GWEN IFILL: General Motors went into federal bankruptcy protection today after months of trying to avoid it. The filing triggered a process that will make the federal government the majority owner in the automaker.
NewsHour correspondent Kwame Holman has our lead story report.
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KWAME HOLMAN: It was the end of an era for the century-old automaker, once a juggernaut of American industry. G.M. made it official this morning, filing for Chapter 11 bankruptcy protection in New York.
The automaker reported nearly $173 billion in debt against assets of $82 billion.
A short time later at the White House, President Obama said it’s a new opportunity to build a successful, competitive company. And he said the planning is well underway.
BARACK OBAMA, President of the United States: Working with my auto task force, G.M. and its stakeholders have produced a viable, achievable plan that will give this iconic American company a chance to rise again.
It’s a plan tailored to the realities of today’s auto market, a plan that positions G.M. to move toward profitability, even if it takes longer than expected for our economy to fully recover, and it’s a plan that builds on G.M.’s recent progress in making better cars.
As this plan takes effect, G.M. will start building a larger share of its cars here at home, including fuel-efficient cars. In fact, if all goes according to plan, the share of G.M. cars sold in the United States that are made here will actually grow for the first time in three decades.
KWAME HOLMAN: As part of that strategy, G.M. will close permanently nine more plants across four states, from Michigan to Virginia. Three other plants will be idled, but remain on standby for a possible return to work in the future.
Still, some 21,000 employees are expected to lose their jobs, one-third of G.M.’s entire U.S. workforce. And the number of G.M. dealers will be reduced by 2,600 nationwide.
The government will end up owning most of the reorganized G.M., assuming a 60 percent ownership stake. The remaining stake will be divided among the United Auto Workers, the Canadian and Ontario governments, and bondholders.
Still, the president said today the government will act as a reluctant shareholder.
BARACK OBAMA: What I have no interest in doing is running G.M. G.M. will be run by a private board of directors and management team with a track record in American manufacturing that reflects a commitment to innovation and quality. They — and not the government — will call the shots and make the decisions about how to turn this company around.
The federal government will refrain from exercising its rights as a shareholder in all but the most fundamental corporate decisions. When a difficult decision has to be made on matters like where to open a new plant or what type of new car to make, the new G.M., not the United States government, will make that decision.
In short, our goal is to get G.M. back on its feet, take a hands-off approach, and get out quickly.
Many will lose jobs
KWAME HOLMAN: Today's White House announcement comes months after G.M. first asked for government help last year. Since then, the company has received $20 billion in federal loans, but failed to restructure on its own. Now G.M. gets another $30 billion as it reorganizes under the eye of a bankruptcy judge.
The reorganization will include union concessions on wages, work rules, and retiree health care, moving billions of dollars of obligations off G.M.'s books. That's one reason G.M.'s new CEO, Fritz Henderson, was talking up the future today in New York.
FRITZ HENDERSON, CEO, General Motors: This new G.M. will be built from the strongest parts of our business, including our best brands and our very finest products. We will have far less debt, fully competitive labor costs, and the ability to generate sustained and positive bottom-line performance.
The new G.M. will have a significantly stronger and healthier balance sheet, which will allow us to better support our brands and products through investment, increase our investment in new technology, and be able to weather difficult times.
KWAME HOLMAN: G.M. once touted its mission as "a car for every purse and purpose." And Henderson issued a new appeal, as he promised warranty coverage and financing will go on.
FRITZ HENDERSON: To those of you who have never tried a G.M. vehicle or have tried one and given up on us, we look forward to the chance to win your business and earn back your trust. Give us another chance. The G.M. that many of you knew, the G.M. that, in fact, had let too many of you down is history.
Today marks the beginning of what will be a new company, a new G.M. dedicated to building the very best cars and trucks, highly fuel-efficient, world-class quality, green technology development, and with truly outstanding design. And, above all, the new G.M. will be rededicated in our entirety as a leadership team to our customers.
KWAME HOLMAN: The plants and workers that don't fit in that new company now confront a bleak future. Today, many were sad, but resigned.
CREON MATTISON, G.M. Employee: I hear it's closing. I love my job. I love what I do. I like working here. I like the people. It's kind of devastating to see a company so big to fall like this. But things happen, and we've got to flow with it.
KWAME HOLMAN: In the meantime, late Sunday, a federal court approved selling most of Chrysler's assets to Fiat. That's pending an appeal by several pension and construction funds holding Chrysler debt.
A 'more focused company'
GWEN IFILL: And with us now from New York is Ray Young, executive vice president and chief financial officer for General Motors.
Thank you for joining us.
RAY YOUNG, Chief Financial Officer, General Motors: You're welcome. Thank you.
GWEN IFILL: So give us a sense, how different will this new G.M., which we kept hearing everyone talk about today, be from the old G.M.?
