<strong>Q.HOW HAS THIS GIANT OF AMERICAN AUTOMOTIVE COMPANIES GONE TO THE WALL?</strong><br /><strong>A.</strong>General Motors (GM) was once the world’s largest company and has for years been seen as a bellwether of the US economy. But, like that other big Detroit car maker Chrysler, it has lost market share in the face of competition from US-based Japanese-owned factories with more efficient working practices and lower-priced cars. The US government, which agreed to fund GM for two months while it worked out a turnaround plan, named today as the deadline for GM to cut debts. They include $20 bn (£12.5bn) owed to the United Auto Workers (UAW) union’s healthcare fund and $27.bn owed to bondholders. But even a debt for equity deal was not enough to stave off GM’s bankruptcy proceedings.<br /><br /><strong>Q.WHAT IS CHAPTER 11?</strong><br /><strong>A.</strong>Chapter 11 of the US bankruptcy code allows a company to sort out its problems while the court protects it from creditors. Although a business needs court approval for important decisions, it has the freedom to keep trading without creditors laying claim to its much-needed cash. GM is likely to use section 363 of the bankruptcy code to speed the deal through in just two to three months. Most of GM’s assets and around a quarter of its debts would form a new version of the company, while unwanted parts of the business would be put aside to be sold or wound down.<br /><br /><strong>Q.WHAT HAVE BONDHOLDERS HAD TO SAY ABOUT THE DEAL?</strong><br /><strong>A.</strong>Bondholders rejected a debt for equity deal last week, which would have swapped their $27 billion debt for a 10 per cent equity stake in the company. GM failed to get agreement from enough bondholders with the earlier deal, but managed to get the nod two days later when it offered the added incentive of warrants to buy an extra stake. Around 15 per cent of bondholders accepted the original deal, with another 19 per cent indicating support later. The sweetened contract was agreed by 54 per cent of bondholders.<br /><br /><strong>Q.WHY IS GM TRYING TO SPEED UP THE BANKRUPTCY PROCESS?</strong><br /><strong>A.</strong>As long as the long-term future of the company remains unsure, car buyers are unwilling to purchase their brands, for fear GM would renege on insurances and maintenance. A similar quick deal appears to have worked well for Chrysler, which is working towards an alliance with Fiat.<br /><br /><strong>Q.HOW WILL THE COMPANY COME OUT OF THE RESTRUCTURING?</strong><br /><strong>A.</strong>The new firm will hopefully emerge with around $17bn of debt, down from the $58bn it has before its restructuring. The US Treasury and the Canadian government will own 72.5 per cent of the ailing carmaker and the United Auto Workers union healthcare fund will own17.5 per cent share (in exchange for healthcare concessions), while unsecured bondholders claim 10 per cent. Bondholders will have an option to buy a further 15 per cent of the equity. Shareholders are likely to receive little or nothing. GM is set to close 14 plants by the end of next year year and the Pontiac, Saturn, Hummer and Saab brands will be sold or discontinued.<br /><br /><strong>Q.WILL UK PLANTS BE AFFECTED?</strong><br /><strong>A.</strong>GM has sold its European arm – which makes Vauxhall and Opel cars - to Canadian-Austrian firm Magna International. Business secretary Lord Mandelson says he has had further assurance the UK production of Vauxhall would not be stopped, but unions fear there will almost certainly still be job cuts amongst UK workers.<br /><br /><strong>Q.HOW BIG WERE GM’S LOSSES?</strong><br /><strong>A.</strong>GM lost $6 billion in the first three months of this year, after losing $30.9bn last year and nearly $39bn in 2007. Over 90 per cent of its stock value was wiped out and by May stock fell to $1 a share, a new low not seen since the 1930s. From being an industry giant, GM was reduced to having a market cap less than one seventh of Macdonalds.