Obama says bankruptcy gives GM 'a chance to rise again'
President Obama said that pushing General Motors Corp. into bankruptcy today was a painful but necessary step to revive the legendary automaker, saving thousands of jobs and avoiding another direct hit to the struggling economy.

"Working with my auto task force, GM and its stakeholders have produced a viable, achievable plan that will give this iconic American company a chance to rise again," Obama said at the White House just hours after the company filed for bankruptcy protection this morning in a Manhattan courtroom.

"I'm confident that the steps I'm announcing today will mark the end of the old GM and the beginning of a new GM," he said.

The U.S. government will become the majority owner of GM, with a 60% stake, a move Obama said he made reluctantly to protect an investment of $30.1 billion in additional taxpayer money to get the company through bankruptcy. He vowed that the company would be run by a private board of directors and that the U.S. government would not be involved in day-to-day decisions, such as opening new plants or launching new vehicles.

Simply loaning GM more money, instead of taking equity in the company, would have continued to saddle GM with "irresponsibly large debt," the reason the company is in its current dire position, Obama said.

"We are acting as reluctant shareholders because that is the only way to help GM to succeed," he said. "What we are not doing, what I have no interest in doing, is run GM."

For at least the next two months -- and potentially much longer -- GM's fate will lie in the hands of Judge Robert Gerber of the U.S. Bankruptcy Court for the Southern District of New York, where the automaker filed its paperwork this morning.

Chrysler's ongoing bankruptcy case was filed in the same jurisdiction, and the smaller automaker is expected to emerge from the court as soon as today. On Sunday night, the judge overseeing that case approved a sale of its assets, opening the door to a merger with Italian automaker Fiat.

"Today marks a defining moment in the reinvention of GM as a leaner, more customer-focused and more cost-competitive company that, above all, can quickly generate winning bottom-line results," Fritz Henderson, GM's president and chief executive, said in a news release. "The court-supervised process we are pursuing provides us with powerful tools to accelerate and complete our reinvention, as well as strong safeguards for our customers and our business."

GM officials characterized the step as a chance to reinvent the company, which has been plagued by financial and operating difficulties for decades and has been in continual restructuring in one form or another since at least 2000.

"Why would a CFO be smiling when he's filing for his company to go bankrupt?" said Ray Young, GM's chief financial officer. "I've never been so invigorated in my life. This is a once-in-a-lifetime opportunity to get our balance sheet healthy."

It will be doing that with taxpayer money. To keep GM afloat as it restructures, the Obama administration will add the $30.1 billion in taxpayer funds to the $20 billion already loaned to the company. In exchange, the U.S. government gets a 60.8% ownership stake.

In its filing, GM reported $83.3 billion in assets against $172.8 billion in debts. The automaker plans to sell much of its assets into a new entity, shedding all but $17 billion of the debt in the process. It will have fewer brands, fewer dealers, fewer factories and fewer employees -- and a plan to be able to make a profit.

GM said today that it would shutter 14 plants, including seven in Michigan and the original Saturn factory in Tennessee, as part of the process. That will drop it to 33 U.S. plants by 2012. It also said it would eliminate 5,000 white-collar jobs by year's end.

Shares of GM continued to trade this morning, dropping to 54 cents, a 28% decline, in early trading. But Dow Jones & Co. said today it had dropped GM from its industrials index, replacing it with Cisco.

A source familiar with the company's restructuring plans said the automaker expects that shares in the newly reorganized company will begin trading during the first quarter of 2010. Current GM shares presumably would cease trading when GM's assets are sold as part of the bankruptcy process.

The Obama administration is touting the GM filing as a difficult but required court-supervised restructuring that will make the company profitable again and a leader in producing fuel-efficient vehicles.

It also will leave the federal government in the unusual -- and potentially uncomfortable -- position of holding a majority stake in GM, which is the top carmaker in the U.S. by volume and No. 2 globally. Administration officials said they hoped to shed the investment as soon as possible and, in the meantime, pledged to keep their hands off day-to-day operations.

In a statement, Obama hailed the swiftness of the Chrysler action. "As a result of the substantial commitment by the U.S. government, and tough sacrifices from all stakeholders involved, Chrysler has a new lease on life. We said this process would be completed quickly and efficiently, and that's exactly what has been accomplished today."