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
United States bankruptcy courts are courts created under Article I of the United States Constitution. The current system of bankruptcy courts was created by the United States Congress in 1978, effective April 1, 1984. United States bankruptcy c ...
for the
Southern District of New York
The United States District Court for the Southern District of New York (in case citations, S.D.N.Y.) is a federal trial court whose geographic jurisdiction encompasses eight counties of New York State. Two of these are in New York City: New ...
. The United States government-endorsed sale enabled the NGMCO Inc.
[GM 363 Asset Sale Approved by U.S. Bankruptcy Court](_blank)
July 6, 2009. Accessed September 8, 2012. ("New GM") to purchase the continuing operational assets of the old GM.
Normal operations, including
employee compensation
Compensation and benefits (C&B) is a sub-discipline of human resources, focused on employee compensation and benefits policy-making. While compensation and benefits are tangible, there are intangible rewards such as recognition, work-life and de ...
,
warranties
In contract law, a warranty is a promise which is not a condition of the contract or an innominate term: (1) it is a term "not going to the root of the contract",Hogg M. (2011). ''Promises and Contract Law: Comparative Perspectives''p. 48 Cambri ...
, and other customer services were uninterrupted during the bankruptcy proceedings.
Operations outside of the United States were not included in the court filing.
The company received $33 billion in
debtor-in-possession financing Debtor-in-possession financing or DIP financing is a special form of financing provided for companies in financial distress, typically during restructuring under corporate bankruptcy law (such as Chapter 11 bankruptcy in the US or CCAA in Canada). ...
to complete the process. 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.
[
][
][
][
][
]
After the Chapter 11 filing, effective Monday, June 8, 2009, GM was removed from the
Dow Jones Industrial Average
The Dow Jones Industrial Average (DJIA), Dow Jones, or simply the Dow (), is a stock market index of 30 prominent companies listed on stock exchanges in the United States.
The DJIA is one of the oldest and most commonly followed equity inde ...
and replaced by
Cisco Systems
Cisco Systems, Inc., commonly known as Cisco, is an American-based multinational digital communications technology conglomerate corporation headquartered in San Jose, California. Cisco develops, manufactures, and sells networking hardware, ...
. From Tuesday June 2, old GM stock has traded
Over the Counter
Over-the-counter (OTC) drugs are medicines sold directly to a consumer without a requirement for a prescription from a healthcare professional, as opposed to prescription drugs, which may be supplied only to consumers possessing a valid prescr ...
(
Pink Sheets/
OTCBB
The OTC (Over-The-Counter) Bulletin Board or OTCBB was a United States quotation medium operated by the Financial Industry Regulatory Authority (FINRA) for its subscribing members. FINRA closed the OTCBB on November 8, 2021.
The board was used for ...
), initially under the symbol GMGMQ
[
] 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
Chapter 11 of the United States Bankruptcy Code (Title 11 of the United States Code) permits reorganization under the bankruptcy laws of the United States. Such reorganization, known as Chapter 11 bankruptcy, is available to every business, wheth ...
reorganization.
[Stoll, John D., and Neil King Jr. (July 10, 2009]
GM Emerges From Bankruptcy
''The Wall Street Journal''. Retrieved on July 10, 2009.
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
Washington Mutual (often abbreviated to WaMu) was the United States' largest savings and loan association until its collapse in 2008.
A savings bank holding company is defined in United States Code: Title 12: Banks and Banking; Section 1842: Def ...
and
WorldCom Inc. 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
An initial public offering (IPO) or stock launch is a public offering in which shares of a company are sold to institutional investors and usually also to retail (individual) investors. An IPO is typically underwritten by one or more investme ...
(IPO) of stock in 2010.
[Stoll, John D., and David McLaughlin (July 2, 2009]
General Motors Aims for IPO Next Year
''The Wall Street Journal''. Retrieved on July 10, 2009. The remaining pre-petition creditors claims are paid from the former corporation's assets.
[
]
Background
General Motors was financially vulnerable before the automotive industry crisis of 2008–2010
The automotive industry crisis of 2008–2010 formed part of the financial crisis of 2007–2008 and the resulting Great Recession. The crisis affected European and Asian automobile manufacturers, but it was primarily felt in the American automob ...
. In 2005, the company posted a loss of US$10.6 billion.
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
Groupe Renault ( , , , also known as the Renault Group in English; legally Renault S.A.) is a French multinational automobile manufacturer established in 1899. The company produces a range of cars and vans, and in the past has manufacture ...
failed. For fiscal year 2007, GM's losses for the year were US$38.7 billion, and sales for the following year dropped by 45%.
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.
Ten days later General Motors representatives, along with executives from Ford
Ford commonly refers to:
* Ford Motor Company, an automobile manufacturer founded by Henry Ford
* Ford (crossing), a shallow crossing on a river
Ford may also refer to:
Ford Motor Company
* Henry Ford, founder of the Ford Motor Company
* Ford F ...
and Chrysler testified about their need for financial aid at a congressional hearing in Washington D.C.
