[JURIST] US automaker General Motors (GM) [corporate website] filed [case materials] for Chapter 11 [text] bankruptcy protection Monday. The proceedings will be handled by Judge Robert Gerber of the US Bankruptcy Court for the Southern District of New York [official website], the court which is also overseeing the bankruptcy of rival automaker Chrysler Group [corporate website]. US President Barack Obama [official profile] addressed concerns that the federal government's large ownership stake in GM may hinder the company's recovery saying [transcript]:
What we are not doing – what I have no interest in doing – is running GM. GM will be run by a private board of directors and management team with a track record in American manufacturing that reflects a commitment to innovation and quality. They – and not the government – will call the shots and make the decisions about how to turn this company around. The federal government will refrain from exercising its rights as a shareholder in all but the most fundamental corporate decisions.
With its initial filing, GM said it has asked the court to approve measures [press release] that would "provide for a smooth transition to the New GM," including allowing the US and Canadian governments to back existing GM warranties, allowing for $33 billion in additional Debtor-in-Possession financing to continue corporate operations, and ensuring that current GM employees become "part of the New GM." GM President and CEO Fritz Henderson [professional profile], who assumed control in March, said in an open letter [text, PDF] that:
Today marks a defining moment in the reinvention of GM. In the face of an economic crisis that has caused enormous disruption in the auto industry, we have reached ground breaking agreements with the U.S. Treasury, the Canadian and Ontario governments, and the UAW and CAW unions, and we have the support of a substantial portion of GM’s bondholders. These agreements allow us to launch a leaner, quicker, more customer-focused and cost-competitive New GM.
A senior Obama administration official, speaking on a conference call with reporters [transcript], said that the "we do not expect [bankruptcy proceedings] to be as speedy as Chrysler's because GM is a far larger, far more complicated global company, but we do expect it to proceed, broadly speaking, along similar lines to the Chrysler one." The United Auto Workers (UAW) [official website] had ratified a settlement agreement [press release] with GM on Friday in an unsuccessful effort to meet the 60-day deadline for GM to restructure its debt announced [transcript] by Obama in March.
The other members of Detroit's "Big Three" automakers have also faced financial troubles recently. Chrysler filed for bankruptcy protection [case materials] in April after failing to negotiate the return of $6.9 billion in debt for $2 billion in cash with secured debt holders. Judge Arthur Gonzales on Monday approved [JURIST report] the sale of most of the assets currently held by Chrysler Group to Italian automaker Fiat S.p.A. [corporate websites]. Ford Motor Company [corporate website] is seeking to regain lost market share [WSJ report] while its domestic rivals are involved in bankruptcy proceedings.