapter 11 reorganization...
(see below).
A creditor meeting, at the New York Hilton Hotel
Hilton Hotels
Hilton Hotels & Resorts is an international chain of full-service hotels and resorts founded by Conrad Hilton and now owned by Hilton Worldwide. Hilton hotels are either owned by, managed by, or franchised to independent operators by Hilton Worldwide. Hilton Hotels became the first coast-to-coast...
, held by the United States Trustee Program
United States Trustee Program
The United States Trustee Program is an agency of the United States Department of Justice that is responsible for overseeing the administration of bankruptcy cases and private trustees. The applicable federal law is found at 28 U.S.C. § 586 and 11 U.S.C. , et seq.In addition to the twenty-one...
, was scheduled for June 3, 2009.
Sale of Hummer
On June 1, 2009, GM announced that the HummerHummer
Hummer was a brand of trucks and SUVs, first marketed in 1992 when AM General began selling a civilian version of the M998 Humvee. In 1998, General Motors purchased the brand name and marketed three vehicles: the original Hummer H1, based on the Humvee; and the H2 and H3 models that were...
brand would be discontinued.
On October 9, they reached an agreement to sell their entire stake in the Hummer brand to China
People's Republic of China
China , officially the People's Republic of China , is the most populous country in the world, with over 1.3 billion citizens. Located in East Asia, the country covers approximately 9.6 million square kilometres...
-based Sichuan Tengzhong Heavy Industrial Machinery Company
Sichuan Tengzhong Heavy Industrial Machinery Company
Sichuan Tengzhong Heavy Industrial Machinery Company Ltd , usually shortened to ) is based in Chengdu, China. Sichuan Tengzhong is a privately owned company known for making a wide range of road equipment, such as bridge piers, highway construction and maintenance machinery...
Ltd. and a group of private investors (Mr. Suolang Duoji, a private entrepreneur with holdings that include the Hong Kong-listed thenardite producer Lumena, would have held the remaining 20 percent stake.) The sale would have net GM around $150 million. The deal would have included manufacturing to continue in the two plants that GM already uses to produce the Hummer trucks through June 2011, with a possible extension until 2012.
On February 24, 2010, GM announced that the sale could not be completed with Sichuan Tengzhong and that they would discontinue the brand. They were approached by several other companies interested in purchasing the Hummer
Hummer
Hummer was a brand of trucks and SUVs, first marketed in 1992 when AM General began selling a civilian version of the M998 Humvee. In 1998, General Motors purchased the brand name and marketed three vehicles: the original Hummer H1, based on the Humvee; and the H2 and H3 models that were...
brand and began reviewing potential buyers. However, in the end no sale could be finalised and Hummer was declared defunct on 24th May 2010.
Sale of Saturn
On June 5, 2009, GM announced that the Saturn brand would be sold to the Penske Automotive GroupPenske Automotive Group
Penske Automotive Group , headquartered in Bloomfield Hills, Michigan, is the world's second largest automotive dealership group.PAG operates 327 retail automotive franchises, representing 42 different brands, and 26 collision repair centers. PAG is a member of the Fortune 500 and Russell 2000, and...
. GM was to continue to build the Aura
Saturn Aura
The Saturn Aura is a mid-size car produced under the Saturn brand of American automaker General Motors. It debuted as a concept car at the North American International Auto Show in January 2005. The production model of the Aura was shown at the 2006 New York Auto Show in April, with production...
, Outlook
Saturn Outlook
The Saturn Outlook is a crossover SUV that debuted at the New York International Auto Show, and is based on the new GM Lambda platform, which it shares with the Buick Enclave, Chevrolet Traverse and GMC Acadia...
and Vue
Saturn VUE
The Saturn Vue is a compact crossover SUV that was sold by General Motors' Saturn marque, and at one time was Saturn's best-selling model. It was the first vehicle to use the GM Theta platform when it was introduced in 2002. A second generation model was launched in 2007 for the 2008 model as a...
for Penske for two years, however, as of September 30, 2009, the deal had fallen through. Penske had asked GM to extend the time it was to build Saturns until it could reach a deal with the Renault Group for vehicle replacements in 2012, but since that deal fell through Penske cancelled the planned sale. GM has said that the Saturn brand will be phased out by the end of the 2009 model year, and the brand was declared defunct on 31st October 2010.
