General Motors files for bankruptcy protection | News and current affairs from Germany and around the world | DW | 01.06.2009
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General Motors files for bankruptcy protection

General Motor's bankruptcy filing is the third-largest in US history and ushers in a new era of government ownership.

GM cars on an assembly line

GM is headed towards bankruptcy

Now that GM has won concessions from trade unions, and backing from its creditors, it will begin the restructuring process. The United States government is set to own 60 percent of the "new GM," which amounts to an unprecedented level of US government involvement in a large American company.

GM's bankruptcy is expected to be legally complicated, in particular because of the company's international reach, which includes German subsidiary Opel. Only GM's US brands were included in Monday's bankruptcy filing.

The US Treasury would provide approximately $30.1 billion (21 billion euros) in funds. In exchange, the US government would receive about $8.8 billion in preferred stock and debt, and roughly 60 percent equity in the automaker.

In return for their concessions, the United Auto Workers trade union would be able to select a director to serve on the GM board with no voting rights.

As part of its restructuring, GM would establish the Voluntary Employee Benefits Association (VEBA), a trust that would provide health care benefits for retired UAW workers. 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.

Canadian money

Canada is also getting involved financially by contributing $10 billion dollars and receiving a 12 percent stake in the new GM. It is also to have a right to select one initial member of the board.

This is on top of the $20 billion that has already been given to the struggling automaker since last December.

In return, GM is to eliminate over 30,000 jobs, sell off many of its over a dozen brands, among which are Hummer, Saab, and Saturn. It is currently looking for a buyer for Volvo.

According to officials, the US government is a "reluctant" equity holder and will keep its involvement to a minimum.

It will also seek to dispose of its equity as soon as possible.

av/Reuters/dpa/AP
Editor: Chuck Penfold/Trinity Hartman

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