GM Breaks Out of Bankruptcy

Like nothing ever happened.

Just 39 days after becoming the largest U.S. industrial company ever to file for bankruptcy, General Motors Corp. is poised to begin anew Friday.

That’s when President and CEO Fritz Henderson holds a news conference to outline the auto maker’s plan to rebound from a landmark financial meltdown.

The historic collapse has prompted GM to surrender ownership to governments and a union-backed trust, while shedding brands, axing dealers and chopping thousands of jobs. Industry experts expect more payroll cuts as the auto maker strives to further improve its cost structure.

“There’s a lot of bureaucracy that has to be torn down and the organization has to be flattened out,” says Erich Merkle, president of Autoconomy.com, a Michigan-based industry consultancy.

GM spokesman Tom Wilkinson says the auto maker is “getting back to work full-time, selling cars and trucks” after a New York bankruptcy judge today closes the door to opponents of the restructuring.

The new GM’s holdings will be spread across four parties, with the Treasury owning 60.8%, the retiree health-care trust of United Auto Workers union 17.5%, the governments of Canada and Ontario 11.7% and bondholders from the old GM 10%.

Treasury officials said last week they expect GM, a onetime fixture on the New York Stock Exchange and longtime component of the Dow Jones Industrial Average index until its Chapter 11 filing, to begin issuing stock again as soon as 2010.

The speedy court ruling belies critics who feared a protracted legal battle. The GM decision, rendered by Judge Robert E. Gerber of the U.S. Bankruptcy Court for the Southern District of New York, comes more quickly than the one that sprung the former Chrysler LLC from Chapter 11 protection last month.

Now called Chrysler Group LLC and managed by Fiat Auto SpA CEO Sergio Marchionne, the auto maker spent some six weeks in bankruptcy.

Still, GM dealer council chief Duane Paddock is unfazed. “Nothing surprises me anymore,” he tells Ward’s, adding the biggest benefit GM will derive from its bankruptcy exit is renewed focus.

“We’re going to get our senior management team back on building and selling and marketing new GM product, instead of dealing with the legal issues that come with bankruptcy,” Paddock says.

While there likely will be fewer names on the payroll, Merkle believes Henderson’s job is safe.

“I think it would be a mistake to lose the expertise and history Fritz Henderson has with the company,” he says. “You have to make sure you have that base expertise to still run the company while also being cognizant there has to be a change culturally at the organization.”

Henderson took the reins from Rick Wagoner, who was ousted in March by the Obama Admin.’s auto industry task force – a major influence in the restructuring of GM and Chrysler by virtue of the Treasury’s stake in both auto makers.

GM sales are in freefall, as is the entire U.S. market. The auto maker’s car sales plummeted nearly 27% last month, compared with like-2008, according to Ward’s data.

The stigma of bankruptcy is “still going to be an issue,” Merkle says. Reconciling its financial failure with consumers is “going to be a huge undertaking for the folks at GM, in terms of, ‘How do we pitch ourselves? How do we position ourselves with consumers?’”

But Paddock dismisses this notion. Bankruptcy “has not even been a conversation on the showroom floor,” he says.

Despite June’s total sales shortfall, GM says its retail deliveries grew 10%, compared with May.

– with James M. Amend

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