The 2009 General Motors Chapter 11 sale of the assets of automobile manufacturer General Motors and some of its subsidiaries was implemented through Chapter 11, Title 11, United States Code in the United States bankruptcy court for the Southern District of New York. The United States government-endorsed sale enabled the NGMCO Inc.[1] ("New GM") to purchase the continuing operational assets of the old GM.[2][3][4] Normal operations, including employee compensation, warranties, and other customer service were uninterrupted during the bankruptcy proceedings.[2] Operations outside of the United States were not included in the court filing.[2]
The company received $33 billion in debtor-in-possession financing to complete the process.[5] GM filed for Chapter 11 reorganization in the Manhattan New York federal bankruptcy court on June 1, 2009, at approximately 8:00 am EDT. June 1, 2009, was the deadline to supply an acceptable viability plan to the U.S. Treasury. The filing reported US$82.29 billion in assets and US$172.81 billion in debt.[6][7][8][9][10]
After the Chapter 11 filing, effective Monday, June 8, 2009, GM was removed from the Dow Jones Industrial Average and replaced by Cisco Systems. From Tuesday June 2, old GM stock has traded Over the Counter (Pink Sheets/OTCBB), initially under the symbol GMGMQ[11] and subsequently under the symbol MTLQQ.
On July 10, 2009, a new entity completed the purchase of continuing operations, assets and trademarks of GM as a part of the 'pre-packaged' Chapter 11 reorganization.[12][13] As ranked by total assets, GM's bankruptcy marks one of the largest corporate Chapter 11 bankruptcies in U.S. history. The Chapter 11 filing was the fourth-largest in U.S. history, following Lehman Brothers Holdings Inc., Washington Mutual and WorldCom Inc.[14] A new entity with the backing of the United States Treasury was formed to acquire profitable assets, under section 363 of the Bankruptcy Code, with the new company planning to issue an initial public offering (IPO) of stock in 2010.[15] The remaining pre-petition creditors claims are paid from the former corporation's assets.[12][15]
After the Chapter 11 filing, effective Monday, June 8, 2009, GM was removed from the Dow Jones Industrial Average and replaced by Cisco Systems. From Tuesday June 2, old GM stock has traded Over the Counter (Pink Sheets/OTCBB), initially under the symbol GMGMQ[11] and subsequently under the symbol MTLQQ.
On July 10, 2009, a new entity completed the purchase of continuing operations, assets and trademarks of GM as a part of the 'pre-packaged' Chapter 11 reorganization.[12][13] As ranked by total assets, GM's bankruptcy marks one of the largest corporate Chapter 11 bankruptcies in U.S. history. The Chapter 11 filing was the fourth-largest in U.S. history, following Lehman Brothers Holdings Inc., Washington Mutual and WorldCom Inc.[14] A new entity with the backing of the United States Treasury was formed to acquire profitable assets, under section 363 of the Bankruptcy Code, with the new company planning to issue an initial public offering (IPO) of stock in 2010.[15] The remaining pre-petition creditors claims are paid from the former corporation's assets.[12][15]
General Motors was financially vulnerable before the automotive industry crisis of 2008-2009. In 2005 the company posted a loss of US$10.6 billion.[17] In 2006, its attempts to obtain U.S. government financing to support its pension liabilities and also to form commercial alliances with Nissan and Renault failed. For fiscal year 2007, GM's losses for the year were US$38.7 billion,[18] and sales for the following year dropped by 45%.[19]
On November 7, 2008, General Motors reported it had projected it would run out of cash around mid-2009 without a combination of government funding, a merger, or sales of assets.[20] Ten days later General Motors representatives, along with executives from Ford and Chrysler testified about their need for financial aid at a congressional hearing in Washington D.C. All three companies were unsuccessful in their attempts to obtain legislation to authorize U.S. government aid, and were invited to draft a new action plan for the sustainability of the industry.[21] On December 2, 2008, General Motors submitted its "Restructuring Plan for Long-Term Viability" to the Senate Banking Committee and House of Representatives Financial Services Committee.[22] Congress declined to act, but in December 2008 the Bush administration provided a "bridge loan" to General Motors with the requirement of a revised business plan.[23] It said it needed $4.6 billion in loans within weeks, from the $18 billion it had already requested, and an additional $12 billion in financial support in order to stave off bankruptcy. On February 26, 2009, General Motors announced that its cash reserves were down to $14 billion at the end of 2008. G.M. lost $30.9 billion, or $53.32 a share, in 2008 and spent $19.2 billion of its cash reserves. Mr. Wagoner met with President Obama’s auto task force, and the company said that it could not survive much longer without additional government loans.