)
, image_skyline =
, image_caption = Clockwise from top left: the Washington Monument and Lincoln Memorial on the National Mall, United States Capitol, Logan Circle, Jefferson Memorial, White House, Adams Morgan, Na ...
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.
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.[General Motors Restructuring Plan for Long-Term Viability](_blank)
/ref> 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.
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
Barack Hussein Obama II ( ; born August 4, 1961) is an American politician who served as the 44th president of the United States from 2009 to 2017. A member of the Democratic Party, Obama was the first African-American president of the ...
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 union
A trade union (labor union in American English), often simply referred to as a union, is an organization of workers intent on "maintaining or improving the conditions of their employment", ch. I such as attaining better wages and benefits ...
s into settlements. GM Chairman and CEO Rick Wagoner
George Richard "Rick" Wagoner Jr. (born February 9, 1953) is an American businessman and former chair and chief executive officer of General Motors. Wagoner resigned as chairman and CEO at General Motors on March 29, 2009, at the request of the ...
was also forced to resign. GM bondholders rejected the government's first offer, but the unions agreed to the preferential terms. A bondholder debt to equity counteroffer was ignored.
Earlier restructuring efforts
Efforts to sell General Motors' European operations ran into difficulties, as the corporation was expected to file for bankruptcy protection by June 1, 2009. 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. 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%.[CNN, 31 May 2009, General Motors on the brink](_blank)
/ref>
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
A credit default swap (CDS) is a financial swap agreement that the seller of the CDS will compensate the buyer in the event of a debt default (by the debtor) or other credit event. That is, the seller of the CDS insures the buyer against so ...
held by these creditors. 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.
U.S. government-backed guarantee of warranties
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.
On May 27, 2009, the U.S. Treasury advanced a secured loan
A secured loan is a loan in which the borrower pledges some asset (e.g. a car or property) as collateral for the loan, which then becomes a secured debt owed to the creditor who gives the loan. The debt is thus secured against the collateral, an ...
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.[
]
Proposed sale of Opel and Vauxhall
On May 30, 2009, it was announced that a deal had been reached to transfer New Opel ( Opel plus Vauxhall
Vauxhall ( ) is a district in South West London, part of the London Borough of Lambeth, England. Vauxhall was part of Surrey until 1889 when the County of London was created. Named after a medieval manor, "Fox Hall", it became well known for ...
, minus Saab
Saab or SAAB may refer to:
Brands and enterprises
* Saab Group, a Swedish aerospace and defence company, formerly known as SAAB, and later as Saab AB
** Datasaab, a former computer company, started as spin off from Saab AB
* Saab Automobile, a fo ...
) assets to a separate company majority-owned by a consortium led by Sberbank
PJSC Sberbank (russian: Сбербанк, initially a contraction of russian: сберегательный банк, translit=sberegatelnyy bank, lit=savings bank, link=no) is a Russian majority state-owned banking and financial services compa ...
of Russia (35%), Magna International
Magna International Inc. is a Canadian parts manufacturer for automakers. It is one of the largest companies in Canada and was recognized on the 2020 ''Forbes'' Global 2000. The company is the largest automobile parts manufacturer in North Americ ...
of Canada (20%), and Opel employees and car dealers (10%). GM was expected to keep a 35% minority stake in the new company. It was announced on November 3, 2009, that the GM board had decided not to sell off Opel. However, after the reorganization in 2017, Opel and Vauxhall would later be sold to Groupe PSA
The PSA Group (), legally known as Peugeot S.A. (Peugeot Société Anonyme, trading as Groupe PSA; formerly known as PSA Peugeot Citroën from 1991 to 2016) was a French multinational automotive manufacturing company which produced automobiles ...
for $2.3 billion.
Chapter 11 protection
Filing
On the morning of June 1, 2009, Chevrolet-Saturn of Harlem
Chevrolet-Saturn of Harlem, Inc., was a car dealership in the East Harlem neighborhood in New York City. Originally touted as a minority-owned dealership and part of the only new-car facility in Harlem, it was abandoned by its original operator ...
, a dealership in Manhattan
Manhattan (), known regionally as the City, is the most densely populated and geographically smallest of the five boroughs of New York City. The borough is also coextensive with New York County, one of the original counties of the U.S. state ...
that is owned by GM itself, filed for bankruptcy protection there, followed in the same court by General Motors Corporation
The General Motors Company (GM) is an American multinational automotive manufacturing company headquartered in Detroit, Michigan, United States. It is the largest automaker in the United States and was the largest in the world for 77 years bef ...
(the main GM in Detroit), GM's subsidiary Saturn LLC
The Saturn Corporation, also known as Saturn LLC, was an American automobile manufacturer, a registered trademark established on January 7, 1985, as a subsidiary of General Motors. The company was an attempt by GM to compete directly with Japane ...
, and Saturn LLC's subsidiary Saturn Distribution Corporation.[ All cases were assigned to Judge Robert Gerber.
