General Motors files for Chapter 11 bankruptcy+

NEW YORK, June 1 Kyodo -
Embattled U.S. automaker General Motors Corp. filed for Chapter 11 bankruptcy
protection on Monday, making it the largest nonfinancial bankruptcy in U.S.
history, U.S. media reported.

The action marks the second bankruptcy filing by a U.S. Big Three automaker,
after Chrysler LLC did the same April 30.
GM filed the bankruptcy protection at the U.S. Bankruptcy Court in the Southern
District of New York, with liabilities totaling $172.81 billion as of March 31,
Reuters reported.
GM had faced a June 1 deadline to work out a viable restructuring plan --
striking a deal to cut debt and labor costs -- or choose a court-supervised
reorganization.
GM's Chapter 11 filing followed the release the previous day of a set of
measures by the U.S. government to rebuild the carmaker under court-supervised
proceedings.
Under the package, the government will place GM under state management by
acquiring a roughly 60 percent equity stake in a recapitalized GM. The package
also features the Canadian government and the Canadian province of Ontario
together getting about a 12 percent stake in the new GM.
In return, the U.S. government will furnish about $30.1 billion in fresh loans
to the new GM.
President Barack Obama will speak about GM shortly before noon Monday. GM Chief
Executive Officer Fritz Henderson will meet the press later in the day.
GM's plight deepened amid dwindling global auto sales during the financial
crisis sparked by the collapse of Lehman Brothers Holdings Inc. last September.
The carmaker had been kept afloat with the backing of $19.4 billion in
emergency federal loans the government provided at the beginning of the year.
In late March, GM received sufficient loans to operate for 60 days under an
additional aid plan Obama released in late March.
All other money the federal government pumped into the faltering company did
not generate desired results, including $13.4 billion in emergency lending
provided by the government of George W. Bush last December and $5 billion the
Treasury lent to GM's financing arm, GMAC LLC, the same month.
GM's last hope of rebuilding its business outside bankruptcy court was
effectively dashed when its debt-cutting talks with bondholders failed last
Wednesday.
The bondholders rejected GM's original debt-for-equity plan that would have
granted them a 10 percent equity stake in GM. GM then opted for Chapter 11
filing and offered a sweetened deal to the bondholders, which would give them a
stake as high as 25 percent including warrants to buy a 15 percent stake.
The United Auto Workers union already approved a set of proposals aimed at
reducing labor costs at GM. The package is expected to cut the amount of money
GM is required to put up for the union's trust fund to cover health care costs
for retired members.
The trust fund will instead obtain a 17.5 percent equity stake in the new GM
and warrants to acquire an additional 2.5 percent in the company.
The latest GM action followed a similar step Chrysler took at the end of April.
Chrysler was unable to work out a viable reconstruction plan despite loans for
30 days of operations it received under Obama's March 31 bailout plan.
Like the two other Big Three automakers, GM was hard hit by a surge in crude
oil prices that peaked last summer, sending sales of its mainstay pickup trucks
and other gas guzzlers dwindling.
GM lagged behind Japanese rivals in developing environmentally friendly
vehicles like hybrid cars. Its higher labor costs added to its plight.
New car sales in the United States tumbled about 34 percent in April from a
year earlier, with those of market leader GM down 33.1 percent to 171,258
units.
GM posted a net loss of $5.98 billion in the January-March quarter, incurring
red ink for the seventh straight quarter. In 2008, the company incurred a net
loss of $30.86 billion, its fourth straight year of red ink.
Reflecting slack sales, GM is downsizing factory operations. The number of GM
factories in the United States is set to drop from 47 in 2008 to 34 by the end
of 2010. The company plans to reduce the number of workers from 61,000 in 2008
to 40,000 in 2010.
Founded in 1908, GM had been the world's largest automaker in terms of sales
volume for more than seven decades until Toyota Motor Corp. overtook it in
2008.
GM manufactures cars and trucks in 34 countries, employs 244,500 people around
the world, and sells and services vehicles in some 140 countries, according to
the company.
==Kyodo