General Motors Corp., humbled by its bankruptcy filing yesterday after decades as a symbol of industrial muscle, faces a future with fewer employees and plants, a sharply reduced network of dealers and brands, and control in the hands of the federal government.
The fallen giant, the largest U.S. industrial company ever to enter bankruptcy, is shedding 21,000 jobs and 2,600 dealers. Sparing few communities, the retrenchment amounts to one-third of its hourly workforce in the U.S. and 40 percent of its dealerships.
"We are acting as reluctant shareholders, because that is the only way to help GM succeed," President Obama said of the temporary nationalization of the company.
Obama lauded what he called a "viable, achievable plan that will give this iconic American company a chance to rise again," as GM followed Chrysler L.L.C. into Bankruptcy Court. Of Detroit's Big Three automakers, only Ford Motor Co. has avoided bankruptcy restructuring and has not taken federal bailout money.
Under the plan, the government will invest $30 billion in GM. This is in addition to the $19.4 billion the company has borrowed from the Treasury since December.
The prepackaged GM bankruptcy deal - crafted by the administration, the company, the United Auto Workers, and a group of bondholders - would give the U.S. government a 60 percent controlling stake in what was once the world's largest automaker. An additional 12.5 percent would be under Canadian government ownership.
"What I have no interest in doing is running GM," Obama said. His only goal, he said, was to get GM back on its feet and then "to get out quickly."
But neither Obama nor his press secretary, Robert Gibbs, offered an indication of how long the government's involvement with GM would last.
The Chapter 11 proceeding will slash GM's debt to $17 billion from $54.4 billion in March, the company said in a statement.
"The agreement may buy some time, but does nothing to ensure GM's success," said House Republican Leader John Boehner of Ohio. "The only thing it makes clear is that the government is firmly in the business of running companies using taxpayer dollars."
Obama said he recognized that even the temporary nationalization of GM "may give some Americans pause." But he called it preferable to letting the company fail - or giving it more and more bailout loans, money it has gone through rapidly.
If all goes according to plan, on top of the 60 percent U.S. stake and Canada's 12.5 percent, the UAW would get a 17.5 percent stake and bondholders would end up with the remaining 10 percent. Existing stockholders' claims would be wiped out.
Obama said the nation's severest economic crisis since the Great Depression had "crippled private capital markets and forced us to take steps in our financial system - and with our auto companies - that we would not have otherwise even considered."
It is one of the largest peacetime nationalizations. The government has taken shares in railways, steel mills, coal mines, and foreclosed homes - but most of these came during times of war.
The government did take over failed savings and loans in the 1980s and, last year, the mortgage giants Fannie Mae and Freddie Mac. In the current economic crisis, it has also taken significant stakes in banks such as Citigroup Inc. and insurer American International Group Inc.
Most nationalizations have been temporary. But at least one has endured - Amtrak.
Obama pledged that, despite its ownership stake, the government would not try to micromanage what is still one of the world's largest automakers despite its loss of market share to foreign competitors over the last two decades.
"GM will be run by a private board of directors and management team," Obama said. "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."
"We're fine with that," Fritz Henderson, president and chief executive officer of GM, told reporters in New York after the company filed for bankruptcy protection there. Henderson said he hoped a leaner, quicker GM could emerge from bankruptcy protection in 60 to 90 days.
GM plans to focus on four core brands - Chevrolet, Buick, Cadillac, and GMC - and get rid of the Pontiac, Saturn, Hummer, and Saab lines.
GM plans to permanently close nine plants and idle three others to trim production and labor costs.
Six of the plants are in GM's home state of Michigan, already hit hard by job cuts in the auto industry. GM's assembly plant in Wilmington will close in July.