The filing by the dealership declared General Motors to be a debtor in possession.][
] The Manhattan dealership's filing allowed General Motors to file its own bankruptcy petition in the , its preferred court. Normally, a company would file for bankruptcy in the courts located either in the state where the company is incorporated (which for GM was Delaware
Delaware ( ) is a state in the Mid-Atlantic region of the United States, bordering Maryland to its south and west; Pennsylvania to its north; and New Jersey and the Atlantic Ocean to its east. The state takes its name from the adjacent Del ...
), or where it conducts operations (which would have been Michigan
Michigan () is a U.S. state, state in the Great Lakes region, Great Lakes region of the Upper Midwest, upper Midwestern United States. With a population of nearly 10.12 million and an area of nearly , Michigan is the List of U.S. states and ...
, where the company was headquartered). General Motors' attorneys, however, preferred to file in the federal courts in New York, because those courts have a reputation for expertise in bankruptcy.[
]
In a press conference later that day, the GM Chief Executive Officer, Fritz Henderson
Frederick Arthur "Fritz" Henderson (born November 29, 1958) was President and Chief Executive Officer of General Motors. Prior to his appointment as CEO on March 31, 2009, Henderson was the Vice President of General Motors and had been with the co ...
, stressed that he intended for the bankruptcy process to move quickly.
In addition to Mr Henderson's press conference, President of the United States
The president of the United States (POTUS) is the head of state and head of government of the United States of America. The president directs the executive branch of the federal government and is the commander-in-chief of the United States ...
Barack Obama
Barack Hussein Obama II ( ; born August 4, 1961) is an American politician who served as the 44th president of the United States from 2009 to 2017. A member of the Democratic Party, Obama was the first African-American president of the ...
made a speech from the White House
The White House is the official residence and workplace of the president of the United States. It is located at 1600 Pennsylvania Avenue NW in Washington, D.C., and has been the residence of every U.S. president since John Adams in ...
after the court filing.
Court schedule and motions
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.
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.[
]
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.
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.
The case schedule laid out by the court is as follows:
*2009-06-19: Deadline for filing all objections to the sale of General Motors.
*2009-06-22: Deadline for making competing bids in the auction of General Motors' assets.
*2009-06-25: Final hearing on the bankruptcy loan.
*2009-07-10: Deadline for completion of the sale, requested by the U.S. Treasury and General Motors.
Planned sale
General Motors auctioned off its assets in
section 363 sale
[
][
] Because the price of these assets were very high, there was only one bidder in the auction, NGMCO Inc. ("New GM"). This company was formed by the United States government with a 60.8% stake, the federal government of Canada
Canada is a country in North America. Its ten provinces and three territories extend from the Atlantic Ocean to the Pacific Ocean and northward into the Arctic Ocean, covering over , making it the world's second-largest country by tot ...
and provincial government of Ontario
Ontario ( ; ) is one of the thirteen provinces and territories of Canada.Ontario is located in the geographic eastern half of Canada, but it has historically and politically been considered to be part of Central Canada. Located in Central C ...
with an 11.7% stake, the United
United may refer to:
Places
* United, Pennsylvania, an unincorporated community
* United, West Virginia, an unincorporated community
Arts and entertainment Films
* ''United'' (2003 film), a Norwegian film
* ''United'' (2011 film), a BBC Two f ...
and Canadian Auto Workers
The Canadian Auto Workers (CAW; formally the National Automobile, Aerospace, Transportation and General Workers Union of Canada) was one of Canada's largest and highest profile labour unions. In 2013, it merged with the Communications, Energy and ...
unions VEBA
VEBA AG (originally from ''Vereinigte Elektrizitäts und Bergwerks Aktiengesellschaft'' or "United Electricity and Mining Corporation") was a German state owned energy company. VEBA was founded in 1929 as a holding company owned by the state of ...
fund with a 17.5% stake, and the unsecured bondholders of General Motors with a 10% stake. The selling company was Motors Liquidation Company
Motors Liquidation Company (MLC), formerly General Motors Corporation, was the company left to settle past liability claims from Chapter 11 reorganization of American car manufacturer General Motors. It exited bankruptcy on March 31, 2011, only ...
("Old GM") (see below).[
]
A creditor meeting, at the New York Hilton Hotel
Hilton Hotels & Resorts (formerly known as Hilton Hotels) is a global brand of full-service hotels and resorts and the flagship brand of American multinational hospitality company Hilton.
The original company was founded by Conrad Hilton. As ...
, held by the United States Trustee Program
The United States Trustee Program is a component of the United States Department of Justice that is responsible for overseeing the administration of bankruptcy cases and private trustees. The applicable federal law is found at and , et seq.
In ...
, was scheduled for June 3, 2009.
Sale of Hummer
On June 1, 2009, GM announced that the Hummer
Hummer (stylized as HUMMER) is a brand of pickups and SUVs that was first marketed in 1992 when AM General began selling a civilian version of the M998 Humvee. Although discontinued in 2010, Hummer returned as a sub-brand of GMC in 2020. ...
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
Sichuan Tengzhong Heavy Industrial Machinery Co., Ltd. is based in Chengdu, China. Sichuan Tengzhong is a privately owned company known for making a wide range of road equipment, such as bridge piers, highway construction and maintenance machine ...
