Bondholders Refuse Deal To Keep GM Out Of Government Hands
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Related: Federal Government To Buy GM
General Motors Corp. still has not been able to reach an agreement with its bondholders regarding its $27 billion exchange offer designed to keep it out of bankruptcy.
GM (NYSE: GM) filed a notice with the U.S. Securities and Exchange Commission this week that reported it has not been able to reach a deal on its exchange offer that expires May 26. GM will announce this week if it will extend the deadline for the offer, according to the filing with the SEC.
A report by Reuters news agency Saturday quoted a spokesman for the creditors committee as saying the offer of 10 percent ownership from GM was not good enough. The report said bondholders want a 58 percent ownership stake in the automaker, but that President Barack Obama’s administration has made it clear that is not going to happen. The bondholders are said to be preparing for a GM bankruptcy filing.
GM executives, including its new CEO Fritz Henderson, have said in recent weeks that GM is hoping to avoid bankruptcy, but that it is preparing for that possibility. A news report Friday in the Washington Post said the Obama administration was steering GM toward filing for bankruptcy, perhaps as soon as this coming week.
The federal government set a June 1 deadline for GM to reach agreements with its bondholders and unions to help it fulfill a requirement to come up with a plan to help it survive the global economic downturn. The United Auto Workers union announced this week it had reached a deal for concessions to its labor agreement with the company. GM had previously filed a plan that was rejected, along with a plan by Chrysler LLC that was rejected. Chrysler filed for bankruptcy last month.
Both automakers have accepted billions of dollars in federal bailout funds from the U.S. Treasury Department, and are seeking more money. Ford Motor Co. (NYSE: F) is the only member of the so-called Big Three from Detroit that has not accepted bailout funds from the government.
GM announced some details of its planned restructuring at the end of April that it says will help it become more viable as a business and competitive with the foreign automakers.
The following is a list from GM’s Web site detailing the major changes planned:
Focusing on four core brands – Chevrolet, Cadillac, Buick and GMC. GM will accelerate the resolution of Saab, Saturn, and Hummer by the end of 2009, and phase out Pontiac by the end of 2010.
Reducing the size of its dealer network from 6,246 in 2008 to 3,605 by the end of 2010.
Reducing the total number of assembly, powertrain, and stamping plants in the U.S. from 47 in 2008 to 34 by the end of 2010, and to 31 by 2012. This reflects six accelerated plant idling/closures from the Feb. 17 plan, and one additional plant idling.
Reducing U.S. hourly employment from about 61,000 in 2008 to 40,000 in 2010, and leveling off at about 38,000 starting in 2011. Th
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