Many are mourning the iconic collapse of General Motors Corp. as it is just hours away from its bankruptcy filing on Monday. But the once largest company in the world may have been quietly betting on a quick comeback as a leaner automaker.
Smooth bankruptcy
As 54 percent of GM bondholders announced their support for a sweetened debt-for-equity offer on Sunday, the GM took another step forward toward a quick exit from bankruptcy protection which the company is expected to file on Monday morning.
Under the new deal, investors holding 27.2 billion U.S. dollars in GM's bonds were offered warrants for another 15 percent in the future on top of the 10 percent stake in the previous deal.
Last Friday, the United Auto Workers (UAW) union ratified a labor contract with an overwhelmingly 74 percent approval. A health-care trust of the UAW will get 17.5 percent stake with the right to buy an additional 2.5 percent stake.
"The GM will benefit from the bankruptcy in the long term," Shusheng Wang, co-director of Global Trade Group at Detroit-based Butzel Long law firm, told Xinhua. He had worked at GM headquarters as legal counselor for nearly 10 years until 2006.
"The GM will shed the bulk of its liabilities, and it will become cost competitive against Japanese transplants under the deal with the union. Even better is that the government will finance the company through bankruptcy," Wang said. "The GM will survive, and become strong again, but as a smaller company focused on vehicles."
Chrysler LLC, another major U.S. automaker which filed for Chapter 11 on April 30, is likely to emerge from bankruptcy as a judge is expected to approve a deal to sell most of Chrysler's assets to a group led by Italy's Fiat SpA.
Chrysler bankruptcy, which was also financed by the U.S. Treasury, has been seen as a model for the GM. Though much larger and more complex, GM bankruptcy would take as little as 60 to 90 days, U.S. government officials told the media last month.
Green bet
When the GM was preparing for a pre-packing bankruptcy, it was also preparing for a shift in product mix in a bid to grab back market share in the United States.
In line with the Obama administration's enthusiasm for green energy and sustainability, the GM introduced Chevrolet Volt, an all-electric plug-in compact car, which is called the company's "new DNA" that "represents a fundamental reinvention of the American automobile industry."
The GM has confirmed the production of low-emission Ecotec engines at its joint venture in China, which will be mounted on the newly launched Chevelet Cruze compact sedan, another fuel-efficient car.
The GM will boost its sales and production of small cars in the United States.
It announced a plan to utilize an idled U.S. assembly line to manufacture small cars on Friday.
And it plans to sell about 17,300 China-made compact cars in the United States in 2011 and to triple that to about 51,500 in 2014, according to a document the GM circulated among U.S. lawmakers.
Government concern
Yet, the possible revival of the auto giant is not without risk. Negotiations with the union and bondholders, supposedly vital to the success of the GM's restructuring plan, were directed and pushed by the Obama administration's task force on auto industry.
With 19.4 billion dollars already lent to the GM and another 30-billion-dollar aid in the pipeline, the U.S. government will be the largest stake holder, getting about 60 percent stake of a new GM.
The fact that the GM will no longer be independent worries many.
Keith Crain, publisher and editorial director of leading auto industry magazine Automotive News, was among the first to come up with the auto company's new nickname "Government Motors."
"I am very concerned about it," Crain said, "None of those in the auto task force had ever run a company before. None."
The Obama administration ousted GM ex-chief executive Rick Wagoner and intended to change the majority of the board.
But officials cautioned that the U.S. government has no intention of nationalizing the GM and will not be intervening in its day-to-day operations.
"The government has no desire to own equity stakes in companies any longer than necessary, and will actively seek to dispose of its ownership as soon as practicable," senior administration officials said in a media briefing in May.
"The goal is to promote strong viable companies that can become profitable quickly and contribute to economic growth and jobs without government involvement."
(Xinhua News Agency June 2, 2009)
