General Motors Plans To Become Independent Of Itself

Posted on 07. Jul, 2009 by in 2000-2009


General Motors, on the day of the news about their asset sale being approved by the New York City bankruptcy court, is one step closer to being independent of itself. It sounds like GM trying to mimic Saab Automobile once again, where Saab wanted to become independent of GM carving itself out of the brand portfolio. However, one can only be so independent with governments having a majority stake.

The “New GM” will be a 60.8%” majority ownership by the U.S. Treasury Department & 11.7% Canada & Ontario Governments, giving it an appropriate name of “Government Motors” for the time being with over 70 percent owned by North American governments.

On the other side of the spectrum, I find it almost comical that the remaining 10 percent of the “old GM” will be now given the name “Motors Liquidation Company”. It’s clear that this name for the “old GM” company has only one purpose and I guess that name was given to ensure that’s the case.

The part that I would like more details on is, how much of Saab Automobile is part of the “new GM”, all of it, or some of it?

Here’s hoping a breakdown chart comes out in the future describing in detail, what’s part of that “old GM”.

Here is their press release:

Approval marks another step toward the launch of an independent new GM

GM 363 Asset Sale Approved by U.S. Bankruptcy Court

NEW YORK – General Motors achieved another milestone in its reinvention last night when Judge Robert E. Gerber of the U.S. Bankruptcy Court for the Southern District of New York approved the sale of substantially all of General Motors Corporation’s assets to NGMCO, Inc., an entity funded by the U.S. Department of the Treasury. In connection with the closing of the sale transaction, NGMCO, Inc. will change its name to General Motors Company and continue to operate under GM’s historic corporate and sub brands. The approval marks another step toward the launch of an independent new GM.

The new company will acquire GM’s strongest operations and will have a competitive operating cost structure, partly as a result of recent agreements with the United Auto Workers (UAW) and Canadian Auto Workers (CAW).

The new GM will have lower leverage and a stronger balance sheet, which when combined with a lower break-even point, will allow it to reduce its risk, operate profitably at much lower volume levels, and to reinvest in the business in the key areas of advanced technology and product development. GM’s subsidiaries outside the United States will be acquired by the new company and are expected to continue to operate without interruption.

The new GM will be headquartered in Detroit and will be led by Fritz Henderson as president and chief executive officer and Edward E. Whitacre, Jr. as chairman of the board of directors.

“A healthy domestic auto industry remains vital to the global economy and we deeply appreciate the support the U.S., Canadian and Ontario governments and taxpayers have given GM, and the sacrifices that have been made by so many. This has been an especially challenging period, and we’ve had to make very difficult decisions to address some of the issues that have plagued our business for decades. Now it’s our responsibility to fix this business and place the company on a clear path to success without delay,” said Henderson.

The new GM’s common stock will be owned by:

· U.S. Department of the Treasury: 60.8 percent

· UAW Retiree Medical Benefits Trust: 17.5 percent

· Canada and Ontario governments: 11.7 percent

· The old GM: 10 percent

Additionally, the old GM and the UAW Retiree Medical Benefits Trust will hold warrants that are exercisable for 15 percent and 2.5 percent of the interests in the new GM, respectively.

The UAW Retiree Medical Benefits Trust and the Canadian government each may nominate one member to serve on the board of the new GM. The retiree benefits trust has selected seasoned auto industry analyst Stephen Girsky. Also selected to serve on the board of directors of the new GM are six current members of the General Motors Corporation board, including Erroll Davis, Neville Isdell, Kent Kresa, Philip Laskawy, Kathryn Marinello and Fritz Henderson. The Canadian government representative and four additional board members to be identified by the U.S. Treasury will be announced at a later date.

Judge Gerber’s order includes a four-day stay before closing of the sale can occur. However, GM expects the sale to close in the near future. The new GM’s business is expected to be immediately operational and fully competitive, with an exciting line of new products, a smaller, more focused brand portfolio and the rationalization of its dealer network well underway. Current GM employees will be offered positions by the new company.

In connection with the closing, the current General Motors Corporation will change its name to Motors Liquidation Company. Retained assets will be wound down or sold. A new board of directors will oversee that process and the liquidation of the company under the supervision of the Bankruptcy Court.

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