General Motors (GM) exited bankruptcy yesterday, far more quickly than most industry watchers had expected, as a leaner automaker aiming to win back US consumers and pay back taxpayers.
A whirlwind 40-day bankruptcy for GM concluded with the closing of a deal that sold key operations and core brands, including Chevrolet and Cadillac, to a new company that will be majority-owned by the US Treasury.
The deal was signed between the government and GM executives at the law firm of Weil, Gotshal & Manges, the company’s chief bankruptcy counsel, a source familiar with the company said.
Chief executive Fritz Henderson and Ed Whitacre, a veteran telecommunications executive and incoming chairman, were set to appear at a news conference at 9am at the automaker’s Detroit headquarters to mark the launch of the new company.
The automaker’s US sales dropped 36 percent last month when it was mired in bankruptcy, and executives said the relaunch of the company had offered a chance to try to break that negative association for consumers.
“I’m very much looking forward to the point where we’re operating in the clean air and the name of the company not being associated with bankruptcy,” GM sales chief Mark LaNeve said on Thursday.
Henderson, who took over as CEO when predecessor Rick Wagoner was ousted by the administration of US President Barack Obama at the end of March, has already detailed plans for a faster-moving and less-bureaucratic company with thinner executive ranks.
GM is cutting its white-collar work force by more than 20 percent by eliminating 6,000 jobs by October. The reduction in executive ranks will slice deeper, with 35 percent planned.
That bid to shake up GM’s long-criticized corporate culture will be a key issue for Henderson as the 100-year-old automaker seeks to relaunch itself.
Another pillar of the plan is GM’s commitment to launch more fuel-efficient cars and to focus its resources on fewer brands, models and dealerships.
GM has burned through US$40 billion over the past four years and posted losses of more than US$80 billion.
The close of the court-approved sale marks the completion of an unprecedented effort by the US administration to save GM and Chrysler from liquidation by slashing debt, labor costs and dealerships.
The White House has also disbursed almost US$80 billion to shore up the auto industry, including US$5 billion in support for auto parts suppliers.
Of the total, US$50 billion has been earmarked for GM, emergency financing that will give the US government a more than 60 percent stake in the new GM.
The new GM will have slashed its debt and healthcare obligations by US$48 billion, dropped almost 40 percent of the dealers from an unprofitable network and moved to cut loose laggard brands such as Saab, Saturn and Hummer.
It will also take advantage of a new labor contract with the UAW that the company says will put its hourly operating costs on par with Japanese competitors led by Toyota Motor Corp.