Yesterday, General Motors, tenuously surviving on the federal government's $15.4 billion bailout, announced its restructuring plan. The plan, which includes cutting 21,000 production jobs in the U.S. and ending the storied Pontiac brand, offers to give the U.S. government a 50 percent equity stake in exchange for cancelling $10 billion of its debt, according to Bloomberg.com.
Under the plan, $27.5 billion in unsecured bond debt would convert to a 10 percent equity stake in the company, while current stock holders get 1 percent. The company would divide the remaining 89 percent of available stock between the federal government and the United Auto Workers, with the union getting up to 39 percent.
GM will also close more than 42 percent of its dealerships, some 2,641 businesses, by the end of next year. A large portion of those closings will result from the sale or elimination of additional GM brands: Saturn, Hummer and Saab.
The Mississippi Automobile Dealers Association believes GM's plan will not greatly affect the state and its 74 GM dealerships.
"I don't think Mississippi is on (GM's) radar," Walt Massey, board chairman of MADA told The Clarion-Ledger.
Pontiac was once known for its muscle cars like the Trans Am and the GTO, but, like Hummer and Saab, had become small niche brands for the automaker. Dealers carrying multiple GM lines have seen those sales shrink in the last few years to nearly zero.
Government control of automakers is not unprecedented, however the amount of equity may be. France owns part of Renault, 15 percent, and the German state of Lower Saxony owns just over 20 percent of Volkswagen. The city of Shanghai has an 84 percent stake in the Shanghai Auto Industry Corp.
The Obama administration must approve GM's plan before the company begins making the proposed changes.
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