Monday, June 01, 2009

General Motors quietly slips into BK

A little later today:

General Motors Corp., the world’s largest automaker for 77 years, will file for bankruptcy today, a landmark for an industry that defined American economic might. The filing, which GM executives said last year wouldn’t happen, marks the plunge of a company that used to make more than half the cars bought in the U.S., including the Corvette, the Cadillac and the Pontiac GTO.

Word has been leaking out since last week to soften the blow to the American psyche. From $40 a share to 75 cents over the past two years.

The “new GM” will get $30.1 billion in bankruptcy financing from the government, and the Treasury “does not anticipate providing any additional assistance” after that, the Obama administration said Sunday in a statement. The federal government will have a 60 percent equity stake in the retooled automaker, and 12 percent will be held by the Canadian government, which is lending $9.5 billion to the company.

Everybody takes a hit:

The United Auto Workers’ health trust fund for retirees, which is owed $20 billion by GM, will be replaced by a new entity that will own 17.5 percent of the new company with warrants to purchase an additional 2.5 percent. Bondholders and other creditors would get a 10 percent stake in the new GM, with warrants for an additional 15 percent, in exchange for $27.1 billion unsecured debt.

Administration officials said GM will have to comply with executive compensation limits the Treasury announced in February for financial institutions that receive more than $500 million in federal funds, as well as the so-called Dodd Amendment. The provision is named after Senate Banking Committee Chairman Chris Dodd, a Connecticut Democrat, who attached the pay restrictions to the $787 billion economic stimulus bill Congress passed on Feb. 13.

Those restrictions place a $500,000 salary cap on the top five executives at banks, and the 20 most highly paid employees below them, and require them to forgo cash bonuses.

Good luck to a leaner, meaner General Bull Moose.

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