GM Waits For Green Light

DETROIT -- General Motors is nearing the finish line in its historic sprint through the bankruptcy process, with a key hearing scheduled for Tuesday on a plan to sell the automaker's best assets to a new government-controlled company.
If all goes as planned, Judge Robert Gerber could approve the sale by the end of the week, and a smaller and leaner GM could begin operations by mid-July. Instead of eight brands,
General Motors ( GMGMQ.PK - news - people ) will have just four: Chevrolet, Cadillac, Buick and GMC (Hummer, Saab and Saturn are being sold; Pontiac will be wound down). It will have about 3,600 dealers, down from 6,000 before the bankruptcy, and 64,000 employees, just 10% of the number it had during the mid-1980s.
If approved, the historic transaction would make U.S. taxpayers the majority owners of the once-mighty automaker, with a 61% stake in the new company. The Canadian and Ontario governments would own 12% and a health-care trust for retirees of the United Auto Workers would own 17.5%. Other creditors would own the remaining shares. GM's public shareholders would be wiped out in bankruptcy.

The new GM will begin operations with a cleaner balance sheet--$17 billion in debt, down from the $74.4 billion it owed in March--and a lower cost structure, meaning a dramatically lower breakeven point. When auto sales rebound, as the economy improves, some industry wags believe GM stands to rake in huge profits very quickly.

But how different will the new GM really be? The UAW remains as entrenched as ever, and the new chief executive, Frederick A. "Fritz" Henderson, is a GM lifer. He is undoubtedly moving faster than his predecessor, G. Richard Wagoner, but that's partly because the U.S. Treasury, which is calling the shots, has GM management on a short leash.

Henderson will need to quickly prove he can lead GM in a new direction. "We can’t just be a smaller GM; we need to be a different GM, too," he told reporters in an online chat recently. But changing GM's culture to encourage more risk-taking will be difficult. "Risk aversion stems in part from 75 years of being the biggest automaker in the world," he said. "By playing 'not to lose,' we sometimes lost our way. We’re changing that right now."

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