New York The first day of the rest of General Motors Corp.’s existence began at 7:57 a.m. Monday with the filing of the fourth-largest bankruptcy ever, a venture that will strip the company of 14 more plants and 17,000 U.S. jobs, while costing the governments of the United States and Canada $40 billion.
Yet for all the carnage, the company and President Barack Obama worked to paint their new partnership in hopeful shades, describing a leaner GM tackling its long-standing defects of product and finances under federal ownership that has vowed to stay out of day-to-day decisions.
“This new GM will be built from the strongest parts of our business, including our best brands and our very finest products,” said GM Chief Executive Fritz Henderson. “We will have far less debt, fully competitive labor costs and the ability to generate sustained and positive bottom line performance.”
GM’s goal: Make money in the withering conditions it faces today — a U.S. market running at 10 million vehicles a year, where GM may hold just an 18 percent share — off from a peak of more than 50 percent in its peak years ending in the 1970s — once it eliminates several brands and models.
Obama hailed the reworking of GM through bankruptcy as “a chance to rise again,” even as he warned of its cost in taxpayer money and jobs.
“A new GM will emerge that can provide a new generation of Americans with the chance to live out their dreams, that can out-compete automakers from around the world,” Obama said at the White House.
In many ways GM’s bankruptcy rippled through the economy Monday. Its shares will be kicked from the Dow Jones Industrial Average — which was up 221 points to 8,721 Monday — after 83 years, replaced by tech hardware maker Cisco Systems.
The company wasted no time in court, winning its first approvals for key payments from U.S. Bankruptcy Judge Robert Gerber, and asking him to hold a hearing June 30 on GM’s plan to sell most of its assets to a new holding company.
The plan mirrors Chrysler’s sale to Fiat SpA, warning a bankruptcy court that absent a speedy swap of assets the company will waste away, destroying thousands of jobs. While Chrysler pursued deals with automakers around the globe, GM says it had only the option offered by the administration.
The court filings portray a company that has “simply run out of money.” No investors have shown interest in keeping GM alive outside the Obama administration, and GM experts estimate that if broken up and sold, the company might draw up to $9.7 billion.
GM said nine weeks in bankruptcy would consume $18.9 billion in cash, according to financial projections.
Obama sought to reassure Americans about the plan critics have dubbed “Government Motors,” saying its scope — injecting a fresh $30.1 billion in U.S. loans to GM in return for a 60 percent stake and the right to reconfigure its board of directors — was the only way to ensure GM’s survival while protecting federal money.
Staff on Obama’s auto task force said the government would try to sell its stake within six to 18 months. The government will replace a majority of GM’s board of directors, but task force members said they would exercise ownership powers as little as possible.
Obama also addressed workers who will lose their jobs and dealerships that will close as part of the restructuring, saying they were making “a sacrifice you may not have chosen to make, but a sacrifice you are nevertheless called to make so that your children and all of our children can grow up in an America that still makes things.”
And as he predicted GM’s revival, Obama echoed the line infamously attributed to Charlie Wilson, the GM president at the pinnacle of the company’s success.
“When that happens, we can truly say that what is good for General Motors, and all who work there, is good for the United States of America,” Obama said.