GM filed for bankruptcy Monday morning in New York, the largest US manufacturer ever to enter the Chapter 11 process. (Two nonmanufacturing corporations ranked larger in asset value when they entered bankruptcy: Lehman Brothers and telecommunications firm WorldCom.)
In a bid to preserve jobs and avoid a devastating collapse of the auto industry, the US Treasury agreed to pump an additional $30 billion into GM, on top of about $20 billion already committed.
An Obama administration task force pushed for concessions from various stakeholders in GM, from the auto workers union to debt holders, so that GM could bring its costs down to a level competitive with foreign rivals.
“This will … allow GM to become profitable at a much lower level of car sales than has been the case before,” a senior Obama administration official told reporters in a Sunday briefing.
With the government helping to orchestrate the company’s overhaul, the automaker hopes to speed its way through bankruptcy in 60 to 90 days, with a “new GM” emerging while portions of the company remain in court to be sorted out on a slower track.
Another Detroit automaker, Chrysler, has already paved the way. It’s on track for an even faster exit from bankruptcy, with its own cash infusion from the government. On Monday, a bankruptcy judge in New York approved the overall plan for America’s No. 3 automaker to sell its key assets into a new company, which will be partly owned by the Italian automaker Fiat.
Problems of Detroit's own making