news20090601jt1

[TODAY'S TOP STORIES] from [The Japan Times]

[NATIONAL NEWS]
Monday, June 1, 2009
Most leaders not told of nuke pact with U.S.
Bureaucrats kept only 'trusted' prime ministers in loop

(Kyodo News) A secret accord between Tokyo and Washington on moving U.S. nuclear weapons through Japanese territory has been controlled by top Foreign Ministry bureaucrats who have told only a handful of "trusted" prime ministers and foreign ministers of its existence, four former top ministry officials have revealed.

All four were vice foreign ministers, the top bureaucratic post in the ministry. The limited number of prime ministers told of the secret accord included Ryutaro Hashimoto and Keizo Obuchi, the former officials said.

The pact gives Japan's tacit approval that U.S. aircraft or naval vessels carrying nuclear weapons can transit Japan.

The revelation indicates that Foreign Ministry bureaucrats have controlled the top-secret matter, not elected officials.

The two allies concluded the secret agreement when the Japan-U.S. Security Treaty was revised in 1960. Although the secret accord became publicly known through the declassification of U.S. diplomatic documents in the late 1990s, the Japanese government has consistently denied its existence.

The government has publicly adhered to the "three nonnuclear principles" of not possessing or developing nuclear weapons, or allowing them on Japanese territory.

It is the first time former top Foreign Ministry bureaucrats have admitted that some prime ministers and foreign ministers knew about the secret deal.

The revelation may shatter the government's long-standing denial and require it to be held accountable to the public.

The Japan-U.S. Security Treaty stipulates that the U.S. needs to consult with Japan before bringing nuclear weapons through Japanese territory. When the security pact was revised, Washington construed that such a requirement should only apply to the stationing of nuclear weapons and not when aircraft or vessels with such weapons are passing through Japan, the former top ministry officials said.

The administration of Prime Minister Nobusuke Kishi, who signed the revised security pact, acquiesced to the U.S. interpretation.

However, the administration of Prime Minister Hayato Ikeda told the Diet in early 1963 that stopovers of U.S. military vessels with nuclear weapons are subject to prior consultation with the Japanese government.

Fearing that the secret deal might be ruined, U.S. Ambassador Edwin Reischauer met with Foreign Minister Masayoshi Ohira that April and asked for confirmation of the U.S. interpretation on stopovers. Ohira only learned about the pact's existence through Reischauer's query, but he approved the U.S. interpretation.

According to the four former top Foreign Ministry officials, these diplomatic exchanges and processes were recorded in Japanese in an in-house document and have been controlled by the North American Affairs Bureau and the old Treaties Bureau, now the International Legal Affairs Bureau.

One of the four said he handed down the matter to his successor. "It was a great secret," he said.

Another said the Foreign Ministry only informed politicians who the ministry saw as trustworthy, which included Hashimoto and Obuchi.

One of them said Foreign Ministry officials decided who among prime ministers and foreign ministers should be told about the secret deal, suggesting bureaucrats controlled the top-secret matter, not elected representatives.

In a written comment, the Foreign Ministry again denied such a secret deal exists.


[NATIONAL NEWS]
Monday, June 1, 2009
Ban on Internet drug sales blasted

By KAZUAKI NAGATA
Staff writer

Kazuyuki Sasada has been using the Internet for years to buy medicine because it is difficult for him to go around to different stores to get the drugs he needs.

"There are also many kinds of medicine that pharmacies don't normally sell," including traditional medicines and herbal drugs, says Sasada, a 60-year-old resident of Higashiosaka, Osaka Prefecture.

He spends about 80,000 to 100,000 a year online for his medicine, and another 40,000 to 50,000 at conventional pharmacies and drug stores.

But starting Monday, as a 2006 revision of the pharmaceutical law and a new health ministry ordinance take effect, new customers will be banned from buying many types of medicine online.

The revision will also allow outlets like convenience stores to sell around 90 percent of the types of drugs that don't require a prescription.

Sasada and others who have purchased medicine online previously, and people who live on isolated islands, will have a two-year transition period before they too are banned from making such purchases.

