AFSCME 3357-HOF'S BLOG

GM Lays its Last Card on the Table
- Last Ditch Plan to Avoid Bankruptcy Announced Today Including Reverse Split

This morning, GM CEO Fritz Henderson held a press conference and announced what appears to be GM's last non-bankruptcy restructuring plan. This plan seems to be more what the government was looking for all along, but it may be too late to avoid Chapter 11 bankruptcy. If I understand the plan, it offers bondholders 10% of their money plus collectively 10% of the stock in the company. The union and retirees get stock for their pension and healthcare givebacks, and the government gets stock for the bailout money. Existing shareholders would retain only 1% of the equity in the restructured company. To do this, GM will execute a 100-1 reverse split, trading 100 shares of current GM stock for 1 share of reorganized GM stock. The government would end up being GM's largest shareholder, which, when you think about it, is appropriate since the government will be providing all the money not just to clean up all old obligations but to pay for future operating losses and restructuring costs as well.

Ninety percent of GM's bondholders must agree to the restructuring for the plan to take effect; otherwise, it's Chapter 11 time.

In other news, Pontiac will be gone. Numerous factories will be closed. More than 22,000 workers will be cut, though not all at once, perhaps 7,000 or 8,000 of those workers will be production workers.