Sale of Saab
On June 16, 2009, it was announced that the Swedish firm Koenigsegg Automotive ABKoenigsegg
Koenigsegg Automotive AB is a Swedish manufacturer of high-performance sports cars based in Ängelholm.-Company:The company was founded in 1994 in Sweden by Christian von Koenigsegg, with the intention of producing a world-class supercar...
and a group of Norwegian investors planned to acquire the Saab
Saab Automobile
Saab Automobile AB, better known as Saab , is a Swedish car manufacturer owned by Dutch automobile manufacturer Swedish Automobile NV, formerly Spyker Cars NV. It is the exclusive automobile Royal Warrant holder as appointed by the King of Sweden...
brand from General Motors
General Motors
General Motors Company , commonly known as GM, formerly incorporated as General Motors Corporation, is an American multinational automotive corporation headquartered in Detroit, Michigan and the world's second-largest automaker in 2010...
. GM would have continued to supply architecture and powertrain technology for an unspecified amount of time. On November 24, 2009 it was announced that the sale of Saab to the Koenigsegg Group had collapsed.
"We're obviously very disappointed with the decision to pull out of the Saab purchase," said GM CEO Fritz Henderson in a statement. "Given the sudden change in direction, we will take the next several days to assess the situation and will advise on the next steps next week."
On February 23, 2010 GM sold Saab to Spyker Cars
Spyker Cars
Spyker Cars is a Dutch sports car marque. The modern Spyker Cars only has the legal right to the brand name. The company's motto is "Nulla tenaci invia est via", which is Latin for "For the tenacious, no road is impassable". The marque's logo displays the piston engine of an airplane, a reference...
, later renamed Swedish Automobile.
363 Sale of assets
On July 10, 2009, GM's continuing operation operational assets were transferred to "Vehicle Acquisition Holdings LLC" which assumed the name "General Motors Company LLC".with the new company planning to issue an initial public offering
Initial public offering
An initial public offering or stock market launch, is the first sale of stock by a private company to the public. It can be used by either small or large companies to raise expansion capital and become publicly traded enterprises...
(IPO) of stock in 2010.
As part of a reorganization plan agreed to with the U.S., Canadian and Ontario governments, and the company's unions, General Motors filed for Chapter 11 Bankruptcy protection in a Manhattan court in New York on June 1, 2009, at approximately 8:00 am. The case was assigned to U.S. Bankruptcy Judge Robert Gerber
Robert Gerber
Robert Gerber is the United States Bankruptcy Court Judge from the Southern District of New York, presiding over the General Motors bankruptcy of June 2009...
. Gerber presided over the bankruptcy of Adelphia Communications Corp.
Shortly after the Chapter 11 filing, it was announced that as of Monday, June 8, 2009, GM would be removed from the Dow Jones Industrial Average
Dow Jones Industrial Average
The Dow Jones Industrial Average , also called the Industrial Average, the Dow Jones, the Dow 30, or simply the Dow, is a stock market index, and one of several indices created by Wall Street Journal editor and Dow Jones & Company co-founder Charles Dow...
, to be replaced by Cisco Systems
Cisco Systems
Cisco Systems, Inc. is an American multinational corporation headquartered in San Jose, California, United States, that designs and sells consumer electronics, networking, voice, and communications technology and services. Cisco has more than 70,000 employees and annual revenue of US$...
. This coincided with the announcement that Citigroup Financial would also be removed and replaced by insurer, Travelers Co. Beginning June 2, GM stock traded on the Pink Sheets
Pink Sheets
OTC Markets Group, Inc., informally known as "Pink Sheets", is a private company that provides services to the U.S. over-the-counter securities market including electronic quotations, trading, messaging, and information platforms. According to the U.S. Securities and Exchange Commission, OTC...
under the symbol GMGMQ. On July 15, the stock symbol was changed to MTLQQ.
