NEW YORK - General Motors filed for Chapter 11 bankruptcy protection yesterday as part of the Obama administration's plan to shrink the automaker to a sustainable size and give a majority ownership stake to the federal government.
GM said it has $172.81 billion in debt and $82.29 billion in assets.
As it reorganizes, the fallen icon of American industry 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 in the form of low-interest loans.
Late yesterday, U.S. bankruptcy court judge Robert Gerber gave interim approval for the Detroit-based automaker's use of a total of $33.3 billion in bankruptcy financing, with $15 billion available for use over the next three weeks.
He will rule on final approval of the financing on June 25.
"Our agreement with the U.S. Treasury and the governments of Canada and Ontario will create a leaner, quicker more customer and completely product-focused company, one that's more cost competitive and has a competitive balance sheet," CEO Fritz Henderson said at a news conference in New York. "This new GM will be built from the strongest parts of our business, including our best brands and products."
The Detroit automaker said warranty coverage, service and customer support will continue uninterrupted, plants will continue to make cars and trucks, and essential suppliers and GM's 235,000 employees worldwide will continue to be paid. GMAC Financial Services said in a statement that it will continues to provide automotive financing to GM and Chrysler dealers and customers, and the federal Pension Benefit Guaranty Corp. said workers' pension plans remain safe.
GM will follow a similar course taken by smaller rival Chrysler LLC, which filed for Chapter 11 protection April 30. A judge on Sunday gave Chrysler approval to sell most of its assets to Italy's Fiat, moving the U.S. automaker closer to a quick exit from court protection, possibly this week.
The plan is for the federal government to take a 60 percent ownership stake in the new GM.
The Canadian government would take 12.5 percent, with the United Auto Workers getting a 17.5 percent share and unsecured bondholders receiving 10 percent.
Existing GM shareholders are expected to be wiped out.
GM shares fell as low as 27 cents in morning trading yesterday, their lowest price in the company's 100-year history, but rebounded to rise to 85 cents in afternoon trading.
The government's partial stake in GM comes on top of a far smaller ownership of Chrysler, as well as significant federal equity in banks, the AIG insurance giant and two mortgage industry titans - all victims of an economic crisis unrivaled since the Great Depression.
But President Obama said the actions were part of a "viable, achievable plan that will give this iconic company a chance to rise again."
He said the government would refrain from playing a management role in all but the most critical areas.