Ltd. 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.[Sichuan Tengzhong](_blank)
(Official statement) 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
Hummer (stylized as HUMMER) is a brand of pickups and SUVs that was first marketed in 1992 when AM General began selling a civilian version of the M998 Humvee. Although discontinued in 2010, Hummer returned as a sub-brand of GMC in 2020. ...
brand and began reviewing potential buyers. However, in the end no sale could be finalised and Hummer was declared defunct on May 24, 2010.
Sale of Saturn
On June 5, 2009, GM announced that the Saturn brand would be sold to the Penske Automotive Group
Penske Automotive Group, Inc., headquartered in Bloomfield Hills, Michigan, is an international transportation services company that operates automotive and commercial truck dealerships principally in the United States, Canada, and Western Europe ...
. GM was to continue to build the Aura, Outlook
Outlook or The Outlook may refer to:
Computing
* Microsoft Outlook, an e-mail and personal information management software product from Microsoft
* Outlook.com, a web mail service from Microsoft
* Outlook on the web, a suite of web applications ...
and Vue
Vue or VUE may refer to:
Places
* Vue, Loire-Atlantique, a commune in France
* The Vue, a skyscraper in Charlotte, North Carolina
Arts, entertainment and media
* Vue (band), a rock and roll band from San Francisco, California
* Vue Cinemas, a c ...
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.
Sale of Saab
On June 16, 2009, it was announced that the Swedish firm Koenigsegg Automotive AB
Koenigsegg Automotive AB () is a Swedish manufacturer of high-performance sports cars based in Ängelholm, Skåne County, Sweden.
Company
The company was founded in 1994 in Sweden by Christian von Koenigsegg, with the intention of producing ...
and a group of Norwegian investors planned to acquire the Saab
Saab or SAAB may refer to:
Brands and enterprises
* Saab Group, a Swedish aerospace and defence company, formerly known as SAAB, and later as Saab AB
** Datasaab, a former computer company, started as spin off from Saab AB
* Saab Automobile, a fo ...
brand from General Motors. GM would have continued to supply architecture and powertrain technology for an unspecified amount of time. On November 24, 2009, it was announced that the sale of Saab to the Koenigsegg Group had collapsed.
"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."
On February 23, 2010 GM sold Saab to Spyker Cars
Spyker Cars (, ) is a Dutch sports car marque. The modern Spyker Cars held the legal rights to the brand name. The company's motto is "''Nulla tenaci invia est via''", Latin for "For the tenacious, no road is impassable". The marque's logo dis ...
, later renamed Swedish Automobile
Spyker Cars (, ) is a Dutch sports car marque. The modern Spyker Cars held the legal rights to the brand name. The company's motto is "''Nulla tenaci invia est via''", Latin for "For the tenacious, no road is impassable". The marque's logo dis ...
. The Saab brand would collapse under Spyker in 2012 after filing for bankruptcy.
363 Sale of assets
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
Chapter 11 of the United States Bankruptcy Code ( Title 11 of the United States Code) permits reorganization under the bankruptcy laws of the United States. Such reorganization, known as Chapter 11 bankruptcy, is available to every business, whet ...
in a federal Manhattan court in New York on June 1, 2009, at approximately 8:00 am, planning to re-emerge as a less debt-burdened organization. The filing reported US$82.29 billion in assets. The case was assigned to U.S. Bankruptcy Judge Robert Gerber, who had previously presided over another high-profile bankruptcy case of Adelphia Communications
Adelphia Communications Corporation was an American cable television company with headquarters in Coudersport, Pennsylvania. It was founded in 1952 by brothers Gus and John Rigas after the pair purchased a cable television franchise for US$300. C ...
Corp.
Shortly after the Chapter 11 filing, it was announced that on Monday, June 8, 2009, GM would be removed from the Dow Jones Industrial Average
The Dow Jones Industrial Average (DJIA), Dow Jones, or simply the Dow (), is a stock market index of 30 prominent companies listed on stock exchanges in the United States.
The DJIA is one of the oldest and most commonly followed equity inde ...
, and replaced by Cisco Systems
Cisco Systems, Inc., commonly known as Cisco, is an American-based multinational digital communications technology conglomerate corporation headquartered in San Jose, California. Cisco develops, manufactures, and sells networking hardware, ...
. This coincided with the announcement that Citigroup Financial would also be removed and replaced by insurer Travelers Co.
$GM was delisted from the NYSE. Beginning June 2, GM stock traded on the Pink Sheets OTC market under the symbol GMGMQ. On July 15, the stock symbol was changed to MTLQQ ("Motors Liquidation Company
Motors Liquidation Company (MLC), formerly General Motors Corporation, was the company left to settle past liability claims from Chapter 11 reorganization of American car manufacturer General Motors. It exited bankruptcy on March 31, 2011, only ...
").