General Motors filed for a government-assisted Chapter 11 bankruptcy protection
Chapter 11, Title 11, United States Code
Chapter 11 is a chapter of the United States Bankruptcy Code, which permits reorganization under the bankruptcy laws of the United States. Chapter 11 bankruptcy is available to every business, whether organized as a corporation or sole proprietorship, and to individuals, although it is most...
on June 1, 2009, with a plan to re-emerge as a less debt-burdened organization.
The chapter 11 petition was filed in the federal court in Manhattan, New York. The filing reported US$82.29 billion in assets.
The company expressed optimism in the future success of the "New GM." As ranked by total assets, the Chapter 11 reorganization is one of the largest successful corporate reorganizations in U.S. history, and the fourth-largest bankruptcy in U.S. history by total assets, following Lehman Brothers Holdings Inc.
Lehman Brothers
Lehman Brothers Holdings Inc. was a global financial services firm. Before declaring bankruptcy in 2008, Lehman was the fourth largest investment bank in the USA , doing business in investment banking, equity and fixed-income sales and trading Lehman Brothers Holdings Inc. (former NYSE ticker...
, Washington Mutual
Washington Mutual
Washington Mutual, Inc. , abbreviated to WaMu, was a savings bank holding company and the former owner of Washington Mutual Bank, which was the United States' largest savings and loan association until its collapse in 2008....
and WorldCom Inc.
MCI Inc.
MCI, Inc. is an American telecommunications subsidiary of Verizon Communications that is headquartered in Ashburn, Virginia...
The "new GM," is formed from the purchase of the desirable assets of "old GM" by an entity called "NGMCO Inc." via the bankruptcy process. NGMCO Inc. was renamed to "General Motors Company" upon purchase of the assets and trade name from "old GM," with the claims of former stakeholders to be handled by the "Motors Liquidation Company
Motors Liquidation Company
Motors Liquidation Company , formerly MTLQQ on OTC Pink, was the company left to settle past liability claims from General Motors Chapter 11 reorganization...
." The purchase was supported by $50 billion in U.S. Treasury loans, giving the U.S. government a 60.8% stake. The Queen of Canada, in right of both Canada
Canada
Canada is a North American country consisting of ten provinces and three territories. Located in the northern part of the continent, it extends from the Atlantic Ocean in the east to the Pacific Ocean in the west, and northward into the Arctic Ocean...
and Ontario
Monarchy in Ontario
By the arrangements of the Canadian federation, Canada's monarchy operates in Ontario as the core of the province's Westminster-style parliamentary democracy. As such, the Crown within Ontario's jurisdiction is referred to as the Crown in Right of Ontario, Her Majesty in Right of Ontario, or the...
, holds 11.7% and the United Auto Workers
United Auto Workers
The International Union, United Automobile, Aerospace and Agricultural Implement Workers of America, better known as the United Auto Workers , is a labor union which represents workers in the United States and Puerto Rico, and formerly in Canada. Founded as part of the Congress of Industrial...
, through its health-care trust (VEBA
Voluntary Employee Beneficiary Association
A voluntary employees' beneficiary association is a form of trust fund permitted under American tax law whose sole purpose must be to provide employee benefits...
), holds a further 17.5%. The remaining 10% is held by unsecured creditor
Unsecured creditor
An unsecured creditor is a creditor other than a preferential creditor that does not have the benefit of any security interests in the assets of the debtor....
s.
On July 10, 2009, GM reported 88,000 U.S. employees, and announced plans to reduce its U.S. workforce to 68,000 by the end of 2009 after filing for bankruptcy.
On July 10, 2009, a new entity, NGMCO Inc. purchased the ongoing operations and trademarks from GM.
The purchasing company in turn changed its name from NGMCO Inc. to General Motors Company, marking the emergence of a new operation from the "pre-packaged" Chapter 11 reorganization.
Under the reorganization process, termed a 363 sale (for Section 363 which is located in Title 11
Title 11 of the United States Code
Title 11 of the United States Code is the primary source of bankruptcy law in the United States Code.-Contents:Title 11 is subdivided into nine chapters. It used to include more chapters, but some of them have since been repealed in their entirety...
, Chapter 3, Subchapter IV of the United States Code
United States Code
The Code of Laws of the United States of America is a compilation and codification of the general and permanent federal laws of the United States...
