They can’t name the price or the buyer, but a day after heading into bankruptcy General Motors was finally able to say it was selling what is arguably its biggest albatross: Hummer.OK, “sell” might be too strong a word, since all they have is a memorandum of understanding. But they said the deal should close by the third quarter, save more than 3,000 U.S. jobs, and see the Hummer get a big investment infusion.In early April, three bidders were in the running for Hummer, and none were automakers. While private equity was said to be among the interested parties, it’s probably a safe bet that Cerberus – the owner of bankrupt Chrysler – is not among them.With the price of gas rising again, and the Hummer the poster-car for the age of excess, the buyer may want to stay anonymous for some time. Maybe as long as it takes to design an environmentally friendly engine for the off-road behemoth. One powered by hamsters would have the added benefit of a catchy new name.
So, it has come to pass. General Motors, ultimate symbol of the world’s greatest car-owing democracy, is to end up in state hands. Henry Ford might have said history is bunk but it is still humbling for all Americans to see Ford’s great rival rescued by the Government, wiping out most bondholders and shareholders. What happens next?
Holders of $27 billion of General Motors‘ unsecured debt have until midnight tonight to decide whether to exchange it for equity, and the chance that the once mighty auto giant will get the 90 percent participation it says it needs to avoid bankruptcy protection is looking just as remote as it did a week ago.
Under the bondholders’ deal, they would swap a 51-percent stake in a restructured company for $27 billion in debt, a person with knowledge of the plan tells Reuters Detroit Bureau Chief Kevin Krolicki. The deal would give the United Auto Workers union 41-percent in a new General Motors while the U.S. government would not receive an equity stake, according to the person who asked not to be named because the offer had not yet been submitted.
Chrysler’s biggest lenders and the U.S. government reached a breakthrough framework deal to cut the automaker’s debt by $6.9 billion, but officials say bankruptcy is still a strong possibility with the Obama administration’s Thursday deadline for a comprehensive rescue plan just hours away.
With just days left to complete deals to slash labor and debt costs or face bankruptcy, Chrysler has won union concessions aimed at paving the way for a deal with Fiat and the U.S. government to save the privately held automaker. The UAW said that deal must be ratified by Wednesday and meets conditions mandated by the Treasury as part of an emergency loan program for Chrysler. Treasury’s deadline is Thursday.
This week’s mega-bankruptcies by mall operator General Growth Properties and Canadian newsprint company AbitibiBowater, have put 2009 well on its way to being the worst ever for filings, according to a report released Thursday by research firm BankruptcyData.com.