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1st June
2009 - General Motors
Corporation Bankruptcy
GM ANNOUNCES AGREEMENT WITH U.S.
TREASURY AND CANADIAN GOVERNMENTS PROVIDING FAST TRACK TO COMPETITIVE
FUTURE FOR 'NEW GM'
NEW GM, BUILT FROM COMPANY'S STRONGEST OPERATIONS,
EXPECTED TO LAUNCH IN 60-90 DAYS UNDER NEW OWNERSHIP
GM FILES VOLUNTARY CHAPTER 11 TO IMPLEMENT '363' SALE
AGREEMENT
GM IS OPEN FOR BUSINESS IN THE U.S. AND WORLDWIDE,
HONORING ALL CUSTOMER COMMITMENTS
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Warranty, service and customer support continue uninterrupted,
backed by the U.S. and Canadian governments
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Essential suppliers to be paid in the normal course |
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Employees to be paid in the normal course |
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Operations outside U.S. not included in court filing |
General Motors Corp. (NYSE: GM) today announced that it has reached
agreements with the U.S. Treasury and the governments of Canada and
Ontario to accelerate its reinvention and create a leaner, stronger "New
GM" positioned for a profitable, self-sustaining and competitive future.
Pending approvals, the New GM is expected to launch in about 60 to 90
days as a separate and independent company from the current GM ("GM"),
with two distinct advantages: it will be built from only GM's best
brands and operations, and it will be supported by a stronger balance
sheet due to a significantly lower debt burden and operating cost
structure than before. The New GM will incorporate the terms of GM's
recent agreements with the United Auto Workers (UAW) and Canadian Auto
Workers (CAW) unions and will be led by GM's current management team.
The New GM will execute the key elements of its April 27 viability
plan, along with additional initiatives, to achieve winning financial
results by putting customers first, concentrating on adding to the
company's line of award-winning cars and trucks through four core brands
and continuing to invest in green, energy-saving technologies.
Under its plan, GM will sell substantially all of its global assets
to the New GM. To implement the sale agreement, GM and three domestic
subsidiaries have filed voluntary petitions for relief under chapter 11
of the United States Bankruptcy Code in the U.S. Bankruptcy Court for
the Southern District of New York, and the sale is subject to the
approval of the Court. Because GM's sale of assets to the New GM already
has the support of the U.S. Treasury, the UAW and a substantial portion
of GM's unsecured bondholders, GM expects the sale to be approved and
consummated expeditiously.
GM has asked the Court to approve a number of steps to protect
current and new GM customers, ensure that its operations will continue
uninterrupted during the court-supervised process, and provide for a
smooth transition to the New GM.
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GM dealers will continue to service GM vehicles and honor GM
warranties, and U.S. and Canadian government guarantees of
manufacturers' warranties are designed to reassure consumers.
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GM will use its cash-on-hand and a new Debtor-in-Possession
(DIP) financing of approximately $33 billion to: ensure an
uninterrupted supply of goods and services and provide for other
cash requirements prior to closing of the asset sale; fund
liabilities to secured lenders; and provide contingency funding to
handle any potential unexpected needs. Furthermore, in conjunction
with the sale, the U.S. Treasury and the Canadian and Ontario
governments will provide funds to administer the wind down of the
remaining assets and the closing of the chapter 11 cases.
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GM employees worldwide will become part of the New GM. |
"Today marks a defining moment in the reinvention of GM as a leaner,
more customer-focused, and more cost-competitive company that, above
all, can quickly generate winning bottom line results," said Fritz
Henderson, GM president and CEO. "The economic crisis has caused
enormous disruption in the auto industry, but with it has come the
opportunity for us to reinvent our business. We are going to do it once
and do it right. The court-supervised process we are pursuing
provides us with powerful tools to accelerate and complete our
reinvention, as well as strong safeguards for our customers and our
business. We are focused on the job at hand, for the benefit of our
customers, employees, dealers, suppliers, retirees, taxpayers, investors
and other stakeholders.
"We recognize the sacrifices that so many have been asked to make as
we have worked to reinvent GM and the automobile," said Henderson. "GM
deeply appreciates the support and the demonstration of confidence in
our future by President Obama, the Presidential Task Force on Autos, the
Canadian and Ontario governments, American and Canadian taxpayers, the
unsecured bondholders who are supporting the proposed sale transaction,
the UAW and CAW and their leadership, and the men and women of GM,
including our retirees. You have enabled us to carry out this vital
transformation for the good of GM, our customers and the economy, and we
are working to validate your trust each day.