, a part of the Bankruptcy Code), the purchaser of the assets of a company in bankruptcy proceedings is able to obtain approval for the purchase from the court prior to the submission of a re-organization plan, free of liens and other claims. It’s used in most Chapter 11 cases that involve a sale of property or other assets. This process is typical of large organizations with complex branding and intellectual property rights issues upon exiting bankruptcy.
The new company plans to issue an initial public offering
Initial public offering
An initial public offering or stock market launch, is the first sale of stock by a private company to the public. It can be used by either small or large companies to raise expansion capital and become publicly traded enterprises...
(IPO) of stock in 2010.
The remaining pre-petition creditors claims are paid from assets of the Motors Liquidation Company
Motors Liquidation Company
Motors Liquidation Company , formerly MTLQQ on OTC Pink, was the company left to settle past liability claims from General Motors Chapter 11 reorganization...
(stock symbol MTLQQ), the new name of the former General Motors Corporation. The directors of Motors Liquidation Company have stated that they believe shares in the company (the "old" GM) will have no value since the company has far more debts than assets.
On July 23, 2009 GM announced its new Board of Directors: Daniel Akerson
Daniel Akerson
Daniel Francis "Dan" Akerson, is the current Chairman and CEO of General Motors. Akerson succeeded Edward Whitacre as CEO on September 1, 2010, and became Chairman of the Board on January 1, 2011. Akerson was a Managing Director of The Carlyle Group and head of global buyout prior to joining...
(of the Carlyle Group
Carlyle Group
The Carlyle Group is an American-based global asset management firm, specializing in private equity, based in Washington, D.C. The Carlyle Group operates in four business areas: corporate private equity, real assets, market strategies and fund-of-funds, through its AlpInvest subsidiary...
), David Bonderman
David Bonderman
David Bonderman is a founding partner of TPG Capital and its Asian affiliate, Newbridge Capital...
(of TPG Capital), Robert D. Krebs (a former railroad executive), Patricia F. Russo (the former CEO of Alcatel-Lucent
Alcatel-Lucent
Alcatel-Lucent is a global telecommunications corporation, headquartered in the 7th arrondissement of Paris, France. It provides telecommunications solutions to service providers, enterprises, and governments around the world, enabling these customers to deliver voice, data, and video services...
), Ed Whitacre
Edward Whitacre, Jr.
Edward Earl "Ed" Whitacre, Jr. is the former Chairman and CEO of General Motors. He is also a former chairman of the board and chief executive officer of AT&T Inc., previously SBC. He served as national president of the Boy Scouts of America from 1998 to 2000...
(GM Chairman) and Fritz Henderson
Frederick Henderson
Frederick Arthur "Fritz" Henderson was President and Chief Executive Officer of General Motors. Prior to his appointment as CEO on March 31, 2009, Henderson was the Vice President of General Motors and has been with the company since 1984...
(GM CEO).
The U.S. Treasury financed a new company to purchase the operating assets of the old GM company in bankruptcy proceedings in the 'pre-packaged' Chapter 11 reorganization in July 2009.
Brand Reorganization
In addition to selling off brands and killing brands like Pontiac and Goodwrench, General Motors Company has restructured its brand architectureBrand architecture
Brand architecture is the structure of brands within an organizational entity. It is the way in which the brands within a company’s portfolio are related to, and differentiated from, one another...
and has adopted a new corporate identity. The practice of putting the "GM Mark of Excellence" on every car, no matter what the brand, was discontinued in August, 2009. The company has moved from a corporate-endorsed hybrid brand architecture structure, where GM underpinned every brand to a multiple brand corporate invisible brand architecture structure. The company's familiar square blue "badge" has been removed from the Web site and advertising, in favor of a new, subtle all-text logo treatment.
Timeline 2008-09
October 10, 2008: GM considered exchanging its remaining 49% stake in GMAC to Cerberus Capital ManagementCerberus Capital Management
Cerberus Capital Management, L.P. is one of the largest private equity investment firms in the United States. The firm is based in New York City, and run by -year-old financier Steve Feinberg. Former U.S...
for Chrysler LLC
Chrysler
Chrysler Group LLC is a multinational automaker headquartered in Auburn Hills, Michigan, USA. Chrysler was first organized as the Chrysler Corporation in 1925....