On the March 30, 2009, deadline President Barack Obama declined to provide financial aid to General Motors, and requested that General Motors produce credible plans, saying that the company's proposals had avoided tough decisions, and that Chapter 11 bankruptcy appeared the most promising way to reduce its debts, by allowing the courts to compel bondholders and trade unions into settlements.[24] GM Chairman and CEO Rick Wagoner was also forced to resign.[25] GM bondholders rejected the government's first offer, but the unions agreed to the preferential terms.[26] A bondholder debt to equity counteroffer was ignored.[27]
Efforts to sell General Motors' European operations ran into difficulties, as the corporation was expected to file for bankruptcy protection by June 1, 2009.[28] United States government officials suggested that, if they were satisfied with the company's plans to restructure, the U.S. government would take at least a 50% equity stake and reserve the right to name board members.[29] On May 31, 2009, news broke that the U.S. would initially likely become the largest shareholder of the reorganized GM following a bankruptcy filing and re-emergence from bankruptcy. The U.S. government would invest up to $50 billion and own 60% of the new GM and the Canadian government would own 12.5%.[30]
Some observers also claimed that creditors were encouraged to push GM into bankruptcy protection because it would trigger a credit event, and thus a beneficial financial payout, on credit default swaps held by these creditors.[31] Due to a lack of transparency, there was no way to find out who the CDS protection buyers and protection writers were, and they were subsequently left out of the negotiation process.[32]
On March 29, 2009, the U.S Treasury committed to fund a government guarantee of General Motors' warranty liabilities, up to US$360.6 million.[33][34]
On May 27, 2009, the U.S. Treasury advanced a secured loan of US$360.6 million to GM, and GM issued a note to the Treasury for US$360.6 million, plus US$24.1 million as additional compensation for the warranty advance, pursuant to the terms of the Warranty Agreement dated December 31, 2008, between GM and the U.S. Treasury. The loan funded a separate account established by GM Warranty LLC, a new special purpose subsidiary of GM that was formed to operate the warranty program. GM also on May 29, 2009, contributed $49.2 million to GM Warranty LLC to fund the program.[35]
On May 30, 2009, it was announced that a deal had been reached to transfer New Opel (Opel pl
On November 7, 2008, General Motors reported it had projected it would run out of cash around mid-2009 without a combination of government funding, a merger, or sales of assets.[20] Ten days later General Motors representatives, along with executives from Ford and Chrysler testified about their need for financial aid at a congressional hearing in Washington D.C. All three companies were unsuccessful in their attempts to obtain legislation to authorize U.S. government aid, and were invited to draft a new action plan for the sustainability of the industry.[21] On December 2, 2008, General Motors submitted its "Restructuring Plan for Long-Term Viability" to the Senate Banking Committee and House of Representatives Financial Services Committee.[22] Congress declined to act, but in December 2008 the Bush administration provided a "bridge loan" to General Motors with the requirement of a revised business plan.[23] It said it needed $4.6 billion in loans within weeks, from the $18 billion it had already requested, and an additional $12 billion in financial support in order to stave off bankruptcy. On February 26, 2009, General Motors announced that its cash reserves were down to $14 billion at the end of 2008. G.M. lost $30.9 billion, or $53.32 a share, in 2008 and spent $19.2 billion of its cash reserves. Mr. Wagoner met with President Obama’s auto task force, and the company said that it could not survive much longer without additional government loans.
