GM Dumps Pontiac and Workers
In a last ditch to stave off bankruptcy, GM announced that it will ditch the Pontiac brand by the end of next year (Hummers, Saabs, and Saturns will be done by the end of 2009 but other companies may buy the brand names), cut 23,000 of its 61,000 factory jobs by 2011, and slash the number of dealers by 42% to 3,600, and offering creditors stock for debt. The US Treasury would end up with at least a 50% stake in the company, bondholders up to 10%, the UAW 39%, and existing stockholders 1%.
Bondholders, who currently own $27 billion in company debt, are the key to the deal going forward. In a letter to bondholders, the company warned:
“If we seek bankruptcy relief, you may receive consideration that is less than what is being offered in the exchange offers and it is possible that you may receive no consideration at all for your GM notes.”
The company will close 16 of its 47 US manufacturing plants by 2012, including six this year and seven next year.
The automaker has already received over $15 billion in taxpayer funding and must present a restructuring plan by June 1 in order to receive additional funding and avoid bankruptcy.