, potentially merging two of Detroit's "Big Three" automakers. Acquisition talks involving Chrysler were cancelled, however, before November 7, 2008, as part of a broader response to the increasing urgency of GM's own cash flow problems. That was a result of Chrysler's senior bank debt currently trading at less than 50 cents on the dollar and because Chrysler's other owner – Daimler, formerly DaimlerChrysler – recently revalued its 19.9% Chrysler stake down to zero, which may or may not reflect its value in a potential sale.
December 12, 2008: General Motors stated that it was nearly out of cash, and may not survive past 2009. The U.S. Senate voted and strongly opposed any source of government assistance through a bailout bridge loan (originally worth $14 billion in emergency aid) which was aimed toward helping the struggling Big Three
Big Three automobile manufacturers
The Big Three, when used in relation to the automotive industry, most generally refers to the three major American automotive companies:Ford, General Motors, and Chrysler...
automakers financially, despite strong support from President George W. Bush
George W. Bush
George Walker Bush is an American politician who served as the 43rd President of the United States, from 2001 to 2009. Before that, he was the 46th Governor of Texas, having served from 1995 to 2000....
and President-elect Barack Obama
Barack Obama
Barack Hussein Obama II is the 44th and current President of the United States. He is the first African American to hold the office. Obama previously served as a United States Senator from Illinois, from January 2005 until he resigned following his victory in the 2008 presidential election.Born in...
, along with some mild support from the Democratic and Republican political parties.
Prior to the U.S. Senate's announcement, General Motors announced that it had hired several lawyers to discuss the possibility of filing for bankruptcy
Bankruptcy
Bankruptcy is a legal status of an insolvent person or an organisation, that is, one that cannot repay the debts owed to creditors. In most jurisdictions bankruptcy is imposed by a court order, often initiated by the debtor....
, with Chapter 11 bankruptcy being one of the options discussed. GM stated that "all options are on the table" for the company. Chrysler LLC, which is owned by Cerberus Capital Management
Cerberus Capital Management
Cerberus Capital Management, L.P. is one of the largest private equity investment firms in the United States. The firm is based in New York City, and run by -year-old financier Steve Feinberg. Former U.S...
, in a similar financial situation, warned that it, too, was nearly out of cash and might not survive much longer.
December 18, 2008: President Bush announced that an "orderly" bankruptcy was one option being considered for both General Motors and Cerberus
Cerberus Capital Management
Cerberus Capital Management, L.P. is one of the largest private equity investment firms in the United States. The firm is based in New York City, and run by -year-old financier Steve Feinberg. Former U.S...
-owned Chrysler LLC. Sources said that setting up this type of "orderly" bankruptcy would be complicated because it would not only involve talks with the automakers, but also the unions and other stakeholders would have to be involved.
December 19, 2008: President Bush approved a bailout plan and gave General Motors and Chrysler $13.4 billion in financing from TARP (Troubled Assets Relief Program
Troubled Assets Relief Program
The Troubled Asset Relief Program is a program of the United States government to purchase assets and equity from financial institutions to strengthen its financial sector that was signed into law by U.S. President George W. Bush on October 3, 2008...
) funds, as well as $4 billion to be "withdrawn later."
As of February 14, 2009: General Motors was considering filing for Chapter 11 bankruptcy
Bankruptcy
Bankruptcy is a legal status of an insolvent person or an organisation, that is, one that cannot repay the debts owed to creditors. In most jurisdictions bankruptcy is imposed by a court order, often initiated by the debtor....
under a plan that would assemble all of their viable assets, including some U.S.
United States
The United States of America is a federal constitutional republic comprising fifty states and a federal district...
brands and international operations, into a new company. Less than a week later, its Saab subsidiary filed for bankruptcy protection in Sweden.