On the March 30, 2009, deadline President Barack Obama declined to provide financial aid to General Motors, and requested that General Motors produce credible plans, saying that the company's proposals had avoided tough decisions, and that Chapter 11 bankruptcy appeared the most promising way to reduce its debts, by allowing the courts to compel bondholders and trade unions into settlements.[24] GM Chairman and CEO Rick Wagoner was also forced to resign.[25] GM bondholders rejected the government's first offer, but the unions agreed to the preferential terms.[26] A bondholder debt to equity counteroffer was ignored.[27]
Efforts to sell General Motors' European operations ran into difficulties, as the corporation was expected to file for bankruptcy protection by June 1, 2009.[28] United States government officials suggested that, if they were satisfied with the company's plans to restructure, the U.S. government would take at least a 50% equity stake and reserve the right to name board members.[29] On May 31, 2009, news broke that the U.S. would initially likely become the largest shareholder of the reorganized GM following a bankruptcy filing and re-emergence from bankruptcy. The U.S. government would invest up to $50 billion and own 60% of the new GM and the Canadian government would own 12.5%.[30]
Some observers also claimed that creditors were encouraged to push GM into bankruptcy protection because it would trigger a credit event, and thus a beneficial financial payout, on credit default swaps held by these creditors.[31] Some observers also claimed that creditors were encouraged to push GM into bankruptcy protection because it would trigger a credit event, and thus a beneficial financial payout, on credit default swaps held by these creditors.[31] Due to a lack of transparency, there was no way to find out who the CDS protection buyers and protection writers were, and they were subsequently left out of the negotiation process.[32]
On March 29, 2009, the U.S Treasury committed to fund a government guarantee of General Motors' warranty liabilities, up to US$360.6 million.[33][34]
On May 27, 2009, the U.S. Treasury advanced a secured loan of US$360.6 million to GM, and GM issued a note to the Treasury for US$360.6 million, plus US$24.1 million as additional compensation for the warranty advance, pursuant to the terms of the Warranty Agreement dated December 31, 2008, between GM and the U.S. Treasury. The loan funded a separate account established by GM Warranty On May 27, 2009, the U.S. Treasury advanced a secured loan of US$360.6 million to GM, and GM issued a note to the Treasury for US$360.6 million, plus US$24.1 million as additional compensation for the warranty advance, pursuant to the terms of the Warranty Agreement dated December 31, 2008, between GM and the U.S. Treasury. The loan funded a separate account established by GM Warranty LLC, a new special purpose subsidiary of GM that was formed to operate the warranty program. GM also on May 29, 2009, contributed $49.2 million to GM Warranty LLC to fund the program.[35]
On May 30, 2009, it was announced that a deal had been reached to transfer New Opel (Opel plus Vauxhall, minus Saab) assets to a separate company majority-owned by a consortium led by Sberbank of Russia (35%), Magna International of Canada (20%), and Opel employees and car dealers (10%). GM was expected to keep a 35% minority stake in the new company.[36][37] It was announced on November 3, 2009, that the GM board had decided not to sell off Opel.[38] However, after the reorganization in 2017, Opel and Vauxhall would later be sold to Groupe PSA for $2.3 billion.[39][40]
Chapter 11 protection
FilingChevrolet-Saturn of Harlem
, a dealership in Manhattan that is owned by GM itself, filed for bankruptcy protection there, followed in the same court by General Motors Corporation (the main GM in Detroit), GM's subsidiary Saturn LLC, and Saturn LLC's subsidiary Saturn Distribution Corporation.[41] All cases were assigned to Judge Robert Gerber.[42]
