General Motors Seeks Quick Bankruptcy
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This is the VOA Special English ECONOMICS REPORT.
This week, General Motors went to bankruptcy court. It became the second of the big three American automakers to seek protection from its creditors while continuing operations. Chrysler declared bankruptcy on April thirtieth, though its plans to leave the process quickly still await final rulings.
General Motors led the auto world for seventy-seven of its one hundred years. Last year Toyota took the lead. Not all of G.M. is losing money. Asia and Latin America have provided growth and profit. But lately bankruptcy became less and less of a surprise.
G.M. was one hundred seventy-two billion dollars in debt. Now creditors will learn who gets repaid and how much. The bankruptcy is America's fourth largest, but the largest for a manufacturer. G.M. hopes it will be quick.
The government plans to invest thirty billion dollars, on top of an earlier twenty billion. In return, taxpayers will own sixty percent of a smaller G.M. Canada and the United Auto Workers union will also own part of the restructured company.
But President Obama made it clear Monday that he wants to limit the intervention in what some now call "Government Motors."
BARACK OBAMA: "In short, our goal is to get G.M. back on its feet, take a hands-off approach and get out quickly."
Is all that possible? Experts say one concern is that lawmakers will try to control company decisions like where to build new factories.
Another concern is that trade partners may consider the G.M. rescue a form of government support barred by free trade agreements. Only one of Detroit's big three, Ford Motor Company, is not taking aid. Yet other countries, especially in Europe, have acted to save jobs in their own car industries.
University of Michigan transportation researcher Bruce Belzowski says one big question is what effect employee morale will have. Employees must believe in the new G.M. And, of course, its products must satisfy the public, as well as new government rules for fuel economy.
To reduce costs, G.M. plans to close more factories and cut more jobs by the end of two thousand eleven. And it wants to cut more than one thousand dealerships by the end of next year. Chrysler wants to quickly dismiss almost eight hundred dealers across the country.
The automakers defended their plans Wednesday as Congress heard from angry dealers.
G.M. plans to sell or discontinue its Saturn, Saab and Pontiac lines. And it may sell its Hummer brand to a heavy equipment company in China.
And that's the VOA Special English ECONOMICS REPORT, written by Mario Ritter. I'm Steve Ember.