General Motors Corp (GM) said it would cut 21,000 US factory jobs by next year, phase out its storied Pontiac brand and ask the US government to take company stock in exchange for half GM’s government debt as part of a major restructuring effort needed to get more government aid.
The struggling automaker also said it would offer 225 shares of common stock for every US$1,000 in notes held by bondholders as part of a debt-for-equity swap.
The announcements came in a filing with the Securities and Exchange Commission (SEC) yesterday.
PHOTO: REUTERS
GM is living on US$15.4 billion in government loans and faces a June 1 deadline to restructure and get more government money. If the restructuring doesn’t satisfy the government, the company could go into bankruptcy protection.
GM said in a press release it would also ask the government to take 50 percent of its common stock in exchange for canceling half the government loans to the company as of June 1.
GM said the bond exchange would wipe away US$27 billion in unsecured debt if successful. The company estimates that after the exchange, bondholders would own 10 percent of the company.
In addition, GM is offering the United Auto Workers stock for at least 50 percent of the US$20 billion the company must pay into a union run trust that will take over retiree health care expenses starting next year.
All the stock offerings mean that current common stockholders would own only 1 percent of the company under the deals, the press release said.
GM owes US$28 billion to large and small bondholders, and under SEC rules, it must disclose its operational plans before making an exchange offer.
GM chief executive Fritz Henderson had said the company had to go further and faster in making its cost cuts to reduce the number of cars and trucks it needs to sell to break even.
The death of Pontiac, famous for the Trans Am sports car and the GTO, came after efforts in the last few years to market Pontiac as performance-oriented brand failed.
The company has said it wanted to keep Pontiac as a niche brand with one or two models, but is buckling under tremendous government pressure to consolidate its eight brands, several of which lose money.
Sources said GM wouldn’t have much new information on Hummer, Saturn or other brands, including Europe’s Opel. GM has said it wants to focus on four core brands, Chevrolet, Cadillac, GMC and Buick.
The government’s restructuring demands include swapping at least two-thirds of GM’s unsecured bond debt for equity in the company.
Such a move would help GM straighten out its debt-laden balance sheet.
Super Typhoon Kong-rey is the largest cyclone to impact Taiwan in 27 years, the Central Weather Administration (CWA) said today. Kong-rey’s radius of maximum wind (RMW) — the distance between the center of a cyclone and its band of strongest winds — has expanded to 320km, CWA forecaster Chang Chun-yao (張竣堯) said. The last time a typhoon of comparable strength with an RMW larger than 300km made landfall in Taiwan was Typhoon Herb in 1996, he said. Herb made landfall between Keelung and Suao (蘇澳) in Yilan County with an RMW of 350km, Chang said. The weather station in Alishan (阿里山) recorded 1.09m of
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