The filing by the dealership declared General Motors to be a debtor in possession.[41] The Manhattan dealership's filing allowed General Motors to file its own bankruptcy petition in the United States Bankruptcy Court for the Southern District of New York, its preferred court. Normally for such cases, the company would have filed in the courts located in the state(s) where the company is incorporated, or where it conducts operations, which for Detroit-headquartered General Motors would have been the courts in Michigan or Delaware, where it is incorporated. General Motors' attorneys, however, preferred to file in the federal courts in New York, because those courts have a reputation for expertise in bankruptcy.[43] In a press conference later that day, the GM Chief Executive Officer, Fritz Henderson, stressed that he intended for the bankruptcy process to move quickly.[44] In addition to Mr Henderson's press conference, President of the United States Barack Obama made a speech from the White House after the court filing.[45] The filing by the dealership declared General Motors to be a debtor in possession.[41] The Manhattan dealership's filing allowed General Motors to file its own bankruptcy petition in the United States Bankruptcy Court for the Southern District of New York, its preferred court. Normally for such cases, the company would have filed in the courts located in the state(s) where the company is incorporated, or where it conducts operations, which for Detroit-headquartered General Motors would have been the courts in Michigan or Delaware, where it is incorporated. General Motors' attorneys, however, preferred to file in the federal courts in New York, because those courts have a reputation for expertise in bankruptcy.[43] In a press conference later that day, the GM Chief Executive Officer, Fritz Henderson, stressed that he intended for the bankruptcy process to move quickly.[44] In addition to Mr Henderson's press conference, President of the United States Barack Obama made a speech from the White House after the court filing.[45]
The General Motors Chapter 11 filing formally was entitled "In re General Motors Corp.", and was case number 09-50026 in the Southern District, Manhattan, New York.[46] General Motors was represented by the New York specialist law firm Weil, Gotshal & Manges. The United States Treasury was represented by the United States Attorneys Office for the Southern District of New York and Cadwalader, Wickersham & Taft LLP. An ad hoc group of the bondholders of General Motors Corporation was also represented in court.[47]
One of the first motions filed in court was one to void the leases on the seven corporate jets, and corporate aircraft hangar at Detroit Metropolitan Wayne County Airport, for being no longer valuable to the company's business — a lease that the company had, according to its spokesman, found itself unable to escape in 2008 when it had tried to.[46]
On June 1, 2009, the court gave interim approval to GM's request to borrow US$15 billion as debtor-in-possession funding, the company only having US$2 billion cash in hand. The United States Treasury argued in court that it was the only source of such debtor in possession funding, and that without the money from the loan General Motors would have no option but liquidation. Other motions in the first-day hearing included motions to approve payments to key suppliers and to employees and distributors who are in possession of goods manufactured for General Motors. All motions passed in court without substantial objection.[47][48]
The case schedule laid out by the court is as follows:
General Motors auctioned off its assets in a section 363 sale.[2][3][4][47][49] Because the price of these assets were very high, there was only one bidder in the auction, NGMCO Inc. ("New GM").[1] This company was formed by the United States government with a 60.8% stake, the federal government of Canada and provincial government of Ontario with an 11.7% stake, the United and Canadian Auto Workers unions VEBA fund[2] with a 17.5% stake, and the unsecured bondholders of General Motors with a 10% stake.[47] The selling company was Motors Liquidation Company ("Old GM") (see below).[50]
A creditor meeting, at the New York Hilton Hotel, held by the United States Trustee Program, was scheduled for June 3, 2009.[48]
On June 1, 2009, GM announced that the Hummer brand would be discontinued. On October 9, they reached an agreement to sell their entire stake in the Hummer brand to China-based Hilton Hotel, held by the United States Trustee Program, was scheduled for June 3, 2009.[48]
On June 1, 2009, GM announced that the Hummer brand would be discontinued. On October 9, they reached an agreement to sell their entire stake in the Hummer brand to China-based Sichuan Tengzhong Heavy Industrial Machinery Company Ltd.[51] and a group of private investors (Mr. Suolang Duoji, a private entrepreneur with holdings that include the Hong Kong-listed thenardite producer Lumena, would have held the remaining 20 percent stake.) The sale would have net GM around $150 million.[52][53] The deal would have included manufacturing to continue in the two plants that GM already uses to produce the Hummer trucks through June 2011, with a possible extension until 2012.
