In a desperate bid to avoid bankruptcy, General Motors Corp. on Monday launched a restructuring plan that would eliminate 2,600 dealers, 21,000 workers, $44 billion in debt and four brands, while leaving the U.S. government owning at least half of the troubled automaker.
GM will accelerate the wind-down of its Hummer, Saturn and Saab brands, ceasing production by year’s end. Pontiac will be terminated after 2010.
The automaker announced the sweeping moves as part of a revised plan being submitted to the Treasury Department, from which it is requesting $11.6 billion in loans on top of the $15.4 billion it already has received.
The plan is centered on a debt-for-equity offering GM is extending to holders of $27 billion in bonds. At least 90 percent of holders of outstanding bonds must accept, the company said, or it will file for bankruptcy by June.
“The objective here is not to survive; the objective is to develop an operating plan that helps us win,” said Fritz Henderson, GM’s chief executive, in a morning conference call. “It’s a difficult period, it’s a challenging period, it’s a very painful period.”
This is the third restructuring plan filed by GM, which lost $30.9 billion in 2008, since December. This time, GM plans to incorporate cuts sufficient to allow it to break even in a market with industry sales as low as 10 million vehicles in the U.S. on an annual basis.
Last year, 13.2 million cars and light trucks were sold in the U.S., but through the first quarter of 2009, sales were on a 9.8 million-unit pace.
Last month, the Treasury Department’s autos task force rejected GM’s previous restructuring plan submitted on Feb. 17, saying it was insufficient in scope and reach. GM was given until June 1 to provide a sustainable business model, or it would face being pushed into bankruptcy.
To do that, GM was asked to reduce obligations to the bondholders and unions for retiree health care and to reduce labor costs.
