General Motors (GM $0.60) filed for bankruptcy this morning and is the third-largest in US history and the largest-ever US manufacturing failure, according to Reuters. GM will receive an additional $30 billion in taxpayer funds to aid the restructuring of the 100-year-old automaker and the government plans to convert most of its $50 billion in loans to assume a 60% stake in the company. GM will be put through a "fast-track bankruptcy," which is expected to result in a new company in about 60 to 90 days. The Canadian government will contribute $9.5 billion in aid in exchange for a 12.5% stake in the automaker. GM plans to close 11 facilities and idle another 3 plants. President Barack Obama is set to speak on the announcement at 12 p.m. ET.
Following the bankruptcy of GM, two of the "big three" automakers will be in court-ordered restructuring and yesterday a bankruptcy judge approved the sale of nearly all of the US assets of privately-held Chrysler to a group led by Italian automaker Fiat (FIATY $11).
In related news, General Motors and Citigroup (C $4) have been removed from the Dow Jones Industrial Average and will be replaced with insurer Travelers Companies (TRV $42) and tech bellwether Cisco Systems (CSCO $19). Shares of TRV and CSCO are nicely higher. Additionally, the New York Stock Exchange said trading in GM shares will be suspended prior to the opening of trading tomorrow.
[Charles Schwab Midday Market View, 6/1/09]