GM Emerges From Bankruptcy After Landmark Government Bailout
Friday, July 10, 2009
General Motors emerged from bankruptcy this morning, with chief executive Fritz Henderson promising that the fallen corporate giant will be reformed and that "business as usual is over."
The announcement signals the substantial completion of one of the largest bankruptcies in U.S. history and the next step in what has become a landmark government bailout.
The new GM will have fewer brands, fewer plants and fewer workers. The number of U.S. executives will be cut by 35 percent. But as important as this shrinking, Henderson said, is the need to revive the automaker's culture, long criticized as insular and slow-moving. Once the world's largest automaker, General Motors has been losing market share for decades.
"It is a new era, and everyone associated with the company must realize this and be prepared to change, and fast," Henderson said.
Formed by the sale of most of the old company's assets out of bankruptcy, the new GM will be an anomaly among American businesses because most of it will be owned by the U.S. and Canadian governments. The U.S. Treasury owns 60.8 percent of the new company's common stock, the UAW retiree health trust has 17.5 percent and the governments of Canada and Ontario 11.7 percent.
Henderson said the company would seek to repay the U.S. investment, but stopped short of promising that taxpayers will recover all of the $50 billion they have put into the company. The company's stock value would have to rise to unprecedented levels for the U.S. to break even on its investment.
Company officials instead seized on the company's emergence from 40 days in bankruptcy to advertise their efforts to reorient the failed automaker.
GM will limit its key executive committee to eight people in order to speed decision-making. It has lured former executive Bob Lutz, a well-regarded industry veteran, out of retirement to lead design, brands and advertising. It hopes to experiment with a way of auctioning cars on eBay. And it is launching a Web site, "Tell Fritz," that will allow consumers to send their comments to company executives.
"I am personally committed to being closer and more available to consumers than ever before," Henderson said.
Moreover, Henderson said he would seek to shake the company free of its complacency, vowing no longer to settle for being merely competitive with it rivals.
"Going forward, our objective . . . is to create products that consumers can judge as best in class," he said.
Even so, the business challenges facing GM are vast. To turn the company around, Henderson and his team must reverse the momentum of a decades-long slide.