GM files for bankruptcy protection

Thomas J. Billitteri, 6/2/2009

To much fanfare but little surprise, General Motors has filed for bankruptcy reorganization, and the auto giant’s biggest shareholder—the federal government—will have a huge task in getting the company back into the hands of private investors.

The bankruptcy filing, the biggest on record for an American industrial company, is aimed at downsizing GM and putting it on a stronger footing. GM, which is $173 billion in debt, has already received $20 billion in federal loans and will get another $30 billion in help from the Treasury Department, plus aid from Canada. The federal government will take a 60 percent ownership stake in the reorganized automaker.

President Barack Obama praised GM’s restructuring plan as “credible” and “full of promise,” but said the government’s aim “is to get GM back on its feet, take a hands-off approach, and get out quickly.” That won’t be easy. The longer GM takes to recover from years of bad management and a flagging global market for new cars, the harder it will be for Washington to keep from micromanaging GM’s business decisions and shed its ownership stake.

What do you think? Should the Obama administration have pushed GM toward bankruptcy reorganization? Will GM survive in the long run?

For more background on the auto industry’s travails, see Thomas J. Billitteri, “Auto Industry’s Future,” CQ Researcher, Feb. 6, 2009.

See also
>President Obama’s remarks on GM”s restructuring.
>Legal documents on the case

Posted by Thomas J. Billitteri on 6/2/2009