NEW YORK -- The Obama Administration expects to take General Motors into Chapter 11 bankruptcy Monday and quickly get the carmaker out with $30.1 billion in bankruptcy financing, the White House said in a statement.
The federal government will have the right to replace GMs current board of directors with its own trustees, except for one director who will be picked by the Canadian government and another selected by a UAW-administered retiree health care trust.
But the White House vowed to exercise its ownership stake in GM "in a hands-off, commercial manner." That is, to let it operate as a car company, not a government agency.
The Obama administration said it didnt intend to provide funding beyond the $30.1 billion in bankruptcy financing. The government has already assisted GM with $19.4 billion since late December.
The $30 billion will give the government a 60 percent stake in a reorganized GM. The governments of Ontario and Canada will provide another $9.5 billion in financing to GM for a 12 percent stake in the new GM.
Dealerships that GM plans to discontinue will be offered an agreement to phase out their stores over the next 18 months.
As part of first day bankruptcy court hearings, GM will ask that dealer incentives owed before the filing be paid for those dealers that GM intends to keep. The company also will ask the court to let it honor all customer warranties, and the administration will allot $361 million to support those warranties.
Chrysler LLC was able to persuade the same New York bankruptcy court to hear the GM case to approve similar measures after its April 30 bankruptcy filing.
More pain for UAW
More pain is in store for the UAW members as well. GM intends to announce that it will close 11 plants and idle three others. The carmaker had aimed in February to cut 21,000 more hourly workers. GM employs about 54,000 workers represented by the UAW.
With the necessary reductions in capacity and a cleaned-up balanced sheet, a reorganized GM will be able to break even on its operations at 10 million annually in industry-wide U.S. vehicle sales, the administration said. The previous breakeven point was 16 million sales, according to the White House.
Contract concessions approved by the UAW last week will save GM about $1.2 billion annually. That agreement calls for elimination of bonuses and cost-of-living increases as well as more flexible factory rules.
The UAW also agreed to accept GM equity instead of cash for most of the funding of the retiree health care trust known as a Voluntary Employee Beneficiary Association.
A majority of GM bondholders also have agreed to a major discount on the total $27.1 billion in unsecured bond debt that they hold.
More than 1,000 bondholders representing at least 54 percent of the bonds said they would take a deal in exchange for 10 percent of equity in the new GM, plus warrants for an additional 15 percent of the new company. That offer was sweetened from a straight 10 percent in the original government offer.
The 54 percent approval of bondholders is still far short of the 90 percent desired by the White House. But the majority approval sets the stage for a quicker resolution of the issue in bankruptcy court.