The Health, Labor and Welfare Ministry claims that its ordinance, which clarifies the 2006 revision to the pharmaceutical law, is necessary because it is difficult to provide proper medicinal information if the seller and purchaser do not meet face to face.

Selling medicine online raises concerns "because it's hard to check the health condition of buyers and lacks communication (between sellers and users)," said Takashi Hashimoto, deputy director of the general affairs division in the ministry's pharmaceutical and food department.

Online vendors, including Hiroshi Mikitani, president of Rakuten Inc., operator of Japan's largest online shopping service, agree that sellers should explain side effects and other information necessary to ensure safety.

But they are not convinced this is impossible online, and they believe the ban violates the right of business as stipulated in the Constitution.

"It would be understandable if many cases of negative side effects or other problems are reported by selling drugs online. But the health ministry has not confirmed that selling medicine online is unsafe," said Genri Goto, chief executive officer of Kenko.com, Inc., a company that sells health-related products, including drugs, over the Internet.

"Let's assume that the face-to-face purchase is safe, but it can't be assumed that it's not safe if it's not face to face," he said.

When buying medicine online from Kenko.com, customers are required to fill out of a questionnaire about their health and are shown an explanation of the medicine they are about to buy. Before the purchase is finalized, they have to affirm with a mouse click that they have read the explanation.

Kenko.com and Wellnet. Co., another company selling medicine online, sued the government May 25. They claim online vendors have the right to continue selling medicine and requested that the ordinance be repealed.

Goto said that when the pharmaceutical law was revised in 2006 to strengthen the safe trade of drugs, nothing was included about online sales. The health ministry put that in the ordinance on its own.

He criticized the ministry for making such a sweeping change through a ministry ordinance and not through a vote in the Diet.

Under the revision, medicines are divided into three categories based on the risk of side effects.

Categories I and II are banned from online sales. Category I medications include stomach antacids and Minoxidil, a medicine to slow or stop hair loss, and category II drugs include aspirin and pregnancy tests. Category III covers such items as vitamins and mouthwashes.

According to Goto, about 70 percent of the drugs that have been sold online will be restricted starting Monday.

The restrictions will lead to a lot of lost money for some drug stores selling products online.

The Japan Online Drug Association, which Goto chairs, says that among its members, some individual drug stores depend on the Internet for 70 percent of their sales.

Many consumers are also not swayed by the ministry's argument that online purchases are unsafe.

Sasada of Higashiosaka said the online stores he uses explain the risks and effects in detail. Before actually clicking to purchase, those online stores direct customers to a page showing information about the drugs, he said.

On the other hand, Sasada said, he has never really received an explanation at a brick-and-mortar store.

"I think the Internet is safer in the current situation," he said.

Faced with the opposition from online drug sellers and buyers, the health ministry decided to adopt the two-year transition period during which previous customers and people who live on isolated islands without drug stores can continue buying drugs online.

Although the ministry is convinced that online drug transactions leave purchasers without a sufficient explanation of the medicine they are buying, it admits more work is needed to ensure the safety of face-to-face purchases as well.

"That is what we would like to thoroughly work on and was the point of the revision," said Takahashi of the health ministry.

news20090601jt2

[TODAY'S TOP STORIES] from [The Japan Times]

[NATIONAL NEWS]
Monday, June 1, 2009
Kobayashi beats U.S. archrival in eating rematch

CULVER CITY, Calif. (AP) Takeru Kobayashi outlasted Joey Chestnut when the eating titans faced off to see who could devour the most pizzas.

Kobayashi, a six-time world hot dog eating champion from Nagano, consumed 5 3/4 P'zones — a mixture between a pizza and a calzone — in a six-minute span of chaotic consumption Saturday to edge Chestnut. The 25-year-old from San Jose, Calif., wolfed down 5 1/2 P'zones on Stage 15 at Sony Studios.

"I'm a little bummed," Chestnut said. "There's nobody I like beating more than him, he pushes me harder than anybody."

