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GM to cut 21,000 US factory jobs, shed Pontiac
(Agencies)
Updated: 2009-04-28 11:51 DETROIT -- General Motors Corp. could be majority owned by the federal government under a massive restructuring plan laid out Monday that will cut 21,000 US factory jobs by next year and phase out the storied Pontiac brand.
The plan, which includes an offer to swap roughly $27 billion in bond debt for GM stock, would leave current shareholders holding just 1 percent of the century-old company, which is fighting for its life in the worst auto sales climate in 27 years.
GM said that it will ask the government to take more than 50 percent of its common stock in exchange for canceling half the government loans to the company as of June 1. The swap would cancel about $10 billion in government debt. In addition, GM is offering stock to the United Auto Workers for at least 50 percent of the $20 billion the company must pay into a union run trust that will take over retiree health care expenses starting next year. If both are successful, the government and UAW health care trust would own 89 percent of GM stock, with the government holding more than a 50 percent stake, CEO Fritz Henderson said in a news conference at GM's Detroit headquarters. President Barack Obama's administration said in a statement that the bond exchange filing is an important step in GM's restructuring but the administration has not made a final decision about taking stock for part of its loans. "The interim plan that GM laid out in this filing reflects the work GM has done since March 30 to chart a new path to financial viability. We will continue to work with GM's management as it refines and finalizes this plan and with all of GM's stakeholders to help GM restructure consistent with the president's commitment to a strong, vibrant American auto industry," the statement said. Henderson said that although the government would own a majority of GM's outstanding common shares, the Treasury "hasn't demonstrated interest in running the company," but would have someone on the board looking out for the taxpayers' interest. The task force has directed current board chairman Kent Kresa to replace several board members. "The shareholders, the VEBA (health care trust) and the government would want to have a someone on the board of directors," he said. Deals with the UAW and the Treasury have yet to be finalized, he said. The struggling automaker said it will offer 225 shares of common stock for every $1,000 in notes held by bondholders as part of a debt-for-equity swap. Henderson said the objective is to reduce GM's $27 billion of outstanding public debt by about $24 billion. The company estimates that after the exchange, bondholders would own 10 percent of the company. That would leave current common stockholders with only 1 percent, GM said. Still, GM shares rose 34 cents, or 21 percent, to $2.03 in midday trading. The plans, if successful, would reduce GM's debt by $44 billion from the present figure of about $62.4 billion. "We would be substantially less-leveraged as a company," Henderson said. |
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