GM bankruptcy: End of an era
After years of losses, the troubled automaker is forced into bankruptcy. GM is set to close a dozen facilities and cut more than 20,000 jobs.
NEW YORK (CNNMoney.com) -- General Motors filed for bankruptcy protection early Monday, a move once viewed as unthinkable that became inevitable after years of losses and market share declines which were capped by a dramatic plunge in sales in recent months.
In the end, even $19.4 billion in federal help wasn't enough to keep the nation's largest automaker out of bankruptcy. The government will pour another $30 billion into GM to fund operations during its reorganization.
Taxpayers will end up with a 60% stake in GM, with the union, its creditors and federal and provincial governments in Canada owning the remainder of the company.
Owners of GM cars should see little change as a result of the bankruptcy since warranties will still be honored. But there will be plenty of pain caused by the bankruptcy and the company's efforts to stem losses.
GM will shed its Pontiac, Saturn, Hummer and Saab brands and cut loose 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.
A dozen facilities were identified for closure, resulting in 20,000 job losses. Assembly lines in Pontiac, Mich., which make full-size pickup trucks, will be closed later this year. A Wilmington, Del.-based plant that makes roadsters for the Pontiac and Saturn brands, will also close later this year.
Three parts distribution warehouses are set to close at the end of this year, while five engine plants and a stamping plant are due to close in 2010. An additional stamping plant is set to close in 2011.
Three more plants. including assembly lines in Spring Hill, Tenn., and Orion, Mich.,are set to be idled and put on stand by status in hopes for a rebound in sales that may never come.
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's 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 (GM, Fortune 500) shares, which closed at just 75 cents a share on Friday, will have their investments essentially wiped out.
Officials from the Obama administration and the United Auto Workers union both have said they hope to sell their stakes in GM as soon as possible, but it is likely that shares of the new GM will not be publicly traded for at least a year or two.
The bankruptcy filing will also spark the removal as of June 8 of GM from the Dow Jones industrial average, a distinction it has held since 1925. The company will be replaced in the Dow by technology giant Cisco Systems (CSCO, Fortune 500), Dow Jones said.
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