Despite these developments, the organization expressed optimism in the future success of a "new GM". On July 10, 2009, after an auction process and approval by Judge Gerber concluded, GM's continuing operational assets and trademarks were transferred to the sole bidder, a primarily government-owned entity called "NGMCO Inc.",[General Motors Company and Subsidiaries Supplemental Material"](_blank)
Retrieved on September 9, 2012.
which upon sale assumed the name ''General Motors Company.'' 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
The monarchy of Canada is Canada's form of government embodied by the Canadian sovereign and head of state. It is at the core of Canada's constitutional Canadian federalism, federal structure and Westminster system, Westminster-style Parliamentar ...
, in right of both Canada and Ontario
Ontario ( ; ) is one of the thirteen provinces and territories of Canada.Ontario is located in the geographic eastern half of Canada, but it has historically and politically been considered to be part of Central Canada. Located in Central C ...
, held 11.7% and the United Auto Workers
The International Union, United Automobile, Aerospace, and Agricultural Implement Workers of America, better known as the United Auto Workers (UAW), is an American labor union that represents workers in the United States (including Puerto Rico) ...
, through its health-care trust (VEBA
VEBA AG (originally from ''Vereinigte Elektrizitäts und Bergwerks Aktiengesellschaft'' or "United Electricity and Mining Corporation") was a German state owned energy company. VEBA was founded in 1929 as a holding company owned by the state of ...
), a further 17.5%. The remaining 10% was held by unsecured creditor
An unsecured creditor is a creditor other than a preferential creditor that does not have the benefit of any security interests in the assets of the debtor.
In the event of the bankruptcy of the debtor, the unsecured creditors usually obtain a '' ...
s.
In other words, a company called "NGMCO Inc.", financed by the U.S. Treasury, Canada, and a labor union, purchased the desirable assets of "old GM" via the bankruptcy process, thus renaming it to "General Motors Company" and forming a "new GM". This marked the emergence of a new operation from the "pre-packaged" Chapter 11
Chapter 11 of the United States Bankruptcy Code (Title 11 of the United States Code) permits reorganization under the bankruptcy laws of the United States. Such reorganization, known as Chapter 11 bankruptcy, is available to every business, wheth ...
reorganization. The claims of former stakeholders and remaining pre-petition creditors of "old GM" would be handled by the "Motors Liquidation Company",[
] with the new company planning to issue an initial public offering
An initial public offering (IPO) or stock launch is a public offering in which shares of a company are sold to institutional investors and usually also to retail (individual) investors. An IPO is typically underwritten by one or more investme ...
(IPO) of stock in 2010. The directors of Motors Liquidation Company stated that they believed shares in the "old" GM would eventually have no value since the company had far more debts than assets.
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.[
][
][
]
As ranked by total assets, the Chapter 11 reorganization of "new GM" from the old 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
Washington Mutual (often abbreviated to WaMu) was the United States' largest savings and loan association until its collapse in 2008.
A savings bank holding company is defined in United States Code: Title 12: Banks and Banking; Section 1842: Def ...
and WorldCom Inc.
The same day, GM reported 88,000 U.S. employees, and announced plans to reduce its U.S. workforce to 68,000 by the end of 2009.
On July 23, 2009, "new GM" announced its new Board of Directors: Daniel Akerson (of the Carlyle Group
The Carlyle Group is a multinational private equity, alternative asset management and financial services corporation based in the United States with $376 billion of assets under management. It specializes in private equity, real assets, and ...
), David Bonderman (of TPG Capital
TPG Inc., previously known as Texas Pacific Group and TPG Capital, is an American investment company based in Fort Worth, Texas. The private equity firm is focused on leveraged buyouts and growth capital. TPG manages investment funds in growth c ...
), Robert D. Krebs (a former railroad executive), Patricia F. Russo (the former CEO of Alcatel-Lucent
Alcatel–Lucent S.A. () was a French–American global telecommunications equipment company, headquartered in Boulogne-Billancourt, France. It was formed in 2006 by the merger of France-based Alcatel and U.S.-based Lucent, the latter being a s ...
), Ed Whitacre
Edward Earl Whitacre Jr. (born November 4, 1941) is the former Chairman and CEO of General Motors. He is also a former chairman of the board and chief executive officer of AT&T, previously Southwestern Bell Corporation (SBC). He served as nat ...
(GM Chairman) and Fritz Henderson
Frederick Arthur "Fritz" Henderson (born November 29, 1958) was President and Chief Executive Officer of General Motors. Prior to his appointment as CEO on March 31, 2009, Henderson was the Vice President of General Motors and had been with the co ...
(GM CEO).
Brand reorganization
In addition to selling off brands and killing brands like Pontiac and Goodwrench, General Motors Company restructured its brand architecture and adopted a new corporate identity. The practice of putting the "GM Mark of Excellence" on every car, no matter what the brand, was discontinued in August 2009. The company moved from a 'corporate-endorsed, hybrid-brand' architecture structure (where GM underpinned every brand) to a 'multiple-brand, corporate-invisible' brand architecture structure. The company's familiar square blue "badge" was removed from its website and advertising, in favor of a new, subtle all-text logo treatment.
