US automaker General Motors filed for bankruptcy on Monday, a move that will allow it to complete restructuring within three months in a bid to become solvent again. On Sunday night, a US court approved the sale of Chrysler to a Fiat-led group.
100 years after its founding, General Motors filed for bankruptcy at a New York court on Monday.
Once the world’s largest corporation and a symbol of US innovation and manufacturing, GM was the world’s largest automaker for 77 years.
"Today will rank as another historic day for the company — the end of an old General Motors and the beginning of a new one," said a White House communiqué.
It is the third-largest bankruptcy in US history, after the failure of financial firm Lehman Brothers in 2008 and telecoms company WorldCom in 2002.
The failure will result in the closure of 11 plants in the United States and a slowdown at three others during the restructuration process.
There has been increasing speculation over GM’s failure during the last few weeks.
President Barack Obama’s administration said that the industry needed support, given that GM employs 92,000 directly in the United States and is indirectly responsible for 500,000 retirees.
The US government will give the automaker 30 billion dollars in aid, in the hope that the company will emerge as a smaller and more competitive entity in 60 to 90 days. The administration, which has already provided 19.4 billion dollars in loans, will receive a 60 percent stake in the new company.
Canada will provide an additional 9.5 billion dollars in financing and receive a 12 percent stake.
FRANCE 24’s Washington, DC correspondent Guillaume Meyer noted that GM has a number of factories in Canada and Ontario. “General Motors means a lot of jobs north of the border,” he said.
The United Auto Workers and bondholders will hold the remaining percentages.
Canadian auto-parts company Magna will buy GM’s German subsidiary Opel, in a deal engineered with the help of the German government on Saturday.
GM's bankruptcy process is expected to be similar to Chrysler's, but administration officials said that "GM is a far larger, far more complicated global company", and the restructuring could take longer.
Chrysler, which filed for bankruptcy protection on April 30, was sold to a consortium led by Italian automaker Fiat. A federal ruling cleared the sale late Sunday.
"Now the hard part begins, which is making GM and Chrysler competitive," said Christopher Richter, auto analyst at CLSA Asia-Pacific Markets in Tokyo. "If they don't do that, then we'll be doing this all over again in a few years."
With the two companies becoming smaller in size, the market would be wide open for Asian rivals like Toyota, Honda and others, he said.
Date created : 2009-06-01