General Motors filed for Chapter 11 bankruptcy protection Monday morning as the Obama administration took a controlling interest in the auto company.
“In short, our goal is to get GM back on its feet, take a hands-off approach, and get out quickly,” President Barack Obama said today.
Under the agreement, taxpayers will own 60 percent of GM once the restructuring is done, Forbes.com reports. The Obama administration will invest an additional $30.1 billion into GM, but senior officials have said they don’t plan on pumping any more money into the company.
Although the American people will own most of the company, this move comes at great cost to them. More jobs will be lost, more plants will close," Obama warned. GM has said that it is closing 11 plants and putting several others on stand-by status until industry sales bounce back.
President Obama said the administration will act as reluctant shareholder because that is the best way to help the automaker who’s been swamped by debt for years.
“Instead of taking so much stock in GM, we could have simply offered the company more loans,” he said. “Piling an irresponsibly large debt on top of the new GM would mean simply repeating the mistakes of the past. So we are acting as reluctant shareholders—because that is the only way to help GM succeed.”
In the 24-page filing, GM showed that it is $172.81 billion in debt and has $82.29 billion in assets. The Associated Press reports that this is the fourth largest bankruptcy filing in all of U.S. history; it’s the largest ever for an industrial company.
The president acknowledged that this venture may take longer than a similar restructuring with Chrysler. He also maintained that although his administration is giving the company more money, it won’t be pulling any strings on the automaker’s restructuring.
“What we are not doing—what I have no interest in doing—is running GM,” the president clarified. “GM will be run by a private board of directors and management team with a track record in American manufacturing that reflects a commitment to innovation and quality. They—and not the government—will call the shots and make the decisions about how to turn this company around.“
– Sonya Eskridge