American car giant General Motors on Monday filed for bankruptcy protection in a move that will see the US government take a 60 percent stake in the company and the likely loss of 20,000 US jobs.
GM's bankruptcy is the biggest industrial collapse in US history
Backed by the US government, the move marks the biggest industrial collapse in America and the bankruptcy filing is the third-largest in US history.
GM is now the second of the "Big Three" US carmakers to enter bankruptcy protection, following Chrysler's lead.
GM's bankruptcy is expected to be legally complicated, in particular because of the company's international reach, which includes German subsidiary Opel and the UK's Vauxhall brand.
Vauxhall and Opel are in the process of being sold off to Canadian-Austrian auto parts manufacturer Magna and a Russian partner, with the aid of the German government.
Only GM's US brands were included in Monday's bankruptcy filing.
The US government is expected to take a 60 percent stake in the carmaker which has struggled with years of heavy losses. Washington will also pump in an additional $30 billion (21 billion euros) to help restructure the 100-year-old automaker.
Canada's government will also contribute another $10 billion and take a 12-percent stake in GM
GM, which had already received $20 billion of emergency loans since the end of last year, said in its bankruptcy filing that its current debts total $173 billion.
"Tough but fair move"
US President Barack Obama said on Monday he was confident General Motors Corp would emerge quickly from bankruptcy, saying the government is in a reluctant position as a controlling shareholder and that he had no interest in running the company.
"I am absolutely confident that if well managed, a new GM will emerge that can ... out-compete automakers around the world and that can once again be an integral part of America's economic future," Obama said in remarks at the White House.
Obama has described the government as a "reluctant shareholder" in GM
President Barack Obama described the move as "tough" but said it was "also fair" and added it would "give this iconic American company a chance to rise again."
The president also promised a hands-off approach, saying the carmaker -- and not his administration -- would be responsible for decisions on the day-to-day running of the company.
"A new chapter"
GM chief executive Fritz Henderson called it a "difficult but very important day" and appealed to customers to "give us another chance." He promised a speedy bankruptcy process that will allow the carmaker to take the necessary steps to reinvent itself.
"We'll do it right and we will do it once," Henderson said at a press conference. "This is not the end of General Motors but the start of a new chapter."
It is expected that GM may be able to exit bankruptcy protection in between 60 and 90 days.
On the same day that GM filed for bankruptcy, a bankruptcy judge approved the sale of Chrysler's best assets into a new company to be managed by Italian carmaker Fiat.
"A sacrifice for the next generation"
The restructuring is expected to produce a drastically leaner GM. Some 20,000 US workers are thought likely to lose their jobs as the firm streamlines its operations. It currently has 173,000 employees across the US, Canada and Mexico.
GM also plans to close three service and parts operations.
President Obama made an appeal to workers who are set to lose their jobs.
The German government is trying hard to save jobs at GM's European subsidiary Opel
"I know you've already seen more than your fair share of hard times," he said. "I want you to know that what you're doing is making a sacrifice for the next generation -- a sacrifice you may not have chosen to make, but a sacrifice that you are nevertheless called to make so that your children and all of our children can grow up in an America that still makes things."
As part of its restructuring, GM would establish the Voluntary Employee Benefits Association (VEBA), a trust that would provide health care benefits for retired workers of United Auto Workers union. In return the VEBA trust would receive 17.5 percent of the restructured GM's equity and will have the right to buy a further two and a half percent.
Editor: Trinity Hartman