UpdateCar giant General Motors files for bankruptcy protection

01 June 2009 13:53  [Source: ICIS news]

(Releads and updates throughout)

LONDON (ICIS news)--Car giant General Motors (GM) has filed for Chapter 11 bankruptcy protection as part of a government-led plan to restructure to 100 year-old company, according to global media reports on Monday.

The move represents the third largest bankruptcy in US history, following Lehman Brothers' collapse and the failure of telecoms group WorldCom.

The Obama administration on Sunday said it would pump in another $30bn (€21bn) – on top of the previous $20bn – and take a 60% stake in the automaker to stop it from being broken up.

It was reported that the United Auto Workers (UAW) union would take 17.5% in shares and the governments of Canada and Ontario would lend $9.5bn and get a 12% stake and $1.7bn debt in return.

President Obama was expected to make a speech at 11:55 EDT, in which he would likely emphasise the government’s continuing commitment to supporting the ailing domestic automotives sector.

GM was expected to close or idle 14 US plants by the end of 2010 as part of its restructuring plan.

That would mean even less demand for the chemicals and derivatives that go into auto manufacturing, and place fresh pressure on an already financially fragile parts supply chain.

GM was reported to have filed for bankruptcy at the US Bankruptcy Court in the Southern District of New York, but there was currently no update on the court's website.

Meanwhile, Germany has agreed a deal with Canadian car parts maker Magna International to take over Opel, part of the European wing of GM. The German government is expected to provide an immediate loan facility of €1.5bn.

($1 = €0.71)

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By: Mark Watts
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