The once mighty US auto industry faces a day of reckoning today with the looming bankruptcy of General Motors (GM) and an expected court ruling on the sale of Chrysler to a group led by Italy’s Fiat.
Today marks a deadline imposed by the administration of US President Barack Obama for the company to submit a viable restructuring plan or file for bankruptcy. A government’s rescue plan for GM could put as much as 72.5 percent of the country’s biggest automaker under state ownership.
With the hours counting down for GM, company bondholders with slightly more than 50 percent of GM’s US$27.2 billion in bond debt voted on Saturday in support of the restructuring plan, the New York Times reported. Under the plan, the bondholders would obtain the rights to buy an extra 15 percent of GM’s stock at a low price. They would also control 25 percent of the new GM, after having supported the new company’s creation in bankruptcy court.
PHOTO: EPA
COOPERATION
Recalcitrant bondholders who opt for confrontation rather than cooperation “will get nothing or very little,” an Obama administration official told reporters on Thursday.
Meanwhile, a US bankruptcy court judge in New York was widely expected to approve a deal between Chrysler and Fiat today.
The third biggest US automaker has declared bankruptcy and is seeking a tie-up with Fiat in a plan presented as the only way to save the company from liquidation.
If presiding Judge Arthur Gonzalez rules against Chrysler, it faces a grim future, with a worst-case scenario being Fiat abandoning the tie-up and the US automaker going into liquidation, with massive job losses.
Legal appeals were expected if Gonzalez ruled in favor, meaning possible new delays. Fiat has said it might back out if the transaction is not completed by June 15.
Developments at Chrysler could provide an example for restructuring at GM, which will similarly have to sell some of its brands and close many dealerships.
But the administration official said a 60 to 90-day timeframe was “better” for GM, contrasted with the fast-track process for Chrysler, which filed for bankruptcy protection on April 30.
“This is a much more complicated company than Chrysler, as a global company. It’s three times the size,” the official said.
DEAL
The United Auto Workers (UAW) union said on Friday its members ratified a deal to allow GM to radically cut costs and its debt load, clearing the way for a quick exit from the expected bankruptcy filing.
GM also announced plans to retool an idled US plant to build small cars it had originally planned to import, and two more US assembly plants could potentially be saved.
The automaker, which normally shuts downs plants for two weeks during the summer, is planning longer-than-normal closures at a variety of facilities this summer, the Detroit Free Press reported. Some factories will be shut down for as long as nine weeks, the newspaper report said. This week, about eight out of its 15 assembly plants will be running.
A Chinese freighter that allegedly snapped an undersea cable linking Taiwan proper to Penghu County is suspected of being owned by a Chinese state-run company and had docked at the ports of Kaohsiung and Keelung for three months using different names. On Tuesday last week, the Togo-flagged freighter Hong Tai 58 (宏泰58號) and its Chinese crew were detained after the Taipei-Penghu No. 3 submarine cable was severed. When the Coast Guard Administration (CGA) first attempted to detain the ship on grounds of possible sabotage, its crew said the ship’s name was Hong Tai 168, although the Automatic Identification System (AIS)
CHANGE OF MIND: The Chinese crew at first showed a willingness to cooperate, but later regretted that when the ship arrived at the port and refused to enter Togolese Republic-registered Chinese freighter Hong Tai (宏泰號) and its crew have been detained on suspicion of deliberately damaging a submarine cable connecting Taiwan proper and Penghu County, the Coast Guard Administration said in a statement yesterday. The case would be subject to a “national security-level investigation” by the Tainan District Prosecutors’ Office, it added. The administration said that it had been monitoring the ship since 7:10pm on Saturday when it appeared to be loitering in waters about 6 nautical miles (11km) northwest of Tainan’s Chiang Chun Fishing Port, adding that the ship’s location was about 0.5 nautical miles north of the No.
An Akizuki-class destroyer last month made the first-ever solo transit of a Japan Maritime Self-Defense Force ship through the Taiwan Strait, Japanese government officials with knowledge of the matter said yesterday. The JS Akizuki carried out a north-to-south transit through the Taiwan Strait on Feb. 5 as it sailed to the South China Sea to participate in a joint exercise with US, Australian and Philippine forces that day. The Japanese destroyer JS Sazanami in September last year made the Japan Maritime Self-Defense Force’s first-ever transit through the Taiwan Strait, but it was joined by vessels from New Zealand and Australia,
COORDINATION, ASSURANCE: Separately, representatives reintroduced a bill that asks the state department to review guidelines on how the US engages with Taiwan US senators on Tuesday introduced the Taiwan travel and tourism coordination act, which they said would bolster bilateral travel and cooperation. The bill, proposed by US senators Marsha Blackburn and Brian Schatz, seeks to establish “robust security screenings for those traveling to the US from Asia, open new markets for American industry, and strengthen the economic partnership between the US and Taiwan,” they said in a statement. “Travel and tourism play a crucial role in a nation’s economic security,” but Taiwan faces “pressure and coercion from the Chinese Communist Party [CCP]” in this sector, the statement said. As Taiwan is a “vital trading
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