In the largest industrial bankruptcy ever-recorded in American history, General Motors Corp., the top U.S. automaker and once the world's largest corporation, filed for bankruptcy protection on Monday, June 1.
In his "auto speech" delivered at the White House at noon Monday, President Barack Obama said this was a moment of celebration. "The filing marked 'the end of an old General Motors and the beginning of a new General Motors,'" he noted.
GM's bankruptcy is the fourth largest in U.S. history and the largest for a U.S. industrial company. In line with a financial regulation plan worked out by the U.S. treasury, the federal government would take 60 percent ownership stake and the Canadian government 12.5 percent with the united auto workers (U.A.W.) getting a 17.5 share and unsecured bondholders receiving 10 percent of the equity in the so-called new GM.
In the course of post-bankruptcy restructuring, the U.S. government will provide an additional 30.1 billion U.S. dollars in financing to help GM restructure under court protection, and it has already provided 19.4 billion dollars in loans. Thus, the U.S. federal government would actually pump close to 50 billion dollars into GM as the latter makes its way through bankruptcy court. So, there is a wisecrack in the U.S. nowadays that GM would be no longer the "General Motors" but "Government Motors".
The federal government injects huge capital into GM in a trying endeavor to help it go through bankruptcy court reorganization, noted public opinions, and this represents a rare, unprecedented experiment with the U.S.'industrial policy.
Nevertheless, administration officials have reminded people that the federal government would not meddle in GM's routine management. "Daily operations will be carried out by GM's management but the administration will play a role in selecting a majority of the new board of directors," according to a shared view of these federal officials.
President Obama in his "auto speech" particularly called for undertaking or sharing essential sacrifices during the GM's restructuring process. Noting that GM is an American company with tens of thousands of employees…, he acknowledged, "a sacrifice you were nevertheless called to make so that your children and all of our children can grow up in America", a longstanding automobile nation.
The linchpin of the deal is a trust fund for retiree health care, which would take over medical costs of GM retirees as of January 2010, so that the annual pensions of 65,000 GM retirees and their families have not been slightly affected for the time being.
In strict compliance with the blueprint set, a new GM will be leaner and better run and its cars more fuel-efficient. General Motors announced on Monday that it will close or idle 14 plants or facilities, and cut 25,000 to 30,000 jobs in the U.S. by 2012 as part of a restructuring plan to improve its competitive edge. Moreover, GM's present bondholders have accepted an offer to swap their 27 billion U.S. dollars in debt for at least 10-percent stake in a new GM.
The collapse of the century-old auto giant came at a time when the United States is experiencing the worst economic recession since the Great Depession of the late 1920s and the early 1930s. Just a month ago, Chrysler LLC, the country's third largest automaker, took the same path.
Bankruptcy judge blessed the Chrysler-Fiat Union before the GM filed for Bankruptcy protection in New York district court on Monday. But unlike Chrysler, GM is much more conspicuous with its development prospects for its immense scale and global impact as well as a more extensive representation.
At the time when GM, the Detroit-based company, filed for bankruptcy protection, another piece of news relating to auto business is especially eye-catching. Obama administration is dispatching eight cabinet secretaries and other administration officials through the Midwest this week to visit auto communities and discuss federal recovery efforts for auto firms and workers and related views about what a GM bankruptcy filing means for employers, suppliers, consumes and communities.
As a matter of fact, the current U.A.W. wages are 63 percent higher than average manufacturing wages in the U.S. and also higher than that for government laborers. Consequently, the loss of payroll jobs in the automotive sector in the U.S. will exert a great impact on community economy. And the objective of the tour of these cabinet officials is designed to minimize such an impact and help the relevant states to make adjustments.
In another development, responses to the GM's bankruptcy filing vary from one stratum to another of Japanese society, critics say. According to Japan Credit Rating Agency, LTD., Tokyo, some 114 Japanese companies, 70 of them auto parts or related companies, currently have business ties with GM and companies in its group.
The GM failure is anticipated and Japanese carmakers have already taken measures to prepare for it. Otherwise, the agency added, there would have been turmoil in Japan if GM had collapsed late last year, but there is unlikely to be any dramatic fall in stock prices in the short-term future since (the news) has already been sufficiently prices into the current markets.
By People's Daily Online and contributed by Ma Xiaoning and Yu Qing, PD resident reporters respectively in U.S. and Japan
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