GM prepares for bankruptcy, government to own major share

The U.S. government was poised to take a 60 per cent ownership in General Motors as the auto giant was set to file bankruptcy protection on Monday.

Administration officials told The Associated Press that the U.S. federal government would pump $30 billion US into GM as it makes its way through bankruptcy court. The automaker has already received $20 billion in government aid.

The Canadian government is expected to take a 12.5 per cent stake in GM and a United Auto Workers trust for health-care expenses would get 17.5 per cent, according to the reports. Bondholders would receive a 10-per-cent stake with the possibility of increasing their share to 25 per cent.

U.S. President Barack Obama is expected to hold a news conference early Monday announcing GM is filing for bankruptcy and outline the length of the process, which could last  from 60 to 90 days in bankruptcy court.

The bankruptcy filing is expected in a New York court room. The company's chief executive officer, Fritz Henderson, will hold a news conference in New York on Monday morning.

GM is also expected to reveal 14 plants it intends to close, cutting 21,000 jobs in the U.S.

Union concessions

But  in return for union concessions and government bailout money here, GM agreed to maintain a percentage of manufacturing in Canada. GM has prepaid suppliers to try to ensure most plants stay open during the restructuring.

"At the end of the day, I think the Canadian operations will survive. But the anxiety, the uncertainty, the sense of desperation is real," said Canadian Auto Workers president Ken Lewenza.

On Sunday, it was announced that a majority of General Motors bondholders have accepted a sweetened deal to swap the company's $27 billion debt for equity.

A statement from GM bondholders said 54 per cent have agreed to exchange their unsecured bonds for a 10 per cent stake in a newly restructured company. The deal includes warrants to purchase a greater stake at a later date.

Last week, the bondholders rejected an offer that did not include warrants.

The deal with the bondholders will make the bankruptcy protection process smoother. The 54 per cent acceptance represents only $14.6 billion (all figures US), but GM would like to wipe all of its $27 billion in unsecured debt.

Sweetened offer

The bondholder support in advance of a bankruptcy protection filing is expected to make it easier for GM to persuade a judge to apply terms of the sweetened offer to all of its unsecured debt.

In another development, two German states on Sunday agreed to support a bridge loan for General Motors Corp.'s Opel unit, putting the final touches on a deal for Canada's Magna International Inc. to acquire the automaker.

Under the deal, pushed through to protect Opel before GM's likely bankruptcy filing, Magna will take a 20 per cent stake in Opel and the Russian-owned Sberbank will take a 35 per cent stake, giving their consortium a majority. GM will retain a 35 per cent holding, while the remaining 10 per cent will go to Opel employees.