RAY YOUNG: Well, it really is going to be a different company. You know, the old G.M. from a balance sheet perspective was burdened with a lot of legacy liabilities, a lot of debt obligations, which under the new G.M. will come up with a fairly clean balance sheet, a very healthy balance sheet.
But probably more importantly is the focus of the new G.M. is going to be a more streamlined company, a more focused company, fewer brands, fewer name plates, but with more marketing dollars supporting each of the products, each of the brands, each nameplates with a very, very competitive cost structure.
And then, lastly, it's also going to be a company with a new spirit, a spirit of being able to win and succeed in this highly competitive market.
GWEN IFILL: And yet today, we saw this bankruptcy filing, which only a few months ago Rick Wagoner, your former CEO, said would be incredibly disruptive and cost $100 billion to do. What's different?
RAY YOUNG: Well, actually, in our submission, February 17th, we indicated bankruptcy would cost a range of $50 billion to $100 billion. In fact, what has happened is the current estimates is about $50 billion, when you consider how much the government has already lent to us.
But we have learned a lot over the past six months about bankruptcy, about the 363 process, the sale process. We've also seen the government come in and play a major role supporting us.
And, frankly, without the government supporting us through the bankruptcy process, we would not be able to go through this process and emerge successfully.
The government's role
GWEN IFILL: So was he incorrect when he said that a bankruptcy would start to drive buyers and investors away?
RAY YOUNG: Well, we've already seen the impact of the threat of bankruptcy impacting our sales over the past couple months. Over the next couple weeks, we're going to be monitoring the situation very, very carefully.
But at the same time, we're going to reassure the customers that General Motors is open for business in the United States and around the world. So hopefully we're going to be able to minimize this impact through basically a very effective communication strategy and ensuring the customers that they can buy General Motors' products with confidence.
GWEN IFILL: What is your understanding of how extensive the government's day-to-day role is going to be in determining things like what kinds of brands you build, what kinds of cars you manufacture, and where it happens, and how much is spent on it, that sort of thing?
RAY YOUNG: Well, President Obama in today's announcement indicated that the government does not want to have any role in the day-to-day operations of General Motors. In discussions with the Treasury Department, he indicated that the new General Motors is going to be a company that's going to be run, led by an independent board of directors, and with a management team that ultimately will be responsible for the shareholders of the company.
So we feel very, very comfortable that we will be empowered in order to make decisions that are in the best interests of General Motors, which ultimately will be in the best interests of the American and Canadian taxpayers who are providing the funding for us over this next several months as we go through the bankruptcy process.
GWEN IFILL: And yet it was the government that forced the hand of Rick Wagoner and got him to resign. The government has already had quite a hand in shaping what G.M. now looks like, what the new G.M. looks like. Yet, for instance, would the Obama White House, would this auto task force be able to decide who is on your board?
RAY YOUNG: No, actually, Kent Kresa, our chairman, has been asked by the government in order to reconstitute the board of directors. And Mr. Kresa is in the process of doing that.
So therefore, from our perspective, you know, we are moving down the path of creating the new General Motors. You know, we have ambitious goals for this company. The management team, we have ambitious goals to grow the company, to succeed, focus, again, on the products and the customers of General Motors.
Stakeholders have sacrificed
GWEN IFILL: You and Fritz Henderson, the CEO, and your product development manager, you've both -- you've all three been there almost, I guess, a combined 70, 60 years. He's been there 30 years at G.M. You've been there 20 years. Fritz Henderson's been there 20-plus years. How is that new? How is that innovative? How isn't that just preservation?
RAY YOUNG: Well, it's fair to say that people -- you know, companies evolve. And I think the best way to explain the change is what has happened over the last 60 days within General Motors.
After President Obama announced the June 1 deadline, our team within General Motors has accomplished an amazing list of accomplishments over the past 60 days, a new UAW contract, new CAW contract, a new strategy in terms of rationalizing manufacturing capacity, the announcement of a small car plant.
We've been basically tackling issues every hour, every day, every week, and knocking them off. So there's a new spirit within General Motors whereby we're going to overcome obstacles, we're going to break through walls, and we're going to succeed.
GWEN IFILL: And what...
RAY YOUNG: And I envision that this type of spirit that...
GWEN IFILL: I'm sorry. Go ahead.
RAY YOUNG: This spirit that we saw in the last 60 days, it's going to continue in the new General Motors.
GWEN IFILL: And what is your message to the creditors, the taxpayers, and the workers today who have discovered they're in pretty deep, and many of them will be losing their jobs?
RAY YOUNG: Well, there's a couple of comments here. You know, first of all, we do want to thank all the stakeholders for their sacrifice in order to help General Motors survive and succeed.
We know there has been a lot of sacrifice, like you say, employees, stockholders, bondholders, retirees, dealers. The government has actually asked for everyone to sacrifice in order for General Motors to survive and succeed.
GWEN IFILL: Ray Young, chief financial officer for General Motors, I guess the new General Motors, thank you very much for joining us.
RAY YOUNG: Thank you very much.