Autowired is reporting that The United States Government could take a majority stakeholding in struggling General Motors in an aggressive debt-for-equity swap. The balance sheet restructuring would lower GM’s debt by $44 billion to an estimated $23bn, leaving the Government and a healthcare trust managed by the United Auto Workers union with 89% of the equity.
The rest would be mainly in the hands of holders of $27bn of unsecured bonds, who are being asked to swap their holdings for shares and accrued interest. Existing shareholders would be left with a miniscule stake.
If the debt restructuring is not accepted by bondholders then GM has little alternative but to file for Chapter 11 bankruptcy.
The move is another part of GM’s latest restructuring plan, which also includes further factory closures, huge job cuts and the closure of its Pontiac brand.
The entire restructuring plan will be considered by the US Government’s motor industry taskforce. The plan must be with the group by June 1. If approved GM could receive further financial help.
Meanwhile, Tony Woodley, the joint general secretary of trade union Unite said that a fire sale by GM of Vauxhall and Opel to Fiat might follow as part of the restructuring. There was no mention of GM’s European operations in its latest restructuring plans.
Mr Woodley said that British, German and Spanish Governments, countries where GM has significant European plants, should fight such a move because GM Europe needed far more investment than Fiat could muster.
Mr Woodley said he feared that GM was in so bad a state that it would sell its European division to ‘anyone’. He likened the position to BMW’s when it was looking to dispose of Rover.