General Motors Corporation earlier today launched a bond exchange that TheDetroitBureau.com said would be unlikely to succeed. It is part of a larger restructuring proposal that, if it goes forward, would effectively turn control of the company over to the U.S. Treasury Department, with 50% of the shares in the new company, and the United Auto Workers union, which would hold 39% of it.
“Treasury and UAW would own 89% of the shares,” said GM CEO Fritz Henderson, who also announced that GM was planning to eliminate its tradition-laden, but marketplace moribund Pontiac brand by 2010, and accelerate the sale or closure of its Hummer, Saab and Saturn brands by the end of 2009.
“They (Treasury) want to make sure the company is run properly. But they have no interest in running the company,” said Henderson, adding the bond exchange will require further negotiations with the U.S. Treasury Department, the United Auto Workers, as well as well as with reluctant, some say hostile, bondholders.
“I’m just dealing with reality,” said Henderson, when asked about how he felt about becoming a government employee. Henderson also cautioned GM still faces the risk of bankruptcy. “It’s greater (now,)” he suggested. “It’s more probable we would go through bankruptcy,” he said. “The bond exchange needs to be successful to avert bankruptcy,” said Henderson, who said each bondholder is being offered 225 GM shares for every $1,000 of debt.
GM shares at mid-day were trading at $2 a share, down from a 52 week high of $24. (more…)