It's Official: GM Files For BankruptcyGeneral Motors filed for bankruptcy early Monday, marking the end of an era for GM, as the troubled automaker now represents the largest bankruptcy in history. Once the world's largest automaker, now the ailing giant will be forced to close more than 10 plants and cut more than 20,000 jobs.
The move to bankruptcy was once thought as unthinkable, but GM was pushed toward it after years of losses and market share drops. Even the $19.4 billion in federal aid was not enough to keep the automaker out of bankruptcy court. The federal government will put another $30 billion into the reorganization to fund operations. Taxpayers will own 60 percent of the company.
GM will shed its Pontiac, Saturn, Hummer and Saab brands and cut off more than 2,000 of its 6,000 U.S. dealerships by next year. That could result in more than 100,000 additional job losses if those dealerships are forced to close.
More than 650,000 retirees and their family members who depend on the company for health insurance will experience cutbacks in their coverage, although their pension benefits are unaffected for now.
Investors in $27 billion worth of GM bonds, including mutual funds and thousands of individual investors, will end up with new stock in a reorganized GM worth a fraction of their original investment.
Owners of current GM shares, which closed at just 75 cents a share on Friday, will have their investments essentially wiped out.
President Barack Obama was scheduled to speak to the nation later Monday to make the case why the bankruptcy and the additional federal help was needed. GM's CEO Fritz Henderson, who is expected to retain his office, is to speak in New York shortly after the president finishes his remarks.
The new GM will hold only $17 billion in debt, instead of the $54.4 billion it owed at the end of the first quarter of 2009. The unions' new contracts with the company and GM's underfunded pension funds will stay with the new company.