General Motors last night offered its final plan to reorganize outside bankruptcy by slashing bond debt, cutting over 21,000 more US jobs and emerging as a nationalised carmaker under majority control by the US government.
GM chief executive Fritz Henderson said the carmaker would file for bankruptcy protection if an offer to exchange bonds for company equity failed to cut $27 billion in bond debt by about 90 per cent or other changes faltered.
Analysts doubted the debt exchange offer would succeed, setting up GM to restructure in Chapter 11.
GM's bondholder's blasted the terms of its debt-exchange as a back-room deal designed to protect the interests of its major union the United Auto Workers, a group that campaigned for President Barack Obama in last year's election.
Representatives of the bondholders said GM and the Obama administration were gambling on a risky and “legally questionable” strategy for a company that once ranked as an icon of American industrial and economic strength.
The White House said last night the US government had no desire to run a domestic automaker despite the potential controlling interest.
“We strongly back an auto industry that we believe can and should be self reliant,” White House spokesman Robert Gibbs told reporters. “It is not our desire to either own or run one of the auto companies.”
GM's new strategy, which will also jettison the Pontiac brand and shut down production of Saturn brand cars this year, underscored how quickly and far it has fallen since last summer when executives, including Henderson, were insisting that the automaker could restructure under a program of “self help.”
Separately, Chrysler lenders were expected to receive a new offer from the US Treasury as early yesterday in the wake of cost-cutting deals the US automaker has reached with unions in the United States and Canada.
Chrysler faces an April 30th deadline to reach a deal with creditors and cement an alliance with Italy's Fiat SpA and continue to receive US government emergency support.
Reuters