WASHINGTON — U.S. taxpayers soon may own 72.5 percent of a General Motors that's no longer a publicly traded company, according to regulatory filings by the carmaker Thursday and details released by the Obama administration.
GM is expected to file for Chapter 11 bankruptcy protection by Monday, and American taxpayers are likely to own, at least for a year or more, a 100-year-old global giant that's long been synonymous with American manufacturing prowess.
"They're in the auto business today, if they were not before," said George Magliano, the director of automotive research for forecaster IHS Global Insight.
A GM filing with the Securities and Exchange Commission early Thursday said that the U.S. Treasury would take a 72.5 percent stake in a new GM, and administration officials confirmed that the U.S. government is likely to provide $30 billion of the $50 billion to be invested in a newly reconstituted automaker. The Treasury Department and White House, on behalf of taxpayers, will help name a new GM board of directors, and presumably will have seats at the table.
"Product decisions, plant decisions, sourcing decisions are all going to be done with a view of keeping the 72 percent owner happy," Magliano said.
With such a large government stake in GM, the Obama administration risks the perception that actions by the new GM are being taken for political, rather than business, reasons.
"Ultimately, I think what it means will be decided by how the ownership is administered," said Scott Peltz, the managing director of corporate restructuring for the consultancy RSM McGladrey.
The administration could choose to put its ownership share in a trust, run by trustees who are business executives, or it could opt for political appointees.
"If the former happens, I think it would be more along the lines of a venture capital fund acquiring a troubled business," said Peltz, who added that Steven Rattner, the head of government's automotive task force, was a prominent private-equity investor.
Bondholders, who hold more than $27 billion in GM debt, have until 5 p.m. Saturday to decide whether to accept a new offer that would give them a 10 percent ownership stake and an option to add another 15 percent when the company has returned to health.
GM has lost more than $90 billion over the past decade. Its stock fell 2.61 percent Thursday to close at $1.12 a share, but it continues to trade despite the impending bankruptcy, which will wipe out shareholders.
In its regulatory filing, GM said it had won agreement from an activist group of GM bondholders who collectively hold more than 20 percent of the company's publicly issued bonds. These bondholders are lobbying other creditors to accept the deal brokered by President Barack Obama's automotive task force.
Earlier this week, the bondholders balked at a plan to give them 10 percent of the new GM, even after the Obama administration and the company agreed to scale back the United Auto Workers union's stake in a newly restructured company. Union workers, through their health care trust, originally were to get a 39 percent stake; that was reduced to 17.5 percent.
The fewer than 65,000 UAW members at GM plants began ratifying amendments to their labor agreement Thursday to allow for their new ownership stake. Preliminary results of the union vote are expected Friday afternoon.
GM said last week it expects to close at least 14 assembly plants and shed another 21,000 jobs.
The Canadian government will invest $9 billion in a new GM, and bondholders, by swapping their portions of the company's debt for equity, would supply another $10 billion.
"Implementation of this proposal would result in a new GM with a healthy balance sheet, putting the new company on a clear path toward long-term viability and success," GM said in a statement.
The new GM will be leaner and free from most of its debts, allowing it to return to profitability quickly, said a senior administration official, who briefed reporters on the condition of anonymity because the negotiations are ongoing.
"What GM had to do was reduce its manufacturing footprint. It had a bloated manufacturing and distribution system," Peltz said. "But at the end of the day, they have to produce cars people want to buy."
GM already has received more than $20 billion in taxpayer bailout money, and the Obama administration has forced out former Chief Executive Officer Rick Wagoner and ordered deep changes in the automaker, including sharing the pain among stakeholders.
GM's unions have been ordered to scale back health and welfare benefits, and the company's shareholders would see their stock wiped out in the restructuring. GM's secured creditors — big Wall Street banks — are among the few that won't take a hit.
With the new agreements in hand, a "new" GM would be able to purchase the assets it wants from the "old" GM, leaving the ones it doesn't want to be disposed of through bankruptcy proceedings.
The tentative agreement came after U.S. and German negotiators couldn't agree on a bridge loan to keep the German automaker Opel and GM's other European subsidiaries operating if the parent company files for bankruptcy. However, there are still two potential buyers for Opel, Fiat of Italy and the Canadian auto-parts maker Magna.
GM is facing a June 1 deadline to reach a deal with stakeholders or enter into bankruptcy. With the major stakeholders now largely in agreement, the company either will avert bankruptcy or will enter it only briefly to shed certain obligations.
Thursday's tentative agreement boosts the chances that if GM seeks Chapter 11 protection from its creditors, it will follow the smooth path enjoyed by Chrysler, which is expected to emerge from bankruptcy within the next few weeks.
"This is a much more complicated company than Chrysler is. It's a global company," the administration official said, noting that GM is unlikely to go through a speedy bankruptcy like its smaller rival. "I think the 60- to 90-day time frame is a better time frame to establish than something that looks like Chrysler."
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GM appears headed for a long, complex bankruptcy
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