Holden Calls Media Conference For 9:00am As GM Heads For Bankruptcy Court Photo:
Tim O'Brien | Jun, 01 2009 | 0 Comments

IN A MOVE that will have surprised no-one: General Motors US will file for bankruptcy early tomorrow morning, Australian time.

As outlined in an announcement from the Obama Administration detailing the bankruptcy process, the move will leave the US Government ? and consequently, US tax-payers - with a 60 percent equity stake in the giant automaker.

The US Treasury will commit a further US$30.1 billion (on top of the nearly US$20 already provided in ?short term? loans) to finance GM for its stay in the bankruptcy bin.

GM will be required to have to repay 'only' US$9 billion of the Federal Government loans. The Canadian and Ontario State Governments are to provide GM with an additional US$9.5 billion, securing 12 percent of GM's stock, but will only be repaid US$1.7 billion.

In what may be more in hope than in expectation, GM has signaled that it intends to emerge from the oversight of the US Bankruptcy Court within 90 days.

In reality, although having secured agreement with the union and negotiated some last minute concessions from bondholders in a partial debt for equity swap, Chapter 11 protection is the only sensible option for GM.

The simple fact of burgeoning debt, of sales of GM cars and trucks having tanked in showrooms and with little hope of trading profitably while saddled with too many plants, too many workers and too many models, GM has no choice but to seek Chapter 11 protection while it restructures its operation.

GM has lost an astonishing US$88 billion since 2005. That is not a ship easily turned round.

As part of the restructure, 11 US plants are marked for closure, a further three will be put into mothballs by the end of 2010. Saab will be cut adrift, so too Hummer - likely sold to any bidder willing to put a hand in the pocket. Pontiac and Saturn will remain dead ducks.


While Holden is predictably tight-lipped about tomorrow?s media announcement, its important role in GM?s engineering development, its engine production for global GM markets, and the fact it is holding the line in a very tough local market, will likely afford it protection while the US parent gets its house in order.

The announcement of local production of the Cruze was also an indicator that Holden has a future in the GM stable.

Speaking to the ABC's The World Today, Federal Industry Minister, Senator Kim Carr, said: "I am optimistic that General Motors Holden will come through this storm and emerge from the other side stronger. I am optimistic that General Motors Holden will not materially be affected by the matters that are likely to be announced in the United States tonight."

Responding to a question that the local operations could be sold off, Senator Carr said, "I don't believe that that is a realistic option."

But, of course, the problem with bankruptcy in the parent is that all bets are off. The US court-appointed 'Chief Restructuring Officer' will be looking at all of GM?s operation, and making decisions to best protect the future of the company, the future of US tax-payer investments, and how best to return balance sheets to the black.

Have a look around you tonight. The automotive world as we have known it is about to change. These are historic days.

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