On February 24, 2010, GM announced that the sale could not be completed with Sichuan Tengzhong and that they would discontinue the brand. They were approached by several other companies interested in purchasing the Hummer brand and began reviewing potential buyers.Hummer brand and began reviewing potential buyers.[54] However, in the end no sale could be finalised and Hummer was declared defunct on May 24, 2010.
On June 5, 2009, GM announced that the Saturn brand would be sold to the Penske Automotive Group.[55] GM was to continue to build the Aura, Outlook and Vue for Penske for two years, however, as of September 30, 2009, the deal had fallen through. Penske had asked GM to extend the time it was to build Saturns until it could reach a deal with the Renault Group for vehicle replacements in 2012, but since that deal fell through Penske cancelled the planned sale. GM has said that the Saturn brand will be phased out by the 2010 model year, and the brand was declared defunct on October 31, 2010.
On
On June 16, 2009, it was announced that the Swedish firm Koenigsegg Automotive AB and a group of Norwegian investors planned to acquire the Saab brand from General Motors. GM would have continued to supply architecture and powertrain technology for an unspecified amount of time.[56] On November 24, 2009, it was announced that the sale of Saab to the Koenigsegg Group had collapsed.[57]
"We're obviously very disappointed with the decision to pull out of the Saab purchase," said GM CEO Fritz Henderson in a statement. "Given the sudden change in direction, we will take the next several days to assess the situation and will advise on the next steps next week."[58]
On February 23, 2010 GM sold Saab to Spyker Cars, later renamed Swedish Automobile.
On July 10, 2009, GM's continuing operation operational assets were transferred to Vehicle Acquisition Holdings LLC which assumed the name General Motors Company.[12][50][59] with the new company planning to issue an initial public offering (IPO) of stock in 2010.[15]
As part of a reorganization plan agreed to with the U.S., Canadian and Ontario governments, and the company's unions, General Motors filed for Chapter 11 Bankruptcy protection in a Manhattan court in New York on June 1, 2009, at approximately 8:00 am. The case was assigned to U.S. Bankruptcy Judge Robert G As part of a reorganization plan agreed to with the U.S., Canadian and Ontario governments, and the company's unions, General Motors filed for Chapter 11 Bankruptcy protection in a Manhattan court in New York on June 1, 2009, at approximately 8:00 am. The case was assigned to U.S. Bankruptcy Judge Robert Gerber. Gerber presided over the bankruptcy of Adelphia Communications Corp.[7]
Shortly after the Chapter 11 filing, it was announced that as of Monday, June 8, 2009, GM would be removed from the Dow Jones Industrial Average, to be replaced by Cisco Systems. This coincided with the announcement that Citigroup Financial would also be removed and replaced by insurer, Travelers Co.[60] Beginning June 2, GM stock traded on the Pink Sheets under the symbol GMGMQ. On July 15, the stock symbol was changed to MTLQQ.
