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GM bosses discuss bankruptcy plan GM bosses discuss bankruptcy plan
(about 3 hours later)
Senior executives at General Motors are expected to meet later to discuss proceedings for a widely expected filing for bankruptcy protection. Senior executives at General Motors are meeting to discuss proceedings for a widely expected filing for bankruptcy protection.
They are likely to firm up the details of how to completely restructure what was once the world's largest car company, under judicial supervision.They are likely to firm up the details of how to completely restructure what was once the world's largest car company, under judicial supervision.
GM's sales have been hit hard by the financial crisis and the firm has received $20bn (£12bn) in state aid.GM's sales have been hit hard by the financial crisis and the firm has received $20bn (£12bn) in state aid.
President Barack Obama will give full details of the restructuring on Monday.President Barack Obama will give full details of the restructuring on Monday.
He is scheduled to hold a press conference on the plan at around 1400 GMT (1500 BST) on Monday. The Obama administration has given GM a 1 June deadline to submit a viable revival plan or file for bankruptcy.
The Obama administration had given GM a 1 June deadline to submit a viable revival plan or file for bankruptcy. A Chapter 11 bankruptcy filing by GM would rank as the third largest bankruptcy in US history following Lehman Brothers' collapse and the failure of telecoms giant WorldCom.
A Chapter 11 bankruptcy filing by GM would rank as one of the largest bankruptcies in US history. European deal
GM's European arm, which makes the Vauxhall and Opel brands, will likely be spared bankruptcy following a deal by Canadian car parts maker Magna to buy GM Europe. GM's European arm will likely be spared bankruptcy following a proposed deal by Canadian car parts maker Magna International to buy GM Europe's Vauxhall and Opel brands.
BANKRUPTCY PROTECTION US bankruptcy protection is called Chapter 11It gives US businesses time to rearrange their finances while continuing to trade, protected from their creditors Ugly choice for GM creditors Mandelson 'reassured' on Vauxhall
However, unions fear that jobs may be lost at Vauxhall plants in Luton and Ellesmere Port, which employ 5,500 people.However, unions fear that jobs may be lost at Vauxhall plants in Luton and Ellesmere Port, which employ 5,500 people.
UK Business Secretary Lord Mandelson said he had received further assurance from GM Europe that Vauxhall production would remain in the UK.
Jobs may also go in Belgium, Poland and Spain.Jobs may also go in Belgium, Poland and Spain.
GM, once the largest company in the world, has been losing market share since the early 1980s.
It has been driven to bankruptcy because of high production costs and by the collapse in credit markets and consumer spending. It made losses of $30bn last year.
GM was also slow to move away from producing gas-guzzling SUVs when consumers were looking for more fuel-efficient vehicles.
Toyota sold more vehicles than GM in 2008, putting an end to the American company's 77-year reign as the world's biggest carmaker.
Creditors keyCreditors key
The support of GM's creditors will be key to orderly bankruptcy proceedings.The support of GM's creditors will be key to orderly bankruptcy proceedings.
BANKRUPTCY PROTECTION US bankruptcy protection is called Chapter 11It gives US businesses time to rearrange their finances while continuing to trade, protected from their creditors Ugly choice for GM creditors
Investors turned down an earlier deal to swap their $27bn worth of GM corporate bonds - IOUs issued by big companies - for a 10% stake in GM. This made bankruptcy all but inevitable.Investors turned down an earlier deal to swap their $27bn worth of GM corporate bonds - IOUs issued by big companies - for a 10% stake in GM. This made bankruptcy all but inevitable.
However, bondholders with slightly more than 50% of GM's bond debt agreed to support a new restructuring plan although this is not seen as enough to prevent bankruptcy, the New York Times reported.However, bondholders with slightly more than 50% of GM's bond debt agreed to support a new restructuring plan although this is not seen as enough to prevent bankruptcy, the New York Times reported.
That plan would split General Motors in two - "Old GM", with all the "bad" assets like defunct car plants - and "New GM", which will own the "good" assets, such as viable factories and brands like Chevrolet and Cadillac.That plan would split General Motors in two - "Old GM", with all the "bad" assets like defunct car plants - and "New GM", which will own the "good" assets, such as viable factories and brands like Chevrolet and Cadillac.
The bondholders were offered up to 25% of "New GM" if they would come on board.The bondholders were offered up to 25% of "New GM" if they would come on board.
But it is still possible that dissident bondholders may mount legal challenges in the bankruptcy court.But it is still possible that dissident bondholders may mount legal challenges in the bankruptcy court.
Meanwhile, a US bankruptcy court judge in New York is expected to approve a deal between US carmaker Chrysler and Italy's Fiat on Monday.Meanwhile, a US bankruptcy court judge in New York is expected to approve a deal between US carmaker Chrysler and Italy's Fiat on Monday.
The third biggest US automaker has declared bankruptcy and is seeking a tie-up with Fiat to save the company from liquidation.The third biggest US automaker has declared bankruptcy and is seeking a tie-up with Fiat to save the company from liquidation.