General Motors filed for bankruptcy protection this morning, marking the end of financial independence for the 100-year-old industrial leviathan that once conflated its interests with the country's and -- counting jobs at the company and its suppliers -- employed well over 1 million people.
The Obama administration said yesterday that the purpose of the bankruptcy is to restructure the storied automaker, as the government has been attempting do with Chrysler. Officials said their hope is that GM would emerge from the process smaller, with fewer workers and brands, less debt, but also more viable.
The bankruptcy filing came at 8 a.m., according to the Associated Press, and was preceded by a bankruptcy petition from a GM affiliate, wire services reported. Meanwhile, last night, a bankruptcy judge approved the sale of substantially all of Chrysler's assets to a group led by Italian automaker Fiat.
The United States will invest another $30 billion during and after the GM bankruptcy process, officials said last night, bringing the U.S. commitment to $50 billion.
Following that infusion, "the U.S. Treasury does not believe or anticipate that any additional assistance to GM will be required," a senior administration official said last night, calling the restructuring a "permanent" solution.
Under the proposed restructuring, about 60 percent of the new GM would be owned by the United States, about 12 percent by the governments of Canada and Ontario, a union health trust would own 17.5 percent, and the company's current bondholders would get 10 percent.
But as the administration builds the case for another massive infusion of government money into the automaker, it is also dealing separately with accusations that its plan unfairly favors the United Auto Workers at the expense of the company's investors.
The fairness issue will be central as the GM bankruptcy case goes before a judge this week: Does the government-sponsored restructuring plan equitably accommodate all of the company's stakeholders?
It is a legal and a political question, pitting company workers against investors, and it will be debated in and out of court.
Similar complaints arose from Chrysler's creditors, mainly banks and hedge funds, but Obama dismissed some of the lenders as mere "speculators," and their legal claims have failed to gain traction in court.
GM's creditors, however, consist of thousands of investors, individuals as well as institutions. One group of individual investors, calling themselves the Main Street Bondholders, have already organized to protest their treatment. And their claims have been echoed by some in Congress.
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