GM's Last-Ditch Plan to Avoid Bankruptcy: Close Pontiac and Shed 21,000 Jobs
With bankruptcy looming and the Obama administration demanding a new viability plan before giving any more federal aid, General Motors released a restructuring plan this morning that goes much farther than February's outline but that also claims a number of casualties—including 21,000 jobs, 13 plants, and the Pontiac brand.
"We are taking tough but necessary actions that are critical to GM's long-term viability," President and CEO Fritz Henderson said in a statement this morning. Those actions include slashing the number of dealers that GM works with by 42 percent, from 6,246 in 2008 to 3,605 by the end of 2010, and closing 13 plants. By next year, the company said, it will cut 21,000 jobs, reducing the current workforce by 34 percent.
The Pontiac brand also will be phased out by the end of next year as the company focuses on its four core brands—Chevrolet, Cadillac, Buick, and GMC. GM doesn't expect to build more Saabs, Saturns, or Hummers after the end of this year, the company said.
Although the auto giant has received $15.4 billion in federal loans, it has said that it needs an additional $11.6 billion in order to survive. It also said that it planned to file for bankruptcy protection unless the debt for equity swap that it announced this morning is successful. In the planned swap, GM would give bondholders 225 company shares in exchange for $1,000 of bondholder debt. The company is urging bondholders to make the exchange speedily, saying the bonds may be worth less if GM has to go to court. In order to avoid bankruptcy, the company said, at least 90 percent of its bondholders must agree to the swap by May 26.
The company has until June 1 to submit a stronger viability plan and come to agreements with both bondholders and the United Automobile Workers union. Talks with the UAW are continuing.
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