The archrivals are best known for their annual Fourth of July hot dog eating showdowns at New York's Coney Island. Chestnut has beaten his Japanese competitor the last two years, winning last year in a five-dog eat-off after they tied at 59 frankfurters in 10 minutes.

This time, they went cheek-to-jowl in a stomach-centric contest sponsored by Pizza Hut featuring the P'zone, a pizza weighing 0.45 kg with pepperoni and other ingredients sealed inside a crust. At nearly 30.5 cm long, it resembles a calzone.

Jaw strength and stomach capacity were sorely tested in consuming one of the most filling foods on the competitive eating circuit.

A serious-looking Chestnut prepped by opening his mouth wide and loosening his jaw. Kobayashi stretched his lean limbs and whispered with his interpreter.

Then it was time.

Chestnut took an early lead, squeezing a P'zone in his left fist while alternately slugging from a water bottle. Soon, liquid splashed all over Chestnut's white jersey and dripped from his mouth.

Kobayashi took a tidier approach.

He roared back to take the lead for good on his second P'zone, tearing off bites of the golden crust, then folding it over and sipping carefully from a series of white paper cups that he refilled with water.

"The crust was very chewy so my technique was to try to drink as much water as possible to soften up the crust in my mouth," Kobayashi said through his translator.

No dunking was allowed, and containers of marinara sauce accompanying each P'zone were tossed aside by both chowhounds.

A small crowd that gathered near the elevated food fest cheered the men on, with Chestnut's highway patrolman brother yelling centimeters from his face to eat faster.

Chestnut couldn't keep up with his 31-year-old rival from Japan.

At the six-minute mark, Kobayashi raised his arms in triumph and lifted his red jersey to show off a set of washboard abs.

"It was tough. Kobayashi came to win," Chestnut said. "I was raised on pizza so it was natural for me to eat it, but I was a little slow to get going and he came out fast."

The thought of a Japanese out-eating an American in a pizza contest wasn't lost on Kobayashi, who is recovering from TMJ, a painful jaw disorder.

"I love pizza," he said. "When I come to America, pizza is my happiness. I look forward to eating it."

Chestnut said he wasn't used to eating pizza that quickly.

"It's doughy," he said. "It takes a lot of chewing. He got off to a really good technique early on, his rhythm was drinking water and swallowing. I changed mine a couple times and never got in the right rhythm."

Kobayashi ended a three-event losing streak to Chestnut, a 25-year-old whose weekday job is in construction management.

"I wanted to prove that I'm champion," Kobayashi said. "A champion will stand up to any battle."

He said he would go for another Fourth of July hot dog championship and then probably retire. Chestnut will be ready and waiting at Coney Island.

"I'll see him in five weeks and I'm going to push him really hard there," he vowed.

Portions of the pizza event will air on the Spike TV "Guys' Choice" show in the U.S. on June 21.



[BUSINESS NEWS]
Monday, June 1, 2009
THE VIEW FROM EUROPE
Will Europeans pass Japan in a post-GM global auto market?

By JOCHEN LEGEWIE

As GM's government-imposed deadline approaches Monday, it is highly likely the automaker that once dominated the global market will file for bankruptcy protection just like Chrysler did a few weeks ago.

Last year, Toyota overtook GM to become the world's largest automaker, and its rise to the top seemed unstoppable. Japan appeared to be No. 1 again, at least in one industry.

But the automobile world looks totally different than it did six months ago. Toyota has announced a record net loss of more than \430 billion for fiscal 2008 and is projecting a \550 billion net loss this year.

Toyota is not the only one suffering. Nissan, once the darling of the stock market, has gone into the red for the first time since Carlos Ghosn took charge. Only Honda and Suzuki ended fiscal 2008 with net profits.

Even in the United States, Toyota suddenly appears vulnerable. Production and sales organizations need to be consolidated. Lexus, its luxury brand, finally lost its title as the most reliable make in J.D. Power's customer satisfaction rankings for the first time in 15 years, falling behind the likes of Buick and Jaguar.