March 5, 2009: GM's independent public accounting firm (Deloitte & Touche) issued a qualified opinion as part of GM's 2008 annual report that stated "[these conditions] raise substantial doubt about its ability to continue as a going concern
Going concern
A going concern is a business that functions without the threat of liquidation for the foreseeable future, usually regarded as at least within 12 months.-Definition of the 'going concern' concept:...
." A qualified going concern audit letter like this is only issued by the auditors when the company is in extreme financial distress and it is likely that it may file for bankruptcy protection.
March 12, 2009: GM's CFO Ray Young said that it would not need the requested $2B in March noting that the cost-cutting measures are starting to take hold.
March 29, 2009: GM's Chairman and CEO, Rick Wagoner
Rick Wagoner
George Richard "Rick" Wagoner, Jr. is an American businessman and former Chairman and Chief Executive Officer of General Motors. Wagoner resigned as Chairman and CEO at General Motors on March 29, 2009, at the request of the White House...
, agreed to immediately resign his position as part of an Obama administration automotive restructuring plan. Wagoner was replaced by Fritz Henderson. In announcing that plan, on March 30, 2009, President Obama stated that both GM and Chrysler
Chrysler
Chrysler Group LLC is a multinational automaker headquartered in Auburn Hills, Michigan, USA. Chrysler was first organized as the Chrysler Corporation in 1925....
may need to use "our bankruptcy code
Bankruptcy in the United States
Bankruptcy in the United States is governed under the United States Constitution which authorizes Congress to enact "uniform Laws on the subject of Bankruptcies throughout the United States." Congress has exercised this authority several times since 1801, most recently by adopting the Bankruptcy...
as a mechanism to help them restructure quickly and emerge stronger." He also announced that the warranties on cars made by these companies would be guaranteed by the U.S. Government.
March 31, 2009: President Barack Obama
Barack Obama
Barack Hussein Obama II is the 44th and current President of the United States. He is the first African American to hold the office. Obama previously served as a United States Senator from Illinois, from January 2005 until he resigned following his victory in the 2008 presidential election.Born in...
announced that he would give GM 60 additional days to try and restructure their company and prove their viability. If they succeeded, Washington would provide General Motors with additional bridge loans. However, if GM could meet the requirements set by the White House, a prepackaged bankruptcy is probable. President Obama reiterated that GM will be part of the future even if bankruptcy is necessary.
April 22, 2009: GM stated that it will not be able to make their June 1, 2009 debt payment.
April 24, 2009: GM announced that they will be scrapping the Pontiac brand in an effort to invest more money into their major brands (Buick, Cadillac, Chevrolet, and GMC).
May 4, 2009: German Economy Minister Karl-Theodor zu Guttenberg said Fiat
Fiat
FIAT, an acronym for Fabbrica Italiana Automobili Torino , is an Italian automobile manufacturer, engine manufacturer, financial, and industrial group based in Turin in the Italian region of Piedmont. Fiat was founded in 1899 by a group of investors including Giovanni Agnelli...
(among others) might be interested in the GM European unit.
June 1, 2009: GM filed for Chapter 11 Bankruptcy
Bankruptcy
Bankruptcy is a legal status of an insolvent person or an organisation, that is, one that cannot repay the debts owed to creditors. In most jurisdictions bankruptcy is imposed by a court order, often initiated by the debtor....
, the fourth largest filing in the United States
United States
The United States of America is a federal constitutional republic comprising fifty states and a federal district...
history after Lehman Brothers
Lehman Brothers
Lehman Brothers Holdings Inc. was a global financial services firm. Before declaring bankruptcy in 2008, Lehman was the fourth largest investment bank in the USA , doing business in investment banking, equity and fixed-income sales and trading Lehman Brothers Holdings Inc. (former NYSE ticker...
, Washington Mutual
Washington Mutual
Washington Mutual, Inc. , abbreviated to WaMu, was a savings bank holding company and the former owner of Washington Mutual Bank, which was the United States' largest savings and loan association until its collapse in 2008....
, and Worldcom.
