Brock Press

Issue date: 6/9/09 Section: Business

It was inevitable.
The public pretended it wasn't, and governments and executives did all they could to convince us otherwise, but it was. And now that it's happened, that is that General Motors (GM) has filed for Chapter 11 bankruptcy protection, the historic company can finally begin down the path toward profitability.
So far, bankruptcy has agreed with GM. They were able to sell their Hummer brand, which has suffered ever since the rise in oil prices and environmental awareness, to a small Chinese manufacturer, Sichuan Tengzhong Heavy Industrial. The Hummer brand was considered a symbol of GM's poor management decisions.
"I'm confident that Hummer will thrive globally under its new ownership," said Troy Clarke, president of GM North America. "And for GM, this sale continues to accelerate the reinvention of GM into a leaner, more focused, and more cost-competitive automaker."
Along with the sale of Hummer, GM has a tentative deal to sell their Saturn brand to Penske Automotive Group, owned by former race car driver and dealership group owner Roger Penske.
"Saturn has a passionate customer base and outstanding dealer network," Penske said. "For nearly 20 years, Saturn has focused on treating the customer right. We share that philosophy, and we want to build on those strengths."
The deal includes rights to approximately 350 Saturn dealerships. General Motors would continue to manufacture the vehicles for up to two years while Penske looks for a company to take over the manufacturing responsibilities. It is expected that Penske would offer all the dealerships new contracts to extend their franchise agreements, keeping all 13,000 Saturn employees employed, at least for the time being.
GM is expected to start fresh in 60 or 90 days depending on how the restructuring process takes shape. When the new GM emerges, the US Treasury will own 60.8 per cent of the common shares while the Canadian and Ontario governments will have a combined 11.7 per cent stake in the new company's equity.
"We are acting as reluctant shareholders, because that is the only way to help GM succeed," U.S. president Barack Obama said during a White House address.
GM bondholders will get a 10 per cent stake with a possibility of increasing their interest to 25 per cent, while shareholders will receive nothing. The trust for health care expenses owned by the United Auto Workers will receive a 17.5 per cent stake.
Meanwhile, fellow automaker Chrysler LLC is planning to exit bankruptcy after a deal was approved in bankruptcy court that would see a new company owned by the US government, a retirement fund for autoworkers and Italian automaker Fiat.

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