General Motors filed for a government-assisted Chapter 11 bankruptcy protection on June 1, 2009, with a plan to re-emerge as a less debt-burdened organization.[13]
The chapter 11 petition was filed in the federal court in Manhattan, New York. The filing reported US$82.29 billion in assets.[7]
The company expressed optimism in the future success of the "New GM".[2] As ranked by total assets, the Chapter 11 reorganization is one of the largest successful corporate reorganizations in U.S. history, and the fourth-largest bankruptcy in U.S. history by total assets, following Lehman Brothers Holdings Inc., Washington Mutual and WorldCom Inc.[14]
The "new GM" is formed from the purchase of the desirable assets of "old GM" by an entity called "NGMCO Inc." via the bankruptcy process.[61] NGMCO Inc. was renamed to "General Motors Company" upon purchase of the assets and trade name from "old GM", with the claims of former stakeholders to be handled by the "Motors Liquidation Company".[50][59] The purchase was supported by $50 billion in U.S. Treasury loans, giving the U.S. government a 60.8% stake. The Queen of Canada, in right of both Canada and Ontario, holds 11.7% and the United Auto Workers, through its health-care trust (VEBA), holds a further 17.5%. The remaining 10% is held by unsecured creditors.[62]
On July 10, 2009, GM reported 88,000 U.S. employees, and announced plans to reduce its U.S. workforce to 68,000 by the end of 2009 after filing for bankruptcy.[63]
On July 10, 2009, a new entity, NGMCO Inc. purchased the ongoing operations and trademarks from GM.[61]
The purchasing company in turn changed its name from NGMCO Inc. to General Motors Company, marking the emergence of a new operation from the "pre-packaged" Chapter 11 reorganization.[12][50][59]
Under the reorganization process, termed a 363 sale (for Section 363 which is located in Title 11, Chapter 3, Subchapter IV of the United States Code, a part of the Bankruptcy Code), the purchaser of the assets of a company in bankruptcy proceedings is able to obtain approval for the purchase from the court prior to the submission of a re-organization plan, free of liens and other claims. It is used in most Chapter 11 cases that involve a sale of property or other assets. This process is typical of large organizations with complex branding and intellectual property rights issues upon exiting bankruptcy.[64][65][66][67]
The new company plans to issue an initial public offering (IPO) of stock in 2010.[68]
The remaining pre-petition creditors claims are paid from assets of the Motors Liquidation Company (stock symbol MTLQQ), the new name of the former General Motors Corporation.[12][68] The directors of Motors Liquidation Company have stated that they believe shares in the company (the "old" GM) will have no value since the company has far more debts than assets.
On July 23, 2009, GM announced its new Board of Directors: Daniel Akerson (of the Carlyle Group), David Bonderman (of TPG Capital), Robert D. Krebs (a former railroad executive), Patricia F. Russo (the former CEO of Alcatel-Lucent), Ed Whitacre (GM Chairman) and Fritz Henderson (GM CEO).[69]
The U.S. Treasury financed a new company to purchase the operating assets of the old GM company in bankruptcy proceedings in the 'pre-packaged' Chapter 11 reorganization in July 2009.[13]
In addition to selling off brands and killing brands like Pontiac and Goodwrench, General Motors Company has restructured its brand architecture and has adopted a new corporate identity.[70] The practice of putting the "GM Mark of Excellence" on every car, no matter what the brand, was discontinued in August 2009.[71] The company has moved from a 'corporate-endorsed, hybrid-brand' architecture structure (where GM underpinned every brand) to a 'multiple-brand, corporate-invisible' brand architecture structure.[72] The company's familiar square blue "badge" has been removed from the Web site and advertising, in favor of a new, subtle all-text logo treatment.[70]
Through the Troubled Asset Relief Program the US Treasury invested a total $51 billion into the GM bankruptcy.[93] Until December 10, 2013, the U. S. Treasury re Through the Troubled Asset Relief Program the US Treasury invested a total $51 billion into the GM bankruptcy.[93] Until December 10, 2013, the U. S. Treasury recovered $39 billion from selling its GM stake. The final direct cost to the Treasury of the GM bailout was $11[94]-12 billion ($10.5 billion for General Motors and $1.5 billion for former GM financing GMAC, now known as Ally).[95] Local tax incentives amounted to $1.7 billion, most of them in Michigan.[96][97] A study by the Center for Automotive Research found that the GM bailout saved 1.2 million jobs and preserved $34.9 billion in tax revenue.[95]
In 2012, In 2012, A trust representing "old" GM's unsecured creditors filed suit in the Southern District of New York against GM over payments made to hedge funds in 2009 in exchange for waiving of claims against GM's Canadian subsidiary. The deal, of which Judge Robert Gerber says he was unaware - despite its disclosure in an SEC filing on the day GM sought Chapter 11 protection - could prompt a reopening of the 2009 case.[98]
Timeline 2008–2009
European Loans
2012 Suit
See also