GM Files For Bankruptcy, Closes Plants, Cuts Workforce

We’ve all heard the new by now, General Motors has filed for Chapter 11 bankruptcy protection. This, despite its wide coverage, bears mentioning as it’s the fourth-largest bankruptcy filing in U.S. history and the largest for an industrial company. General Motors said it has $172.81 billion in debt and $82.29 billion in assets.

As it reorganizes, the company will rely on $30 billion of additional financial assistance from the Treasury Department and $9.5 billion from Canada. That’s on top of about $20 billion in taxpayer money GM already has received.

The plan is for the federal government to take a 60% ownership stake in the new GM. The Canadian government would take 12.5%, with the United Auto Workers getting a 17.5% share and unsecured bondholders receiving 10%. Existing GM shareholders are expected to be wiped out.

GM said it will permanently close nine more plants and idle three others. The Pontiac, MI, and Wilmington, DE, assembly plants will close this year, while plants in Spring Hill, TN, and Orion, MI, will shut down production but remain on standby. One of the idled plants will be retooled to build a small car that GM had originally planned to build in China. Seven powertrain and parts stamping plants will be closed starting in June 2010, while an additional stamping plant will be idled but remain on standby.

GM’s filing follows the Chapter 11 filing by Chrysler, which also has been hurt by the economic slump. Chrysler’s plan gives a 55% stake of the new company to a union-run trust for retirees. Fiat gets a 20% stake that can ultimately grow to 35%. The U.S. and Canadian governments get smaller pieces.

Ford Motor Co., has so far avoided bankruptcy by mortgaging all of its assets in 2006 to borrow roughly $25 billion. GM will move forward with four core brands, Chevrolet, Cadillac, Buick and GMC, and cut four others. The company plans to cut 21,000 employees, about 34% of its work force, and reduce the number of dealers by 2,600.