General Motors could be out of ‘jail’ and on its new path by the end of this week, having staged one of the greatest escapes in corporate history.
From a company looking down the barrel of rising debts, slumping cash slows, disappearing cash reserves and plunging car sales, $US60 billion later, it has only three days to go before the new GM appears.
The company’s CEO, Fritz Henderson said in a posting on a company website that after a four day sale of the sale process expires (to allow appeals to be made):
"We expect the sale to close immediately after the appeal process is exhausted later this week, and for the new GM to be operational and fully competitive, with an exciting line of new products, a smaller and more focused brand portfolio, and a clear mission to put the customer first in everything we do," Henderson said in the blog posting.
US Bankruptcy Judge Robert Gerber, in clearing the way for the sale of GM’s good assets on Sunday night, US time, gave opponents until Thursday at noon to appeal and win an additional delay from a higher court.
The new GM will be known as General Motors Co. and is backed with $US50 billion in Federal government loans.
The Treasury Department will hold 60.8% stake in GM, which will be privately owned until at least next year, while the Canadian government will have 11.7% and the United Auto Workers union health care trust fund will hold 17.5%. Unsecured creditors will hold 10 percent of GM.
If there are no appears, GM will emerge from bankruptcy 40 days after it collapsed.
That will mean it will join rival Chrysler in having its debts and costs ‘cleansed’ by a Government inspired and driven process unprecedented for its size and speed in American history.
In his web posting, Mr Henderson compared the company’s time in bankruptcy protection to "fixing our bike while we ride it."
"Our focus in recent weeks has been on creating a new company from the strongest parts of the old GM, and on doing it with transparency and speed. This has been an especially challenging period, and we’ve had to make very difficult decisions to address some of the issues that have plagued our business for decades," Henderson said.
"We have, in effect, been fixing our bike while we ride it. Now the repair work is almost done, and we’re steering the company back onto a path to viability and success.
We’re ready for the challenge, and prepared to ride as fast as we can."
The restructured GM will get the remaining $US20 billion in government bankruptcy financing over the rest of this year and may be ready to go to market early next year.
According to the head of the US Government’s Car Task force, investment banker, Steve Rattner, told the media that he was confident that the bankruptcy judge’s decision to allow the sale of the automaker’s best assets to a "New GM" would withstand appeals.
The timing of a return would depend on the health of the stockmarket.
Reuters and Bloomberg reported him as saying; "I believe that will be some time next year," he said. "I would like to think and hope that would be in the first half of next year but I would not want to predict anything specific."
The government was committed to selling its stake as quickly as possible, but Rattner added, "when you’re a 60 percent shareholder, you can’t sell it all in one day."
Of the $US60 billion in financing to support GM’s turnaround, half of is bankruptcy financing. About $US50 billion of the government’s money will be converted into shares in the new company, which will continue the name General Motors.
Mr Rattner told the media that GM has so far received about $US10 to $US11 billion of the bankruptcy financing.
Rattner repeated previous statements that the rebuilt GM and Chrysler would be able to break even in a tough economic environment where car and light truck sales are running at 10 to 11 million units a year. They were at a rate well under 10 million in June.