July 10, 2009: A new company financed by the United States Treasury, "NGMCO Inc" purchased the most of the assets, and the trademarks of the General Motors Corporation. Vehicle Acquisition Holdings LLC then changed its name to "General Motors Company". The General Motors Corporation (old GM) in turn changed its name to "Motors Liquidation Company" and it continued in bankruptcy proceedings to settle with its bondholders, and on other liabilities. The new GM company, after the purchase of most of the assets of "old GM" is not a participant in the continuing bankruptcy proceedings of Motors Liquidation Company (Old GM). The "new GM" is mostly owned by the United States Government.
Motors Liquidation Company
General Motors Corporation, upon sale of its major assets, trademarks and intellectual property on July 10, 2009, pursuant to the provisions of section 363 of the Bankruptcy Code, was renamed as Motors Liquidation CompanyMotors Liquidation Company
Motors Liquidation Company , formerly MTLQQ on OTC Pink, was the company left to settle past liability claims from General Motors Chapter 11 reorganization...
. It continued its bankruptcy court proceedings which will ultimately lead to settling liability claims.
Motors Liquidation Company announced on July 10, 2009 in relation to its equity and debt investors:
Motors Liquidation Company's stock symbol was changed from GMGMQ to MTLQQ, effective July 15, 2009.
New General Motors
The new General Motors is named General Motors Company LLC which is separate and independent from the old corporation.The new company retains four of its major brands: Chevrolet, Cadillac, GMC, and Buick. Also the company is planning to keep 3600 out of 6000 of its US dealerships. Lastly, the company is shutting down 14 of its US plants, which will eliminate 20000 of its 80000 current employees. The General Motors Company is now a smaller, restructured version of the former General Motors Corporation.European Loans
GM received loans from European governments in 2009, and has reduced its ownership stake in European operations as part of its reorganization." As of July 10, 2009, the new GM has over $40 billion in cash, with the company's reorganized liability total of $48.8 billion which includes $24.4 billion to be paid to the Voluntary Employee Benefits Association (VEBA) trust, $9 billion to the U.S. and Canadian governments, and $15 billion in liabilities to suppliers and other bills. GM is slated to pay $10 billion to the VEBA trust in December 2009, with the remainder being paid in increments from 2012-19. GM isn't required to make contributions to its pension fund until 2013, but it may elect to if needed, since the company contribued $15.2 billion to its pension fund in 2003. Stock market conditions cause the fund value to fluctuate. In February 2009, GM's combined pension fund had about $85 billion in assets, $56 billion in assets for hourly pensions and $29 billion in assets for salaried pensions.The domain name
Domain name
A domain name is an identification string that defines a realm of administrative autonomy, authority, or control in the Internet. Domain names are formed by the rules and procedures of the Domain Name System ....
gm.com attracted at least 7 million visitors annually by 2008.
United States
Although the Obama administration had initially provided the automaker five years to repay the money in full, in March 2010 GM made more than $2 billion in payments to the U.S. and Canadian governments and promised to pay the full balance of the loan portion by June. The company beat that self-imposed deadline when on April 21, 2010, GM CEO Ed Whitacre Jr. announced that the company had paid back the entire amount of the U.S. and Canadian government loans, with interest, a total of $8.1 billion. The government still has $2.1 billion invested in preferred shares that pay dividends, plus a 61% share of common equity valued at about $45 billion to the U.S. and another $8.1 billion to Canada. Improved sales of new models are cited as improving the company's cash flow and allowing for the early payments. GM is also investing hundreds of millions in assembly plants in Kansas and Detroit, credited for preserving jobs.Some congressmen were critical of the statement that GM had repaid the loan from TARP calling it a "lie to the American people". At issue is the money for the loan repayment came from other bailout funds housed in an escrow account belonging to the company. In a letter from Rep. Darrell Issa and Rep. Jim Jordan to Ed Whitacre, it is called an "attempt to disguise what is merely the exchange of one pool of taxpayer money for another pool of taxpayer money as 'real progress'". Senator Charles E. Grassley, Republican of Iowa called it a government-enabled “TARP money shuffle.”
The Competitive Enterprise Institute said it filed a false-advertising complaint with the Federal Trade Commission.
External links
- Motors Liquidation Company
- http://www.gmcourtdocs.com/ — website of the General Motors Claim Agent: Bankruptcy paperwork and related documents Assessment of the GM plan of February 17, 2009 presented to the U.S. Government