June 02, 2009|By Andrea K. Walker | Andrea K. Walker,andrea.walker@baltsun.com
Legendary automaker General Motors Corp. on Monday became the largest U.S. industrial company ever to file for bankruptcy-law protection, in a restructuring that puts it under unprecedented government ownership and jump-starts a plan that will include plant closings and thousands of job losses, but that the company hopes will return it to profitability.
The transmission plant in White Marsh will remain open, but a Wilmington, Del., plant that has many workers who live in the Baltimore area will shut down July 31.
The bankruptcy reflects the downfall of what was once an icon in the auto industry whose management problems were exacerbated so badly by the global recession that the Obama administration stepped in to take over. The company, which had $82.3 billion in assets and $172.8 billion in debt, is expected to be entirely different when it emerges from bankruptcy in 60 to 90 days.
"Today marks a defining moment in the history of General Motors," said Fritz Henderson, the automaker's chief executive and president, during a news conference Monday. "This allows us to permanently address problems that we have not been able to address before today."
The bankruptcy will have widespread ramifications, with the auto giant eliminating 21,000 jobs. It already said it would also shut 2,600 dealers, including at least 10 that have been in contact with the Maryland Automobile Dealers Association.
The Wilmington plant, which makes Pontiac and Saturn roadsters, is among 14 plants and three parts facilities to be shut by GM by 2010.
As part of the plan, GM will receive $30 billion of financial assistance from the Treasury Department and $9.5 billion from Canada, on top of $20 billion it has already received. The federal government will take a 60 percent ownership stake in the new GM, the Canadian government 12.5 percent, the United Auto Workers union 17.5 percent and unsecured bondholders 10 percent. Existing GM shareholders will lose everything.
Henderson said the company needed to get through bankruptcy quickly to hang onto market share and minimize the impact of lost sales if people become reluctant to buy from a bankrupt manufacturer. Warranty coverage, service and customer support will continue during bankruptcy. GMAC Financial Services said in a statement that it will continue to offer financing to GM and Chrysler dealers and customers. The federal Pension Benefit Guaranty Corp. said that GM pensions, which it insures, remain safe.
"The most important thing that needs to happen is we need to move fast," Henderson said. "Not with a sense of urgency. I'm talking about pure, unadulterated speed."
Henderson said the restructuring will create a leaner, more efficient company with less debt and fewer employees and dealerships.
President Barack Obama, in a speech Monday morning, said GM's plan was a "viable, achievable plan that will give this iconic company a chance to rise again." He also said getting to a better GM "will come at a cost.
"It will take a painful toll on many Americans who have relied on General Motors throughout the generations," Obama said.
But one critic said the company restructuring still wouldn't solve what he describes as GM's problems with labor costs. Peter Morici, a University of Maryland economist, said GM can't be as flexible with changes in the factory because it has to negotiate with the UAW. Japanese car companies just make the changes, he said. He also said some GM cars still aren't made as well as Japanese cars and those that are are still perceived as inferior.
"This does not make them competitive," Morici said of the restructuring plan. "There are going to be long-term issues."
Wanda Hopkins of Pasadena is feeling the pain again. She was transferred to the Wilmington plant in 2006, a year after the GM factory on Broening Highway in Baltimore shut down. Then in December, she was temporarily laid off from the Wilmington plant as well. She had hoped her seniority would mean she would be called back eventually when a job opened up, but she said that won't happen now.
"I'm 55. I'm too young to retire," she added. "Who's going to hire me at 55 years old? Factory jobs are all but gone. I'm used to assembly work."
Tim Lee, GM North America vice president of manufacturing, said sales of the cars manufactured in Wilmington were slow. He also said the plant's location made for logistical challenges, including high freight costs.
"It was a very, very difficult decision," Lee said during a conference call. "Wilmington has always been what we call one of our 'can do plants,' " he said.
The century-old GM sold half the cars on the road in the 1950s and 1960s, but its U.S. share has dropped below 20 percent as Japanese brands have become more popular. The company once employed more than 500,000 and now has about 100,000 workers.
