General Motors Corp on Monday announced plans to close plants, cut hourly workers and dealers and to eliminate its Pontiac brand in an effort to meet government demands for a quicker and deeper restructuring.
The new viability plan was announced as GM filed plans for an exchange of $27.2 billion of bonds for common stock, warning that it would seek bankruptcy protection if the offer did not receive sufficient interest.
Overall, GM hopes to cut $44 billion of liabilities through the bond exchange, and by adjusting the funding of a healthcare trust for United Auto Workers union retirees that would be funded half by GM equity.
In a filing with the Securities and Exchange Commission, GM said it is offering to issue 225 shares of its common stock for each $1,000 principal of notes and to pay cash for accrued interest. GM said bondholders would hold about 10 percent of the company after a successful exchange offer.
The White House task force called the bond exchange an important restructuring step and said that the new program showed progress and it would continue to work with GM management as it refines the plan.
GM shares rose 9.5 percent to $1.85 Monday in premarket trading.
GM, which last week took $2 billion of emergency U.S. government loans to bring its total to $15.4 billion so far, was told by the Obama administration in late March it had to June 1 to dig deeper and move faster for continued support.
The automaker plans to focus on four core brands in the United States -- Chevrolet, Cadillac, Buick and GMC -- and phase out the Pontiac brand by the end of next year.
Overall structural costs in North America would be reduced by an additional $1.8 billion in 2010 from the plan submitted to the government in mid-February to $23.2 billion.
The cuts accelerate plans that were submitted to the Obama administration, but rejected as too small and too slow when former Chief Executive Rick Wagoner was ousted.
GM said the new plan called for deep cuts by the end of 2010: reducing the number of U.S. plants to 34 from 47, slashing the U.S. hourly workforce by about 21,000 to 40,000 and cutting its dealer network to 3,605 from 6,246.
GM said that it was moving to close or idle six additional plants from the mid February plan that was rejected by the Obama administration. The automaker has 47 assembly, powertrain and stamping plants in the United States.
The automaker's cuts in hourly workers represent an additional 7,000 to 8,000 from the earlier plan and the dealer reductions represent an additional 500 dealers coming four years earlier than its previous plan.
(Reporting by David Bailey, editing by Dave Zimmerman)