With the clock ticking on a June 1 government deadline to restructure, General Motors Corp. worked feverishly Sunday to shore up its global businesses to clear the way for a speedy reorganization in bankruptcy court.
GM, part of American life for more than 100 years and once the country’s largest employer, is expected to file for Chapter 11 bankruptcy protection at 8 a.m. EDT Monday, according to people familiar with the company’s plans. They declined to be identified because the plans haven’t been officially announced.
GM plans to name turnaround executive Al Koch to serve as its chief restructuring officer to help the company through bankruptcy protection, said a person familiar with the matter. The person, who spoke on condition of anonymity, was not authorized to speak about the appointment publicly.
Koch, a managing director with AlixPartners LLP, is a veteran turnaround specialist who helped Kmart Corp. through its Chapter 11 reorganization. He will lead the separation of the automaker’s assets into a “New GM” and the remaining parts of the company that will form “Old GM.” Koch will lead the management team that winds down the “Old GM” company once the automaker emerges from bankruptcy.
A majority of the Detroit automaker’s unsecured bondholders have accepted a deal viewed as crucial to reorganization, and Germany agreed to loan $2 billion to GM’s German unit, Opel, as part of its acquisition by a Canadian auto parts supplier.
The moves don’t change much for GM, but better prepare it for a bankruptcy protection filing, said Rebecca Lindland, an auto analyst for the consulting firm IHS Global Insight.
“The more agreements GM has with its interests, the better the bankruptcy is going to go,” she said. “It’s not a game changer at all.”
It would be the largest industrial bankruptcy in U.S. history, and the fourth-largest overall. In addition, a GM bankruptcy would be unprecedented as the federal government would pump billions more into the company, and take a 72.5 percent interest in the automaker.
On Sunday a group of large, institutional bondholders, representing 54 percent of GM bondholders, agreed to exchange their unsecured bonds for a 10 percent stake in a newly restructured company, plus warrants to purchase a greater share later. They had balked at an earlier offer, that gave them 10 percent of the company without the warrants.
The Treasury, which has been guiding the Detroit automaker toward a rescue plan, notified the company Sunday the response was sufficient to move forward with a pre-packaged bankruptcy filing. In a previous exchange offer, the Treasury demanded participation of 90 percent of bondholders, representing unsecured debt of $24 billion.
President Barack Obama is expected to give a speech addressing the Detroit automaker’s future just before noon Monday. GM Chief Executive Fritz Henderson has scheduled a news conference in New York to directly follow the president’s remarks at 12:15 p.m. EDT.
GM already has received about $20 billion in government loans and could get $30 billion more to make it through what is expected to be a 60- to 90-day reorganization in bankruptcy court.
Beyond the bankruptcy announcement Monday, GM is expected to reveal 14 plants it intends to close and name the buyer of its Hummer division.