Come Monday, June 1st General Motors will file bankruptcy papers. This is according to an official close to the situation. The action is expected to take between 60 and 90 days, which is considerably longer than the 28 days taken by Chrysler LLC's bankruptcy filing process.
The good news though is that the Obama administration will pump an extra US$30 billion into GM to add to the US$19.4 billion it has already spent as part of a sweetener to bondholders. Under a new restructured GM the bondholders would get 10 percent of equity with warrants to buy an extra 15 percent. A report says at least 35 percent of them will approve the restructuring plan under which all this would happen.
Some are not happy with the new offer. A group called the Main Street Bondholders said in a statement: "The U.S. government appears to overtly favour the UAW members over America's seniors and retirees..."
The massive US$30 billion loan would be converted into equity and GM would only have to repay US$8 billion of it. The majority of the rest would stay with the government as equity. The state's stake in the company as a result would be 72.5 percent. However, should the UAW trust fund and bondholders exercise their warrants this portion would be reduced to 55 percent. GM will likely become a private entity for up to 18 months after which its shares would be publicly traded again.
Meanwhile GM Europe insists that despite reports to the contrary, the two bidders who want the Opel/ Vauxhall business are committed to keeping the Vauxhall manufacturing facility in the UK going. The two bidders are Fiat of Italy and Magna of Canada.
