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General Motors today formally collapsed in the world's biggest industrial bankruptcy.
The giant US carmaker behind such brands as the Cadillac, Buick and Hummer, filed for bankruptcy protection from its creditors as part of a Washington bailout which will cost the US taxpayer $50 billion (£30.5 billion).
GM is following the trail blazed by its car and jeep rival Chrysler which today was formally bankrupted having filed for protection a month ago.
The formal bankruptcy of Chrysler triggers a deal which will see the automaker taken over by Italian car group Fiat in league with healthcare funds of the US carworkers' union the United Auto Workers.
It is envisaged that GM will follow the same template but instead with the US government's taking a majority 60% control. Signing off the Chrysler bankruptcy in a Manhattan court in the early hours of this morning, Judge Arthur Gonzalez said the US and Canadian administrations “have made the determination that it is in their respective national interests to save the automobile industry in the same way that the US Treasury concluded that it was in the national interest to protect financial institutions.”
With liabilities outstretching assets by more than $90 billion, the failure of GM makes it the largest corporate crash after last autumn's collapse of the banking group Lehman Brothers and the failure earlier this decade of telecoms company WorldCom.
The Canadian government is planning to take a 12% stake in GM in return for a $9.5 billion injection while UAW healthcare funds and the GM bondholders will also hold minority stakes.
Treasury secretary Tim Geithner said: “We want a quick clean exit as soon as conditions permit. We're very optimistic these firms will emerge without further government assistance.”
Even if it ditches more than 20,000 of its 61,000 workers and closes as many as 10 factories in the US, experts still fear for the future of a heavily restructured, leaner GM.
Bruce Clark of Moody's credit rating agency said: “The ultimate revitalisation of the company will likely depend heavily on the revenue side.” He added that the most important deciding factors were how quickly car sales recover and how many will be prepared to buy cars from “a manufacturer in bankruptcy”
Judge Robert Gerber was named to handle the bankruptcy. He is best known for running the high-profile bankruptcy proceedings of cable TV giant Adelphia, which was eventually bought by Time Warner and Comcast for nearly $18 billion in 2006.
Reader views (4)
This ending has been coming for 20+ years. The credit crunch only brought it forward a few years. For some reason car manufacturers decided thay should have a presence in all market sectors. Now we have numerous variants many of which only appeal if the main thing in your life!
- Man U Fan, London
Pretty sure they will not be the only ones
- Mike, London England
So nationalization has finally come to the USA. Does that make the government fellow travelers or communists?
- Mick, London, England
This sounds very similar to the problems which British Layland had beck in the 70s, with the unions not cooperating in modernisation & management unwilling or unable to modernise the company. Perhaps the USA is going to go through the same industrial change that the UK had.
- Richard, Thame
