Alex Wong/Getty Images
President Obama speaks at the White House about General Motors' Chapter 11 bankruptcy filing on Monday.
President Obama speaks at the White House about General Motors' Chapter 11 bankruptcy filing on Monday. Alex Wong/Getty Images
Camilo Jose Vergara
The General Motors world headquarters building in Detroit. Ironically, the pink monorail passing by features a Pepsi advertisement that reads, "Optimismmmmmmmmmmmm."
The General Motors world headquarters building in Detroit. Ironically, the pink monorail passing by features a Pepsi advertisement that reads, "Optimismmmmmmmmmmmm." Camilo Jose Vergara
Declaring the government "a reluctant shareholder," President Obama said Monday that pushing General Motors Corp. into bankruptcy was a strategy designed to create a more viable company, rather than one that was a continued drain on taxpayers.
Hours after the automaker filed for Chapter 11 bankruptcy protection in New York, Obama embraced a company restructuring plan that includes closing or idling an additional 14 plants, producing more cars domestically and focusing on the production of fuel-efficient cars.
"Working with my auto task force, GM and its stakeholders have produced a viable, achievable plan that will give this iconic American company a chance to rise again," the president said at a White House news conference. "It's a plan tailored to the realities of today's auto market, a plan that positions GM to move toward profitability, even if it takes longer than expected for our economy to fully recover."
The plan calls for the U.S. government to increase its investment in GM by $30 billion, for a total of $50 billion in aid, giving the government a 60 percent stake in the company, Obama said. Still, he underscored that he has no interest in getting into the auto manufacturing industry.
"What we are not doing, what I have no interest in doing, is running GM," the president said, adding that the company will be run by a private board of directors and management team. "They, and not the government, will call the shots and make the decisions about how to turn this company around."
Founded in 1908, General Motors was the biggest automaker in the world for 77 years, until it was supplanted by Toyota in 2007. Some of GM's best-known cars and trucks were sold under the Chevrolet, GMC, Pontiac and Saturn brands. But in its bankruptcy filing on Monday, the company said it has $172.81 billion in debt and $82.29 billion in assets.
GM's bankruptcy filing is the fourth-largest in U.S. history.
"Today marks a defining moment in the reinvention of GM as a leaner, more customer-focused, and more cost-competitive company that, above all, can quickly generate winning bottom line results," GM President and CEO Fritz Henderson said in a statement on the company's Web site. "The economic crisis has caused enormous disruption in the auto industry, but with it has come the opportunity for us to reinvent our business."
In addition to the $30 billion in new funding that Obama pledged to help the 100-year-old company retool, Canada and Ontario provincial government are lending GM $9.5 billion in exchange for 11.7 percent of the reorganized company's common shares. Canadian Prime Minister Stephen Harper said the move was necessary to protect Canadian jobs. "The Canada-U.S. auto sector is heavily integrated, and a viable GM will provide long-term security for thousands of Canadians who work for suppliers, research and development institutions, and other supporting industries," Harper said in a statement.
In bankruptcy filings, GM said it hopes to launch the "New GM" as a separate and independent company in 60 to 90 days. The company's plans include focusing on four core brands: Chevrolet, Cadillac, Buick and GMC. The company stressed that all warranty, service and customer support will continue without interruption — backed by the U.S. and Canadian governments.
News of the bankruptcy filing was followed by news that General Motors would be dropped from the Dow Jones industrial average after 83 years.
Obama noted that Chrysler has improved its fortunes after filing for bankruptcy protection more than a month ago. Over the weekend, a U.S. bankruptcy judge approved the sale of most of Chrysler's assets to a new company headed by Italian carmaker Fiat.
The president said he believes GM also will emerge a stronger company, but he cautioned that a turnaround could take longer than Chrysler's because it is a bigger and more complex company.
While General Motors' bankruptcy had been expected for weeks, the filing still sent shock waves through Detroit and Michigan. Of the 14 plants that GM intends to close or idle, seven are in Michigan. That means the loss of 9,000 more jobs in a state that has lost hundreds of thousands over the past decade.
More than 100,000 additional jobs in Michigan could also disappear over the next year as the effects of GM and Chrysler bankruptcies ripple through the state's economy — especially the massive auto supply sector.
The White House said the continued downsizing is part of a painful but necessary restructuring process for the automaker. The government said GM will immediately seek authority to continue paying its suppliers while in bankruptcy and that remaining employees will be paid as usual.
In Spring Hill, Tenn., workers lamented the closing of the GM plant where the Saturn brand was developed to help GM compete with fuel-efficient Japanese cars.
The plant produced its last Saturn in 2007, but GM invested $1 billion to retool the facility to assemble the Chevy Traverse. In November, the plant will be idled and about 2,500 employees will be laid off indefinitely
Local union Chairman Mike Herron said workers are disappointed but believe Spring Hill is well-positioned for a comeback.
"Everything in that facility is new," he said. "It's state of the art, and it's ready to go ahead and build new products, so we feel good as we go forward that we have all of our ducks in a row." Herron said Spring Hill will compete with other sites for a new assignment, possibly a new, small car for GM.
Some GM dealers predicted the bankruptcy would be good for sales.
"Good news. Get that 800-pound gorilla off our back," said John Ferraiolo, general manager of Chase Chevrolet in Stockton, Calif. He said the company's problems represented the accumulated effect of poor decisions by GM management that date back to the 1980s.
"They built too many cars for too long. We tried to put a bug in their ear for a long time, quit building so many cars," Ferraiolo said. "And hopefully the company would have learned their lessons and they'll be stronger."
Michigan Rep. Thaddeus McCotter, who represents an area hard hit by closures, said the government must now focus on helping the people in communities where plants are closing.
"It's gonna be a much more difficult slog for Michigan to get through what is clearly an auto apocalypse for us," the Republican congressman said.
From reports by NPR and member stations WDET and WPNL