"From day one, the New GM will be well-positioned to capitalize on
the award-winning vehicles we have developed and launched during the
past few years, and on our investments in exciting new technologies like
the Chevy Volt, so that we can build and return value to our customers
and to the millions who will have a stake in our success. The New GM
will play a critical role in the future of the automobile, and assure
that the U.S. has a strong stake in this rapidly changing global
manufacturing industry," Henderson said.
Business operations continue globally without interruption
GM's North American manufacturing operations continues to monitor
production output to make sure it aligns with market demand, and
currently intends to ramp up manufacturing operations as market demand
improves during the latter half of the year.
None of GM's operations outside of the U.S. are included in the U.S.
court filings or court-supervised process, and these filings have no
direct legal impact on GM's plans and operations outside the U.S. GM
confirmed that all business operations are continuing without
interruption in its Europe; Latin America, Africa and the Middle East;
and Asia Pacific regions.
"Worldwide, GM dealers are open for business, offering competitive
financing options on our award-winning vehicles, continuing to honor our
industry-leading warranty coverage, and providing outstanding service,"
said Henderson. "Furthermore, the U.S. Treasury and the Canadian
governments have issued a strong vote of confidence by backing GM's
vehicle warranties."
GM has filed various "first day" motions with the Court to ensure the
company's continued ability to conduct normal business operations. Upon
Court approval, GM will be expressly authorized, among other things, to:
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Honor all obligations to customers and continue customer
programs, including warranties, without interruption |
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Respect our operating and financing agreements with GMAC,
supporting continued wholesale financing for dealers and retail
financing for customers |
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Pay dealers' open accounts and continue warranty and incentive
programs |
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Pay essential suppliers and logistics providers for goods and
services provided before and after the company's court filings |
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Continue pay and benefits for employees and retirees; however,
the amount of non-qualified pension for some executive retirees may
be affected. |
The New GM
GM's agreements with the U.S. Treasury, the Canadian and Ontario
governments and the UAW and CAW, in addition to the support of a
substantial portion of GM's unsecured bondholders, will enable the New
GM to be a leaner, faster and more customer-focused enterprise,
consistent with the vision, goals and plans of GM's enhanced operating
plan announced April 27.
The New GM will:
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Focus on four core brands in the U.S. - Chevrolet, Cadillac,
Buick and GMC - with fewer nameplates and a more competitive level
of marketing support per brand |
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Effectively close the competitive gap in active worker labor
costs compared with transplant auto manufacturers |
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More efficiently utilize U.S. capacity while increasing over
time the percentage of U.S. sales manufactured domestically |
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Feature lower structural costs enabling its North American
region to break even (on an adjusted EBIT basis) at a U.S. total
industry volume of approximately 10 million vehicles. This rate is
substantially below the 15 to 17 million annual vehicle sales rates
recorded from 1995 through 2007 |
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Achieve its lower structural costs in part by further reducing
2009 salaried employment in North America from its year-end total of
35,100 to approximately 27,200, and continuing to improve its
balance sheet by reducing retiree benefits for salaried retirees and
non-UAW hourly retirees |
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Provide a higher level of customer service through a more
focused U.S. network of approximately 3,600 dealers |
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Continue and increase its investment and leadership in fuel
economy and advanced propulsion technologies |
Capital Structure of the New GM
A critical element of GM's reinvention is to achieve a significantly
stronger and healthier balance sheet. On March 31, 2009, GM reported
consolidated debt of $54.4 billion, along with additional liabilities,
including an estimated $20 billion obligation to the UAW VEBA.
Under GM's agreements with the U.S. Treasury, the Canadian and
Ontario governments, and the UAW and CAW, and with the support of a
substantial portion of GM's unsecured bondholders, upon closing of GM's
sale of assets to the New GM, the New GM's capital structure will be
comprised of:
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Approximately $17 billion in total consolidated debt, including:
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- $6.7 billion of debt owed to the U.S. Treasury
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- $1.3 billion of debt owed to the Canadian and Ontario
governments
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- $2.5 billion of notes issued to the new Voluntary Employee
Beneficiary Association (New VEBA) |
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- Approximately $6.8 billion of other, primarily international
debt, but excluding Europe |
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$9 billion of perpetual preferred stock with a 9 percent annual
dividend, payable quarterly in cash, $2.1 billion of which will be
issued to the U.S. Treasury, $0.4 billion of which will be issued to
the Canadian and Ontario governments and $6.5 billion of which will
be issued to the New VEBA |
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Common equity, 60.8 percent of which will be owned by the U.S.