Timeline 2008–2009
October 10, 2008: GM considered exchanging its remaining 49% stake in GMAC to Cerberus Capital Management
Cerberus Capital Management, L.P. is an American private equity firm,Leaders Magazine"Providing Economic Opportunity: An Interview with The Honorable Dan Quayle, Chairman, Cerberus Global Investments, LLC". specializing in distressed investing. ...
for Chrysler LLC
Stellantis North America (officially FCA US and formerly Chrysler ()) is one of the " Big Three" automobile manufacturers in the United States, headquartered in Auburn Hills, Michigan. It is the American subsidiary of the multinational automotiv ...
, potentially merging two of Detroit's "Big Three" automakers.[Reports: Chrysler, GM discuss merger, acquisition](_blank)
/ref> Acquisition talks involving Chrysler were cancelled, however, before November 7, 2008, as part of a broader response to the increasing urgency of GM's own cash flow problems. That was a result of Chrysler's senior bank debt currently trading at less than 50 cents on the dollar and because Chrysler's other owner – Daimler, formerly DaimlerChrysler – recently revalued its 19.9% Chrysler stake down to zero, which may or may not reflect its value in a potential sale.[''Bloomberg.com']
GM Says It May Run Out of Operating Cash This Year (Update2) By Jeff Green and Mike Ramsey
/ref>
December 12, 2008: General Motors stated that it was nearly out of cash, and may not survive past 2009. The U.S. Senate
The United States Senate is the upper chamber of the United States Congress, with the House of Representatives being the lower chamber. Together they compose the national bicameral legislature of the United States.
The composition and pow ...
voted and strongly opposed any source of government assistance through a bailout bridge loan (originally worth $14 billion in emergency aid) which was aimed toward helping the struggling Big Three automakers financially, despite strong support from President George W. Bush
George Walker Bush (born July 6, 1946) is an American politician who served as the 43rd president of the United States from 2001 to 2009. A member of the Republican Party, Bush family, and son of the 41st president George H. W. Bush, he ...
and President-elect Barack Obama
Barack Hussein Obama II ( ; born August 4, 1961) is an American politician who served as the 44th president of the United States from 2009 to 2017. A member of the Democratic Party, Obama was the first African-American president of the ...
, along with some mild support from the Democratic and Republican political parties.
Prior to the U.S. Senate's announcement, General Motors announced that it had hired several lawyers
A lawyer is a person who practices law. The role of a lawyer varies greatly across different legal jurisdictions. A lawyer can be classified as an advocate, attorney, barrister, canon lawyer, civil law notary, counsel, counselor, solicitor, ...
to discuss the possibility of filing for bankruptcy, with Chapter 11 bankruptcy being one of the options discussed. GM stated that "all options are on the table" for the company. Chrysler LLC
Stellantis North America (officially FCA US and formerly Chrysler ()) is one of the " Big Three" automobile manufacturers in the United States, headquartered in Auburn Hills, Michigan. It is the American subsidiary of the multinational automotiv ...
, which is owned by Cerberus Capital Management
Cerberus Capital Management, L.P. is an American private equity firm,Leaders Magazine"Providing Economic Opportunity: An Interview with The Honorable Dan Quayle, Chairman, Cerberus Global Investments, LLC". specializing in distressed investing. ...
, in a similar financial situation, warned that it, too, was nearly out of cash and might not survive much longer.
December 18, 2008: President Bush announced that an "orderly" bankruptcy was one option being considered for both General Motors and Cerberus
In Greek mythology, Cerberus (; grc-gre, Κέρβερος ''Kérberos'' ), often referred to as the hound of Hades, is a multi-headed dog that guards the gates of the Underworld to prevent the dead from leaving. He was the offspring of the ...
-owned Chrysler LLC
Stellantis North America (officially FCA US and formerly Chrysler ()) is one of the " Big Three" automobile manufacturers in the United States, headquartered in Auburn Hills, Michigan. It is the American subsidiary of the multinational automotiv ...
. Sources said that setting up this type of "orderly" bankruptcy would be complicated because it would not only involve talks with the automakers, but also the unions and other stakeholders would have to be involved.
December 19, 2008: President Bush approved a bailout plan and gave General Motors and Chrysler $13.4 billion in financing from TARP (Troubled Assets Relief Program
The Troubled Asset Relief Program (TARP) is a program of the United States government to purchase toxic assets and equity from financial institutions to strengthen its financial sector that was passed by Congress and signed into law by President ...
) funds, as well as $4 billion to be "withdrawn later".
As of February 14, 2009: General Motors was considering filing for Chapter 11
Chapter 11 of the United States Bankruptcy Code (Title 11 of the United States Code) permits reorganization under the bankruptcy laws of the United States. Such reorganization, known as Chapter 11 bankruptcy, is available to every business, wheth ...
bankruptcy under a plan that would assemble all of their viable assets, including some U.S.
The United States of America (U.S.A. or USA), commonly known as the United States (U.S. or US) or America, is a country primarily located in North America. It consists of 50 states, a federal district, five major unincorporated territori ...
brands and international operations, into a new company. Less than a week later, its Saab subsidiary filed for bankruptcy protection in Sweden.
