General Motors Corporation, one of the world's largest automakers, today filed for bankruptcy amidst mounting debt and plummeting sales, ending a century-old dominance in the automobile market.

GM said it has reached agreements with the US Treasury and the governments of Canada and Ontario to accelerate its reinvention and create a leaner, stronger `New GM' positioned for a profitable, self-sustaining and competitive future.

''Pending approvals, the New GM is expected to launch in about 60 to 90 days as a separate and independent company from the current GM, with two distinct advantages: it will be built from only GM's best brands and operations.

GM would focus on its four core brands in the US, namely, Chevrolet, Cadillac, Buick and GMC.

GM said it has also signed agreements with the the United Auto Workers (UAW) and Canadian Auto Workers (CAW) unions and will be led by GM's current management team.

GM employees worldwide will become part of the New GM.

The New GM will execute the key elements of its 27 April viability plan, along with additional initiatives, to achieve winning financial results by putting customers first, concentrating on adding to the company's line of award-winning cars and trucks through four core brands and continuing to invest in green, energy-saving technologies.

The voluntary petitions for relief filed under chapter 11 of the US Bankruptcy Code, GM and three of its subsidiaries have sought permission from the US bankruptcy court for the Southern District of New York, to sell substantially all of its global assets to the New GM.

Besides the US Treasury, GM's sale of assets to the New GM has also the support of the UAW and a substantial portion of GM's unsecured bondholders and GM said it expects the sale to be approved and consummated expeditiously.

GM has asked the court to approve a number of steps to protect current and new GM customers, ensure that its operations will continue uninterrupted during the court-supervised process, and provide for a smooth transition to the New GM.

GM dealers will continue to service GM vehicles and honor GM warranties, and US and Canadian government guarantees of manufacturers' warranties are designed to reassure consumers.

GM said it will use its cash-on-hand and a new Debtor-in-Possession (DIP) financing of approximately $33 billion to: ensure an uninterrupted supply of goods and services and provide for other cash requirements prior to closing of the asset sale; fund liabilities to secured lenders; and provide contingency funding to handle any potential unexpected needs.

Furthermore, in conjunction with the sale, the US Treasury and the Canadian and Ontario governments will provide funds to administer the wind down of the remaining assets and the closing of the chapter 11 cases.

"Today marks a defining moment in the reinvention of GM as a leaner, more customer-focused, and more cost-competitive company that, above all, can quickly generate winning bottom line results," said Fritz Henderson, GM president and CEO. "The economic crisis has caused enormous disruption in the auto industry, but with it has come the opportunity for us to reinvent our business. We are going to do it once and do it right. The court-supervised process we are pursuing provides us with powerful tools to accelerate and complete our reinvention, as well as strong safeguards for our customers and our business. We are focused on the job at hand, for the benefit of our customers, employees, dealers, suppliers, retirees, taxpayers, investors and other stakeholders,'' he added.

Henderson said GM has the support of President Obama, the Presidential Task Force on Autos, the Canadian and Ontario governments, American and Canadian taxpayers, the unsecured bondholders of the company as also the UAW and CAW and their leadership, for the proposed sale transaction.

"From day one, the New GM will be well-positioned to capitalise on the award-winning vehicles we have developed and launched during the past few years, and on our investments in exciting new technologies like the Chevy Volt, so that we can build and return value to our customers and to the millions who will have a stake in our success. The New GM will play a critical role in the future of the automobile, and assure that the US has a strong stake in this rapidly changing global manufacturing industry," Henderson said.

Non-US operations intact
None of GM's operations outside of the US are included in the US court filings or court-supervised process, and these filings have no direct legal impact on GM's plans and operations outside the US, GM said.

GM confirmed that all its business operations in Europe, Latin America, Africa and the Middle East and Asia Pacific regions are continuing without interruption.

Upon Court approval, GM said it will be expressly authorised, among other things, to:

• Honor all obligations to customers and continue customer programmes,  including warranties, without interruption;
• Respect operating and financing agreements with GMAC, supporting continued wholesale financing for dealers and retail financing for customers;
• Pay dealers' open accounts and continue warranty and incentive programmes;
• Pay essential suppliers and logistics providers for goods and services provided before and after the company's court filings;
• Continue pay and benefits for employees and retirees; however, the amount of non-qualified pension for some executive retirees may be affected.

The New GM expects to break even in the North American region at a US total industry volume of approximately 10 million vehicles.

It expects to achieve lower structural costs in part by further reducing 2009 salaried employment in North America from its year-end total of 35,100 to approximately 27,200, and continuing to improve its balance sheet by reducing retiree benefits for salaried retirees and non-UAW hourly retirees

GM said it would reduce its US dealer network to around 3,600 for focused customer service and increase its investment and leadership in fuel economy and advanced propulsion technologies.

Capital Structure of New GM
GM reported consolidated debt of $54.4 billion, along with additional liabilities, including an estimated $20 billion obligation to the UAW VEBA, as of 31 March 2009.

GM has signed agreements with the US Treasury, the Canadian and Ontario governments, and the UAW and CAW, and with the support of a substantial portion of GM's unsecured bondholders.

Upon closing of GM's sale of assets to the New GM, the New GM's capital structure will be comprised of approximately $17 billion in total consolidated debt, including:

$6.7 billion of debt owed to the US Treasury;
 
$1.3 billion of debt owed to the Canadian and Ontario governments;

$2.5 billion of notes issued to the new Voluntary Employee Beneficiary Association (New VEBA);

Approximately $6.8 billion of other, primarily international debt, but excluding Europe;

$9 billion of perpetual preferred stock with a 9 per cent annual dividend, payable quarterly in cash to the US Treasury, the Canadian and Ontario governments and the New VEBA Common equity.

Other than the $8 billion of debt owed to the US Treasury and the Canadian and Ontario governments by the New GM, all amounts owed by GM or the New GM to the US Treasury and Canadian and Ontario governments would be equitised in exchange for the New GM securities, and no other debt will be owed by GM to the US Treasury and the Canadian and Ontario governments.

GM Europe Restructuring
Separately, GM Europe announced an agreement for €1.5 billion of bridge financing from the German government and a memorandum of understanding to partner with Magna International Inc. Under the agreement, the Opel/Vauxhall assets have been pooled under Adam Opel GmbH, with the majority of the shares of Adam Opel GmbH being put into an independent trust (the balance to remain with General Motors), while final negotiations with Magna proceed. Negotiations to close the agreement should take several weeks.