Treasury, 11.7 percent of which will be owned by the Canadian and
Ontario governments, 17.5 percent of which will be owned by the New
VEBA, and 10 percent of which has been reserved for GM for the
benefit of the unsecured bondholders and other unsecured creditors
of GM |
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Warrants granted to the New VEBA to acquire newly issued shares
in the New GM equal to 2.5 percent of its outstanding common equity |
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Warrants granted to GM at closing to acquire newly issued shares
in the New GM equal to 15 percent of its outstanding common equity,
with various exercise prices and expirations |
Other than the $8 billion of debt owed to the U.S. Treasury and the
Canadian and Ontario governments by the New GM, all amounts owed by GM
or the New GM to the U.S. Treasury and Canadian and Ontario governments
would be equitized in exchange for the New GM securities described
above, and no other debt will be owed by GM to the U.S. Treasury and the
Canadian and Ontario governments.
GM Europe Restructuring
GM announced separately today, GM Europe has an agreement for €1.5
billion of bridge financing from the German government and a Memorandum
of Understanding to partner with Magna International Inc. Under the
agreement, the Opel/Vauxhall assets have been pooled under Adam Opel
GmbH, with the majority of the shares of Adam Opel GmbH being put into
an independent trust (the balance to remain with General Motors), while
final negotiations with Magna proceed. Negotiations to close the
agreement should take several weeks. Additional details will be
available athttp://media.gm.com/eur/gm/en/.
New products and technologies on track
The New GM, with its strong financial base and best-in-class dealer
network, will support a portfolio of award-winning vehicles, including
the Chevy Malibu (2008 North American Car of the Year and J.D. Power and
Associates' segment leader in its 2008 Initial Quality Survey), Cadillac
CTS (Motor Trend Car of the Year) and its Buick brand (tied for 1st
place in J.D. Power and Associates' 2009 Vehicle Dependability Study).
The New GM will have a number of key vehicle launches in 2009 and 2010,
including:
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Chevrolet Camaro, a dramatic, moderately priced sport coupe with
highway fuel economy of up to 29 mpg |
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An all-new Buick LaCrosse premium midsize sedan
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The luxury midsize Cadillac SRX crossover and CTS Sport Wagon |
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The Chevy Equinox and GMC Terrain, midsize crossovers with
class-leading highway fuel economy of 32 mpg |
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The Chevy Cruze, GM's new global compact car |
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The revolutionary Chevy Volt, an extended-range electric vehicle
that can travel up to 40 miles on battery power alone with the
extended-range capability of more than 300 total miles. |
"Our products are our future, and our lineup of new cars and
crossovers are a great foundation for success," said Henderson. "The New
GM is here to stay, and our brands position us to compete well in
profitable segments with vehicles that are second-to-none."
GM also reaffirmed its commitment to improve the fuel efficiency of
its vehicle fleet, meet or exceed new federal fuel economy and emissions
regulations, and push ahead with advanced propulsion technology. GM will
launch the Chevrolet Volt extended range electric vehicle in 2010,
expects to have 14 hybrid models in production by 2012, and will have 65
percent of vehicles alternative-fuel capable by 2014.
"The New GM will become a long-term global leader in the development
of fuel-efficient and advanced-technology vehicles," said Henderson. "In
doing so, the New GM will contribute to the development of advanced
engineering and manufacturing capabilities in the United States, which
are critical to the future of the U.S. economy."
GM's primary bankruptcy counsel is Weil, Gotshal & Manges LLP. GM is
also represented by Jenner & Block LLP and Honigman Miller Schwartz and
Cohn LLP as counsels. Cravath, Swaine, & Moore LLP is providing legal
advice to the GM Board of Directors. GM's restructuring advisor is AP
Services LLP and its financial advisors are Morgan Stanley, Evercore
Partners and the Blackstone Group LLP.
More information about GM's chapter 11 cases is available at
www.GM.com/restructuring.
Court filings and claims information are available at
www.GMcourtdocs.com.
About GM
General Motors Corp. (NYSE: GM), one of the world's largest automakers,
was founded in 1908, and today manufactures cars and trucks in 34
countries. With its global headquarters in Detroit, GM employs 234,500
people in every major region of the world, and sells and services
vehicles in some 140 countries. In 2008, GM sold 8.35 million cars and
trucks globally under the following brands: Buick, Cadillac, Chevrolet,
GMC, GM Daewoo, Holden, Hummer, Opel, Pontiac, Saab, Saturn, Vauxhall
and Wuling. GM's largest national market is the U.S., followed by China,
Brazil, the United Kingdom, Canada, Russia and Germany. GM's OnStar
subsidiary is the industry leader in vehicle safety, security and
information services.
Source:
General Motors Corporation Press Release
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