March 5, 2009: GM's independent public accounting firm (Deloitte & Touche
Deloitte Touche Tohmatsu Limited (), commonly referred to as Deloitte, is an international professional services network headquartered in London, England. Deloitte is the largest professional services network by revenue and number of profession ...
) issued a qualified opinion as part of GM's 2008 annual report that stated " hese conditionsraise substantial doubt about its ability to continue as a going concern
A going concern is a business that is assumed will meet its financial obligations when they become due. It functions without the threat of liquidation for the foreseeable future, which is usually regarded as at least the next 12 months or the spec ...
". A qualified going concern audit letter like this is only issued by the auditors when the company is in extreme financial distress and it is likely that it may file for bankruptcy protection.
March 12, 2009: GM's CFO Ray Young said that it would not need the requested $2B in March noting that the cost-cutting measures are starting to take hold.
March 29, 2009: GM's Chairman and CEO, Rick Wagoner
George Richard "Rick" Wagoner Jr. (born February 9, 1953) is an American businessman and former chair and chief executive officer of General Motors. Wagoner resigned as chairman and CEO at General Motors on March 29, 2009, at the request of the ...
, agreed to immediately resign his position as part of an Obama administration automotive restructuring plan. Wagoner was replaced by Fritz Henderson
Frederick Arthur "Fritz" Henderson (born November 29, 1958) was President and Chief Executive Officer of General Motors. Prior to his appointment as CEO on March 31, 2009, Henderson was the Vice President of General Motors and had been with the co ...
. In announcing that plan, on March 30, 2009, President Obama stated that both GM and Chrysler may need to use "our bankruptcy code as a mechanism to help them restructure quickly and emerge stronger".[President Obama's remarks on U.S. auto industry, March 30, 2009](_blank)
/ref> He also announced that the warranties on cars made by these companies would be guaranteed by the U.S. Government.
March 31, 2009: President Barack Obama
Barack Hussein Obama II ( ; born August 4, 1961) is an American politician who served as the 44th president of the United States from 2009 to 2017. A member of the Democratic Party, Obama was the first African-American president of the ...
announced that he would give GM 60 additional days to try and restructure their company and prove their viability. If they succeeded, Washington would provide General Motors with additional bridge loans. However, if GM could not meet the requirements set by the White House, a prepackaged bankruptcy is probable. President Obama reiterated that GM will be part of the future even if bankruptcy is necessary.
April 22, 2009: GM stated that it will not be able to make their June 1, 2009, debt payment.[Detroit Free Press. April 22, 2009](_blank)
/ref>
April 24, 2009: GM announced that they will be scrapping the Pontiac brand in an effort to invest more money into their major brands (Buick, Cadillac, Chevrolet, and GMC). It was the second discontinuation of a major GM brand in the 21st century, after Oldsmobile
Oldsmobile or formally the Oldsmobile Division of General Motors was a brand of American automobiles, produced for most of its existence by General Motors. Originally established as "Olds Motor Vehicle Company" by Ransom E. Olds in 1897, it pro ...
(which ended production in 2004).
May 4, 2009: German Economy Minister Karl-Theodor zu Guttenberg
Karl-Theodor Maria Nikolaus Johann Jacob Philipp Franz Joseph Sylvester Buhl-Freiherr von und zu Guttenberg (born 5 December 1971), known professionally as Karl-Theodor zu Guttenberg, is a German businessman and politician of the Christian Soc ...
said Fiat (among others) might be interested in the GM European unit.
June 1, 2009: GM filed for Chapter 11
Chapter 11 of the United States Bankruptcy Code (Title 11 of the United States Code) permits reorganization under the bankruptcy laws of the United States. Such reorganization, known as Chapter 11 bankruptcy, is available to every business, wheth ...
Bankruptcy, the fourth largest filing in the United States
The United States of America (U.S.A. or USA), commonly known as the United States (U.S. or US) or America, is a country primarily located in North America. It consists of 50 states, a federal district, five major unincorporated territori ...
history after Lehman Brothers
Lehman Brothers Holdings Inc. ( ) was an American global financial services firm founded in 1847. Before filing for bankruptcy in 2008, Lehman was the fourth-largest investment bank in the United States (behind Goldman Sachs, Morgan Stanley, a ...
, Washington Mutual
Washington Mutual (often abbreviated to WaMu) was the United States' largest savings and loan association until its collapse in 2008.
A savings bank holding company is defined in United States Code: Title 12: Banks and Banking; Section 1842: Def ...
, and Worldcom
MCI, Inc. (subsequently Worldcom and MCI WorldCom) was a telecommunications company. For a time, it was the second largest long-distance telephone company in the United States, after AT&T. Worldcom grew largely by acquiring other telecommunic ...
.[ On June 29, 2009, General Motors announced that they would discontinue the ]NUMMI
New United Motor Manufacturing, Inc. (NUMMI) was an American automobile manufacturing company in Fremont, California, jointly owned by General Motors and Toyota that opened in 1984 and closed in 2010.
