General Motors filed for Chapter 11 Bankruptcy protection today.  The one time largest corporation in the world had been consumed by a mountain of debt in a heavy cash flow industry that had only gotten worse once the credit crisis hit both the United States and internationally last fall and consumers either stopped being able to qualify for auto loans or stopped purchasing new cars altogether due to tremendous uncertainty in the marketplace.  The Chapter 11 proceedings taking place in United States Bankruptcy Court in Manhattan will allow GM, like fellow Detroit automaker Chrysler, to restructure its finances and hopefully emerge as a leaner, meaner new model ready to take on foreign competition in the years ahead.

The Federal government will be financing an additional $30 Billion cash injection into GM to keep it from going under, and will take a 60% ownership stake in the company, which it hopes to be able to sell down the road to get taxpayer money back.  Unfortunately the new General Motors will need to close between 12 and 20 factories according to the current plan and lay off 21,000 union workers.  But these job losses are a fraction of the millions who would go unemployed should the entire corporation go under.

This is a sad day for GM and America.  The old GM, as many have noted, had grown so far out of control that it functioned in many ways like the Pentagon; an organization so big that its management had difficulty grasping how it worked or how to improve it. Hopefully the reorganization of this gigantic corporation, through the largest bankruptcy in history, into something more manageable and profitable will reenergize the flailing US auto industry and bring it back to its former glory.

LINKS:

CNN: GM Bankruptcy: End of an era

AP: General Motors files for bankruptcy protection

Chicago Tribune: Michigan reaction to GM Bankruptcy filing