Rescue Plan Would Give U.S. Most of GM's Stock

By David Cho, Peter Whoriskey and Kendra Marr
Washington Post Staff Writers
Wednesday, May 27, 2009

The United States and Canada would own nearly three-quarters of a restructured General Motors, effectively nationalizing the border-straddling industrial colossus as part of an overhaul plan that would put most of the rest of the company in the hands of a union trust fund.

Sources said the plan, a bankruptcy reorganization proposal being drafted by the Obama administration, would require the U.S. government to lend GM about $30 billion on top of the $19.4 billion already invested, giving it the majority stake. Canada is preparing to lend about $9 billion for a smaller interest, the sources said.

These figures would total nearly $60 billion, making the GM bailout one of the largest corporate rescues since the current economic crisis began last year and one of the largest reorganizations in history.

The sources cautioned that the negotiations are continuing and the totals could change.

GM moved closer to bankruptcy on two fronts yesterday. The automaker's bondholders rejected a company request to forgo much of what they are owed in exchange for a small amount of stock, making it likely that their differences will be settled in court. Meanwhile, union leadership approved concessions aimed at protecting labor's interest whether a filing is necessary or not.

The government is taking on the ownership role at GM reluctantly, officials have said, adding that it is not intended as a permanent situation. Nonetheless, for the foreseeable future, the United States will have broad power over the company, including the ability to appoint board seats.

In preparing GM for a trip to bankruptcy court, the U.S. government is following the path set by Chrysler, which is hoping to emerge from the process after a relatively short stay. Today, a federal bankruptcy judge is scheduled to consider a critical motion that would allow a revived Chrysler to be formed from the sale of most of Chrysler's assets to an entity led by Italy's Fiat.

Aside from the United States and Canada, which would together control about 72 percent of GM, the union's retiree health trust would hold a stake starting at 17.5 percent that could grow to 20 percent. The existing bondholders could end up owning about 10 percent of the company.

One source said that the ownership breakdown was fluid and subject to continuing negotiations before GM's expected bankruptcy filing Monday. Another person, who spoke on condition of anonymity because the discussions are private, said some paperwork could be submitted by the weekend.

As the corporate behemoth moved to the brink of bankruptcy yesterday, there was a flurry of activity among its stakeholders, primarily its bondholders and its union, the United Auto Workers.

The bondholders had been given a deadline of 11:59 p.m. last night to agree to a company offer.

The bondholders are owed $27 billion. GM had asked that at least 90 percent of them agree to a deal under which they would drop their debt claims in exchange a 10 percent stake in the company. But too many rejected the offer, sources said yesterday.

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