GM Emerges From Bankruptcy With CEO Promising Change
By Peter Whoriskey
General Motors emerged from bankruptcy early this morning, with chief executive Fritz Henderson promising that the fallen corporate giant will be reformed and that "business as usual at GM is over."
The announcement signals the completion of one of the largest bankruptcies in U.S. history and the next step in what has become a landmark government bailout.
The new GM will have fewer brands, fewer plants and fewer workers. The number of U.S. executives will be cut by 35 percent and U.S. salaried employment will drop by 20 percent by the end of this year. As important, Henderson said, is that the corporate culture at the automaker must evolve, enabling the company to be more nimble and more focused on beating its competitors.
"The new GM is born," Henderson said.
Henderson said that the company would seek to repay the U.S. money, but stopped short of promising that the U.S. will recover all of the $50 billion it has put into the company.
The announcement followed the sale of most GM's assets through bankruptcy to a new company that is primarily owned by the governments of the United States, Canada and Ontario, and by a trust fund providing medical benefits to UAW retirees. The U.S. Treasury will own 60.8 percent of common stock in the new company, the UAW retiree health trust will have 17.5 percent and the governments of Canada and Ontario 11.7 percent. The old GM will own 10 percent of the common stock.
The business challenges facing the reformed GM are vast. The nation's largest automaker has steadily lost market share for years, and many consumers are reluctant to buy a GM or any American car.
"I know most Americans want this company to succeed," said Edward E. Whitacre, the former AT&T executive who was chosen by the government's auto task force to be the company's new chairman. But "there's still a lot of work to be done."
Critics, including some of GM's creditors, have said the company should simply have been allowed to fail. But U.S. Bankruptcy Judge Robert E. Gerber wrote in a July 7 ruling that a liquidation would be "staggering" to the public. The company has 225,000 employees, 500,000 retirees, 6,000 dealers and 11,500 suppliers.
The order took effect yesterday.
The case "raises the specter of systemic failure throughout the North American auto industry, and grievous damage to all of the communities in which GM operates," the judge wrote. "Under these circumstances I find it hardly surprising that the U.S., Canadian and Ontario government would not stand idly by and allow those consequences to happen."
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By Peter Whoriskey
General Motors emerged from bankruptcy early this morning, with chief executive Fritz Henderson promising that the fallen corporate giant will be reformed and that "business as usual at GM is over."
The announcement signals the completion of one of the largest bankruptcies in U.S. history and the next step in what has become a landmark government bailout.
The new GM will have fewer brands, fewer plants and fewer workers. The number of U.S. executives will be cut by 35 percent and U.S. salaried employment will drop by 20 percent by the end of this year. As important, Henderson said, is that the corporate culture at the automaker must evolve, enabling the company to be more nimble and more focused on beating its competitors.
"The new GM is born," Henderson said.
Henderson said that the company would seek to repay the U.S. money, but stopped short of promising that the U.S. will recover all of the $50 billion it has put into the company.
The announcement followed the sale of most GM's assets through bankruptcy to a new company that is primarily owned by the governments of the United States, Canada and Ontario, and by a trust fund providing medical benefits to UAW retirees. The U.S. Treasury will own 60.8 percent of common stock in the new company, the UAW retiree health trust will have 17.5 percent and the governments of Canada and Ontario 11.7 percent. The old GM will own 10 percent of the common stock.
The business challenges facing the reformed GM are vast. The nation's largest automaker has steadily lost market share for years, and many consumers are reluctant to buy a GM or any American car.
"I know most Americans want this company to succeed," said Edward E. Whitacre, the former AT&T executive who was chosen by the government's auto task force to be the company's new chairman. But "there's still a lot of work to be done."
Critics, including some of GM's creditors, have said the company should simply have been allowed to fail. But U.S. Bankruptcy Judge Robert E. Gerber wrote in a July 7 ruling that a liquidation would be "staggering" to the public. The company has 225,000 employees, 500,000 retirees, 6,000 dealers and 11,500 suppliers.
The order took effect yesterday.
The case "raises the specter of systemic failure throughout the North American auto industry, and grievous damage to all of the communities in which GM operates," the judge wrote. "Under these circumstances I find it hardly surprising that the U.S., Canadian and Ontario government would not stand idly by and allow those consequences to happen."
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