GM exits bankruptcy protection

A new GM emerged from bankruptcy protection on Friday, far more quickly than most industry watchers had expected, as a leaner automaker aiming to win back American consumers & pay back taxpayers. A whirlwind 40-day bankruptcy for GM concluded with closing of a deal that sold key operations & core brands, including Chevrolet & Cadillac, to a new company that will be majority owned by the Treasury. The deal was signed between the gov't. & GM execs at their law firm, a source said. Industry analysts viewed the brevity of the bankruptcy as a positive development. "I think this type of case won't do well in a long Chapter 11. Negatives to the business are cut significantly by getting the companies out of Chapter 11 as rapidly as possible, & the Chapter 11 process has worked in the manner it is supposed to because you have quickly a new entity that is free of the overhang of the old GM ," said attorney Richard Mikels, head of the bankruptcy practice at Mintz, Levin, Cohn, Ferris, Glovsky & Popeo. Fritz Henderson & Ed Whitacre, veteran telecom exec & incoming chairman, were set to appear at a news conference at the automaker's Detroit headquarters to mark the launch of the new company. The automaker's U.S. sales fell 36% in June when it was mired in bankruptcy, & execs said the relaunch of it offered a chance to try to break that negative association for consumers. "I'm very much looking forward to the point where we're operating in the clean air & the name of GM not being associated with bankruptcy," GM sales chief Mark LaNeve said. Henderson, who took over as CEO when predecessor Rick Wagoner was ousted by the Obama administration at the end of March, has already detailed plans for a faster-moving and less-bureaucratic company with thinner executive ranks. GM is cutting its white-collar work force by over 20% by eliminating 6,000 jobs by Oct. The reduction in exec ranks will slice deeper, with 35% planned. That bid to shake up GM's long-criticized corporate culture will be a key issue for Henderson as the 100-year-old automaker seeks to relaunch itself. Steve Rattner, head of the Obama administration's autos task force, said it would be "natural" for Henderson to cut layers of management to make the company "a bit closer to the ground, leaner and meaner." Another pillar of the plan is GM's commitment to launch more fuel-efficient cars & to focus its resources on fewer brands, models and dealerships. "I'm still cautiously optimistic -- they still need to put a product out there that everyone is excited about purchasing. The legacy costs are gone; challenge in the future is how to approach a marketplace that has been burned by GM ," said Pete Hastings, Senior VP & fixed-income analyst at Morgan Keegan. GM's burned through $40B over the past 4 years & posted losses of over $80B. The close of the court-approved sale marks the completion of an unprecedented effort by the administration to save GM & Chrysler from liquidation by slashing debt, labor costs & dealerships. The White House also disbursed almost $80B to shore up the auto industry, including $5B in support for auto parts suppliers. Of the total, $50B has been earmarked for GM, emergency financing that will give the U.S. gov't. over 60% stake in the new GM .
Chrysler exited bankruptcy a month ago after blazing a precedent-setting trail for GM by following an asset sale plan that gave operational control of the smaller automaker to Italy's Fiat SpA. Both Chrysler and GM hived off their best assets as a means of creating new structures apart from the previous companies that were bankrupt. It will take years to sell off the companies' remaining assets through bankruptcy court proceedings. As part of the changes to be announced today, Bob Lutz, GM outspoken & high-profile former product chief, agreed to stay on in a new position, a person at GM said. Lutz had earlier announced plans to retire at the end of the year. The new GM will have slashed its debt & healthcare obligations by $48B, dropped almost 40% of the dealers from an unprofitable network and moved to cut loose laggard brands like Saab, Saturn & Hummer. The new GM will also take advantage of a new labor contract with the UAW the company says will put its hourly operating costs on par with Japanese competitors led by Toyota Motor.