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GM plans major revamp to get government aid

GENERAL Motors Corp said yesterday that it will cut 21,000 factory jobs in the United States by next year, phase out its Pontiac brand and ask the government to take company stock in exchange for half of GM's government debt as part of a major restructuring effort needed to get more government aid.

The struggling auto maker also said it will offer 225 shares of common stock for every US$1,000 in notes held by bondholders as part of a debt-for-equity swap. The announcements came in a filing with the Securities and Exchange Commission.

GM is living on US$15.4 billion in government loans and faces a June 1 deadline to restructure and get more government money. If the restructuring doesn't satisfy the government, the company could go into bankruptcy protection.

GM said in a news release that it will ask the government to take 50 percent of its common stock in exchange for canceling half the government loans to the company as of June 1.

GM said the bond exchange aims to wipe away a large majority of the company's US$27 billion in unsecured debt. The company estimates that after the exchange, bondholders would own 10 percent of the company.

In addition, GM is offering the United Auto Workers stock for at least 50 percent of the US$20 billion the company must pay into a union run trust that will take over retiree health care expenses starting next year.

All the stock offerings mean that current common stockholders would own only 1 percent of the company under the deals, the press release says.

GM also said that it would speed up six additional factory closings that were previously announced in February, although it did not identify them in its news release. Additional salaried job cuts are also coming, beyond the 3,400 in the US completed last week.

Including previously announced plant closures, the restructuring will leave GM with 34 factories at the end of next year, down from 47 at the end of 2008. The company also said it plans to thin its dealership ranks by 42 percent from 2008 to 2010, cutting them from 6,246 to 3,605.

"The Viability Plan reflects the direction of President Obama and the US Treasury that GM should go further and faster on our restructuring," GM CEO Fritz Henderson said in a statement.


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