US [updated 13:20BST]: GM files for bankruptcy
General Motors filed for bankruptcy today, entering a new and uncertain era of government ownership.
The filing is the third-largest in US history and the largest-ever US manufacturing bankruptcy, according to Reuters, which noted that the decision to push GM into a fast-track bankruptcy, and provide US$30bn of additional taxpayer funds to restructure the automaker is a huge gamble for the Obama presidency.
The GM plan as detailed by US officials is for a quick process that would allow a much smaller GM to emerge from court protection within 60 to 90 days.
"Now the hard part begins, which is making GM and Chrysler competitive. If they don't do that, then we'll be doing this all over again in a few years," Christopher Richter, auto analyst at CLSA Asia-Pacific Markets in Tokyo, told the news agency.
"The immediate implication is that the companies are going to get smaller and so market share is up for grabs, which means that rivals like Toyota, Honda, Nissan and Hyundai are going to gain share."
The governments of Canada and the province of Ontario agreed to provide another $9.5bn to GM in a late addition to the plans for the bankruptcy that have been taking shape for weeks, US officials were quoted as saying.
The UAW would have a 17.5% stake in the "new GM." The Canadian government would own 12% stake and GM bondholders would get 10%.
Officials involved in the planning for GM told Reuters the White House was a "reluctant investor" in GM but had to prevent a liquidation that analysts say would have cost tens of thousands of jobs at a time when the economy was mired in recession.
Analysts said that while there were large risks to the Obama administration's approach, it had at least succeeded in pulling GM back from the brink of collapse.
"I think they have a much greater chance of emerging as a healthy company now than they did just six months ago," Aaron Bragman, an analyst at IHS Global Insight, told Reuters. "Nobody gave them any possibility of emerging as a whole company."
US officials said there was no plan to provide any further funding for GM and insisted that all of the Detroit 3 could survive. Ford has not sought emergency federal aid.
"We do believe, and completely endemic in the president's decision was a belief, that this country can support three domestic successful viable auto companies," a senior Obama administration official told the news agency.
In the case of GM, the goal of restructuring is to allow it to return to profitability if US industry-wide auto sales recover even slightly to near 10m on an annual basis.
Until now, GM had counted on a recovery to the 16m unit mark the industry last saw in 2007 in order to stop losing money, officials said.
Should GM and Chrysler emerge swiftly from bankruptcy this summer, the autos task force will stay in business - shifting to an investment management role, the report said.
Senior administration officials on Sunday told Reuters there was plenty to keep the task force staff busy, monitoring the government's stake of about 60% of GM, and less than a 10% stake in Chrysler.
While the "new GM" is expected to emerge quickly from court protection, its shuttered plants, stranded equipment and other spurned assets would be left to liquidation in bankruptcy.
Al Koch, a managing director at advisory firm AlixPartners, will be appointed chief restructuring officer in charge of liquidating those GM assets. A veteran restructuring adviser, Koch has had prominent roles in retailer Kmart's restructuring and other turnarounds.
Over the weekend, GM won support from investors representing 54% of its $27bn in bondholder debt for the US government's plans, Reuters noted. The bondholders could take up to 25% of GM if it recovers to be worth what it was in 2004.
The bondholders' support does not ensure court approval but gives the company an important symbolic victory that bankruptcy experts and analysts said would help GM's case.
GM also concluded an amended agreement with the UAW under which the union will receive a 17.5% stake in a restructured company and other debt and preferred stock instead of $20bn in cash.
US president Barack Obama was expected to outline GM's next steps just before noon eastern time (5pm in the UK) and a press conference hosted by GM CEO Fritz Henderson was expected to follow soon after.
Obama said in an interview with NBC aired over the weekend that the government was forced to take over GM in order to prevent a collapse that could have brought down other companies and further batter the recession-hit US economy.
"My preference would have been to stay out of it completely," Obama was quoted as saying.
A Chapter 11 filing will raise questions about what impact bankruptcy would have on GM's sales, whether proceedings could get bogged down and whether government involvement would help the automaker overcome its challenges of making and marketing better cars, Reuters said earlier.
See also: US: GM's 'New GM' statement in full