General Motors files for landmark bankruptcy

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General Motors filed the largest ever industrial bankruptcy Monday morning under a strategy mapped out by the White House to quickly reorganize the venerable Detroit company in two to three months.

In its landmark filing before the U.S. bankruptcy court in Manhattan, the company said it had $172.81 billion in debt and $82.29 billion in assets — putting it only behind the Goliath bankruptcies of Lehman Brothers, Worldcom and Enron in size. But GM’s sprawling operations around the world and huge workforce put its case in a class by itself.

GM’s historic filing came as the Manhattan court approved the sale of Chrysler to a consortium led by Italy’s Fiat automaker, in a critical step that will enable the smaller automaker to quickly emerge from a bankruptcy process that started only a month ago. The White House has said the Chrysler case is a model for GM’s.

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But the bankruptcy will create hardship and unemployment in many communities as GM shutters nine plants and idles three more in its efforts to downsize and increase efficiency. Among the factories that will be closed is an assembly plant in Wilmington, Del., and a powertrain plant in Fredericksburg, Va. Other plants will be shut temporarily in hopes that demand for new cars will pick up in later years.

“I recognize that this may give some Americans pause,” said President Obama, addressing the controversy in a statement at noon Monday. “The hard times are not over.”

But he insisted his plans for GM and Chrysler will be successful at launching an all new auto industry in the United States that focuses on making small, fuel-efficient cars. Both companies after bankruptcy will be rid of huge debts that held them back from being competitive in the past, he said.

“The GM of the future will be different than the GM of the past,” he said, insisting it will be a good investment for taxpayers and workers.

The White House laid out details of the plan Sunday after a last major piece fell into place with over half the company’s bondholders giving their assent to the reorganization. In a key last-minute development, senior administration officials said the White House pared its ownership share of the reorganized company to 60 percent from 72.5 percent to accommodate bigger shares for the investors and Canadian government, which is providing GM with $9 billion in aid.

The U.S. government’s majority ownership in the century-old automaker is intended to compensate for $50 billion in total financing provided by U.S. taxpayers, including $30 billion during the bankruptcy and $20 billion before the filing. But analysts warn that taxpayers are never likely to see all their money returned — and the senior officials did not dispute that.

Mr. Obama and senior administration officials have stressed that federal involvement with the companies has been forced by circumstances, and the administration is reluctantly giving the government ownership of the nation’s largest manufacturing firm.

“My preference would have been to stay out of it completely,” Mr. Obama said in an interview with NBC over the weekend.

The sweeping restructuring and downsizing aims to make GM profitable at a level of 10 million annual car sales in the United States — above the current sales rate of about 9 million but far below the 16 million in annual sales that were needed to keep GM afloat in the past.

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