Detroit, Michigan – General Motors has filed for bankruptcy protection, anticipating that the New GM will launch in about 60 to 90 days as a separate and independent company from the current GM. The company announced that it had reached agreements with the U.S. Treasury, and with the governments of Canada and Ontario, to accelerate its reinvention and create a leaner and stronger company.

The New GM will be built only from GM’s best brands and operations, and will be supported by a stronger balance sheet, due to a significantly lower debt burden and operating cost structure than before. The new company will incorporate the terms of GM’s recent agreements with the United Auto Workers Union (UAW) and Canadian Auto Workers Union (CAW) and will be led by GM’s current management team.

Under the plan, GM will sell substantially all of its global assets to the New GM. The sale is subject to approval of the U.S. Bankruptcy Court for the Southern District of New York, but because the sale already has the support of the U.S. Treasury, the UAW and a substantial portion of GM’s unsecured bondholders, the company expects the sale to be approved and consummated expeditiously.

GM has asked the court to approve a number of steps to protect current and new GM customers, ensure that its operations will continue uninterrupted during the court-supervised process, and provide a for a smooth transition.

GM will continue to service GM vehicles and honour GM warranties; U.S. and Canadian government guarantees of manufacturers’ warranties are designed to reassure consumers.

The company will use its cash-on-hand and a new debtor-in-possession financing of approximately US$33 billion to ensure an uninterrupted supply of goods and services, provide for other cash requirements prior to closing of the asset sale, fund liabilities to secured lenders, and provide contingency funding to handle any potential unexpected needs.

In conjunction with the sale, the Canadian and Ontario governments and the U.S. Treasury will provide funds to administer the wind-down of the remaining assets and the closing of the Chapter 11 cases. GM employees worldwide will become part of the New GM.

None of GM’s operations outside of the U.S. are included in the filings or process. GM confirmed that all business operations are continuing without interruption in its Europe, Latin America, Africa and the Middle East, and Asia Pacific regions.

The New GM will focus on four core brands in the U.S. – Chevrolet, Cadillac, Buick and GMC – with fewer nameplates and a more competitive level of marketing support per brand. The company said it will also effectively close the competitive gap in active worker labour costs compared with transplant auto manufacturers, more efficiently utilize U.S. capacity while gradually increasing the percentage of U.S. sales manufactured domestically over time, and feature lower structural costs that will enable its North American region to break even on a U.S. total industry volume of approximately 10 million vehicles. This rate is substantially below the 15 to 17 million annual vehicle sales rates recorded from 1995 through 2007.

The company will further reduce its salaried employment in North American in 2009 from 35,100 to approximately 27,200 workers, reduce retirees benefits for salaried retirees and non-UAW hourly retirees, and reduce its U.S. network to approximately 3,600 dealers.

On March 31, 2009, GM reported consolidated debt of $54.4 billion, along with additional liabilities, including an estimated $20 billion obligation to the UAW VEBA (Voluntary Employees Beneficiary Association). Under the new agreement, the company’s capital structure will be comprised of approximately $17 billion in total consolidated debt, including $6.7 billion owed to the U.S. Treasury, $1.3 billion to the Canadian and Ontario governments, $2.5 billion of notes issued to the New VEBA, and approximately $6.8 billion of other debt, primarily international but excluding Europe.

Separately, GM Europe has announced an agreement for €1.5 billion of bridge financing from the German government and a memorandum of understanding to partner with Canada’s Magna International Inc. for the assets of Opel and Vauxhall.

GM also reaffirmed its U.S. commitment to improve the fuel efficiency of its vehicle fleet, meet or exceed new federal fuel economy and emissions regulations, and push ahead with advanced propulsion technology. It will launch the Chevrolet Volt extended-range electric vehicle in 2010, expects to have 14 hybrid models in production by 2012, and will have 65 per cent of its vehicles alternative-fuel capable by 2014.


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