It's Official

From Bloomberg by way of Calculated Risk comes word that GM will file for court protection in the U.S. on Monday. It plans to sell most of its assets to a new company.

Plans are for a quick bankruptcy. As vice-chairman Bob Lutz describes it

We intend to get in and out very soon,” he said today at an Automotive Press Association luncheon in Detroit. “The U.S. government wants its money back, and our plan is to pay it back as quickly as possible. The U.S. government doesn’t want to own auto companies.

What emerges from this will be a publicly owned manufacturer, as

[t]he filing shows the U.S. Treasury owning 72.5 percent of equity in the new GM, a union health-care trust with 17.5 percent and 10 percent going to the old GM to hand to creditors in the bankruptcy process.

In Canada, the federal and Ontario governments will likely remain minority shareholders. The Globe article reports that

[t]he company said the U.S. Treasury would allocate a portion of equity to the governments of Canada and Ontario in return for Canadian participation in the loans. It did not say what proportion of that equity stak eCanada would take. ...

and that

[i]f Canadian governments received 18 per cent of proposed government equity in GM – proportionate to their expected loan contribution – they would end up with a 13-per-cent stake in the company.

The apparent goal is for GM to build on its two most successful brands, Chevrolet and Cadillac, in creating a much smaller but leaner manufacturer shorn of the burden of most of its legacy costs. Given this much stronger capacity to compete, one wonders if Ford will be able to avoid the same route, and if not, how much of a burden it will place on already cash-strapped governments here and in the U.S..