After the plant was closed by its owners, th ...
joint venture with Toyota.
July 10, 2009: A new company financed by the United States Treasury, "NGMCO Inc" purchased most of the assets, and the trademarks of the General Motors Corporation. Vehicle Acquisition Holdings LLC then changed its name to "General Motors Company". The General Motors Corporation (old GM) in turn changed its name to "Motors Liquidation Company" and it continued in bankruptcy proceedings to settle with its bondholders, and on other liabilities. The new GM company, after the purchase of most of the assets of "old GM" is not a participant in the continuing bankruptcy proceedings of Motors Liquidation Company (Old GM). The "new GM" is mostly owned by the United States Government
The federal government of the United States (U.S. federal government or U.S. government) is the national government of the United States, a federal republic located primarily in North America, composed of 50 states, a city within a feder ...
.
Motors Liquidation Company
General Motors Corporation, upon sale of its major assets, trademarks and intellectual property on July 10, 2009, pursuant to the provisions of section 363 of the Bankruptcy Code, was renamed as Motors Liquidation Company
Motors Liquidation Company (MLC), formerly General Motors Corporation, was the company left to settle past liability claims from Chapter 11 reorganization of American car manufacturer General Motors. It exited bankruptcy on March 31, 2011, only ...
. It continued its bankruptcy court proceedings, exiting bankruptcy and splitting into four trusts. Motors Liquidation Company announced on July 10, 2009, in relation to its equity and debt investors:
Motors Liquidation Company's stock symbol was changed from GMGMQ to MTLQQ, effective July 15, 2009.
New General Motors
The new General Motors was named General Motors Company LLC, a separate and independent entity from the old corporation. The new company retained four of its major brands: Chevrolet, Cadillac, GMC, and Buick. It planned to keep 3,600 out of 6,000 of its US dealerships. Lastly, the company was also shutting down 14 of its US plants, which would eliminate 20,000 of its 80,000 current employees. The present General Motors Company is a smaller, restructured version of the former General Motors Corporation.
Bailouts
European loans
GM received loans from European governments in 2009, and reduced its ownership stake in European operations as part of its reorganization. As of July 10, 2009, the new GM has over $40 billion in cash, with the company's reorganized liability total of $48.8 billion which includes $24.4 billion to be paid to the Voluntary Employee Beneficiary Association
A voluntary employees' beneficiary association (VEBA) is a form of trust fund permitted under United States federal tax law, whose sole purpose must be to provide employee benefits.Hopkins, Bruce R. ''The Law of Tax-Exempt Organizations.'' Hoboke ...
(VEBA) trust, $9 billion to the U.S. and Canadian governments, and $15 billion in liabilities to suppliers and other bills. GM was bound to pay $10 billion to the VEBA trust in December 2009, with the remainder being paid in increments from 2012-19. GM was not required to make contributions to its pension fund until 2013, but it could elect to if needed, since the company contributed $15.2 billion to its pension fund in 2003. Stock market conditions cause the fund value to fluctuate. In February 2009, GM's combined pension fund had about $85 billion in assets, $56 billion in assets for hourly pensions and $29 billion in assets for salaried pensions.[Burr, Barry S. (February 23, 2009]
GM's pension fund
''Pensions & Investments.'' Retrieved on July 15, 2009.
United States
Through the Troubled Asset Relief Program
The Troubled Asset Relief Program (TARP) is a program of the United States government to purchase toxic assets and equity from financial institutions to strengthen its financial sector that was passed by Congress and signed into law by President ...
the US Treasury invested a total $51 billion into the GM bankruptcy. 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 $11-12 billion ($10.5 billion for General Motors and $1.5 billion for former GM financing GMAC, now known as Ally). Local tax incentives amounted to $1.7 billion, most of them in Michigan. 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.
2012 suit
In 2012, a trust representing "old" GM's unsecured creditors filed suit in the Southern District of New York
The United States District Court for the Southern District of New York (in case citations, S.D.N.Y.) is a federal trial court whose geographic jurisdiction encompasses eight counties of New York State. Two of these are in New York City: New ...
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 at the time a reopening of the 2009 case.
See also
* Automotive industry crisis of 2008–2010
The automotive industry crisis of 2008–2010 formed part of the financial crisis of 2007–2008 and the resulting Great Recession. The crisis affected European and Asian automobile manufacturers, but it was primarily felt in the American automob ...
* Chrysler Chapter 11 reorganization
References
External links
Motors Liquidation Company
Website of the General Motors Claim Agent: Bankruptcy paperwork and related documents
* Assessment of the GM plan of February 17, 2009, presented to the U.S. Government
{{DEFAULTSORT:General Motors Chapter 11 Reorganization
Companies that have filed for Chapter 11 bankruptcy
Chapter 11
Chapter 11 of the United States Bankruptcy Code (Title 11 of the United States Code) permits reorganization under the bankruptcy laws of the United States. Such reorganization, known as Chapter 11 bankruptcy, is available to every business, wheth ...
Great Recession in the United States
2009 in Canada
2009 in the United States
General Motors litigation