Early morning filing planned. Obama will address nation. U.S. to put up $30B more for 60% stake - 'End of an old GM and the beginning of a new one.'
By Chris Isidore, CNNMoney.com senior writer
A bankruptcy petition will be filed at 8 a.m., according to a source with direct knowledge of the bankruptcy proceedings.
President Obama will address the nation shortly before noon on Monday to explain the rationale for the filing and his hopes that this is the best route for a turnaround, two officials close to the situation told CNN.
"Today will rank as another historic day for the company -- the end of an old General Motors and the beginning of a new one," the administration stated in documents released Sunday.
Chapter 11 bankruptcy will aim to help GM emerge with only its more profitable plants, brands, dealerships and contracts. Unprofitable plants, contracts and other liabilities that the company can no longer afford would be left behind.
The rescue of GM is being led by an unlikely coalition of the U.S. and Canadian governments and the company's employees and creditors.
The Obama administration will commit another $30 billion on top of the $19.4 billion it has already given GM to cover its losses and fund its operations.
The U.S. government will get a 60% equity stake in the new company after restructuring, as well as $8.8 billion in debt and preferred stock.
A trust established to fund health care benefits for retirees of the United Auto Workers union will own 17.5%, and get the right to purchase another 2.5% of the company. The governments of Canada and Ontario will lend $9.5 billion and receive 12% of the equity in the new GM.
Finally, bondholders who lent GM $27 billion will forgo much of what they are owed and instead get a 10% share of the new company plus the right to secure another 15%.
In addition, investors who own 54% of those bonds have agreed to not fight plans for a quick bankruptcy. The deal could make it easier for GM to restructure by neutralizing some of the opposition to a bankruptcy filing.
But for GM, the bankruptcy filing will be just the beginning of a major overhaul aimed at creating a much smaller company.
As part of the reorganization, GM is expected to cut 20,000 jobs and close about a dozen plants by the end of 2010. The company has already said it will slash 40% of its network of 6,000 retail dealerships by next year and drop four of its brands -- Hummer, Saab, Saturn and Pontiac.
The impact of GM's bankruptcy, which follows a Chapter 11 filing by Chrysler on April 30, will ripple across the nation to dealers, suppliers and other businesses large and small that work in the sector.
The company, once the country's largest private sector employer, has only a fraction of its former staff. Its 80,000 hourly and salaried U.S. employees are half the number it had as recently as 2001.
Nearly 500,000 U.S. retirees, as well as more than 150,000 of their family members, depend on GM health insurance and pension plans. Retirees will see cuts in their health care coverage, although the company's underfunded pension plans are not expected to be affected by a bankruptcy filing.
In addition, some 300,000 employees at GM dealerships will be affected, as well as hundreds of thousands of workers at auto parts makers and other GM suppliers whose jobs depend on the company's survival.
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