Meanwhile, in Europe, two major players — Fiat and the Volkswagen Group — are making headlines, but not for the same reasons as their Japanese or American peers. Ridiculed and nearly bankrupt only five years ago, Fiat has re-emerged under the regime of CEO Sergio Marchionne. The company has taken a stake in Chrysler and is also bidding for one in Opel, the German GM daughter that's looking for a white knight.

But Fiat's plans don't stop there; they are also after GM's business in Latin America. If all of these acquisitions succeeded, Fiat would become the world's No. 2 auto manufacturer.

As for VW, this is another company that has rebounded from difficulties, fighting off a takeover attempt last year by Porsche, its largest shareholder. In April, VW made headlines when its Golf VI was selected World Car of the Year in New York.

But its new Polo concept car, unveiled a month earlier at the Geneva Motor Show, was probably even more important in the global competition for eco-supremacy. The Polo wowed the audience with a remarkable fuel efficiency of 30.3 km per liter. This is far better than Toyota's Prius and even drew praise from the Nikkei, which said such a vehicle could knock Toyota and Honda off their green-technology thrones.

So are we witnessing the arrival of an era dominated by European automakers, or will the old regime continue to hold court? The answer is a clear neither-nor.

Let's make a quick assessment of the players by market.

North America: Ford is the only maker likely to avoid the fate of Chrysler and GM, but it will struggle for its future; only optimistic observers believe it will return to profitability in 2010. Clearly, U.S. dominance of the automotive world is over.

Japan: Japan's automakers are struggling, but not quite as badly as the Americans. Indeed, some of them might come back stronger in the near future. There is no doubt Toyota is great position with its high technologies, deep pockets and global market presence.

While Honda might have pulled out of Formula One, it also won the 2009 World Car of the Year award for cleanest car with a fuel-cell vehicle — the Honda Clarity FCX. The company's success with the recently launched Insight, Honda's first hybrid to top the domestic sales rankings, was also noteworthy.

The third remarkable auto force in Nippon is Suzuki. Not only did it manage a net profit last year, but it also appears well-positioned to weather the storm and tap future demand, thanks to its focus on small cars and its presence in India.

Europe: In this region, the picture is more complex. Apart from Fiat and Volkswagen, the German automakers seem to have an edge over their competitors, especially the French. The technological power and premium image of Daimler, BMW and Audi constitute strengths that cannot be easily destroyed by a financial crisis.

In addition, BMW benefits from having the Quandt family as a strong shareholder, as Audi benefits from its links to powerhouse Volkswagen. And even Daimler won some breathing space on March 22, when Abu Dhabi's Aabar became a new major shareholder.

What about the emerging economies of China and India?

China: The Chinese market is on track to sell more than 10 million units this year and will possibly surpass the American market to become the global No. 1. But the country still lacks one or two automakers that can make global headlines. Such companies will likely arrive, eventually, but it will take a few more years.

India: Tata is different. With the Nano, the first car to sell for less than $2,500, they have made headlines and already received 203,000 orders. If Tata is to weather the financial storm well, it will have to become a new force in autos.

South Korea: Hyundai of South Korea meanwhile is already a global force but still lags in top technologies, especially "green" cars.

Summing up, it looks as if the Japanese and German makers still have the global edge and will keep it for years to come, if only for their undisputed lead in technology. But demand is a different story, because it takes place outside of Germany and Japan. With China, India — and probably Russia — emerging as major markets, Germany and its makers will benefit from a large European hinterland that includes Eastern Europe.

CONTINUED ON 20090601jt3

news20090601jt3

[TODAY'S TOP STORIES] from [The Japan Times]

[BUSINESS NEWS]
Monday, June 1, 2009
THE VIEW FROM EUROPE
Will Europeans pass Japan in a post-GM global auto market?

By JOCHEN LEGEWIE

CONTINUED FROM news20090601jt2

Here in Japan, however, the story is different. Interest in cars is rapidly declining. The Tokyo Motor Show in October is struggling to attract exhibitors from overseas while China's appeal continuously grows. Japanese auto makers clearly need a business model that doesn't rely only on a strong home market and a few key technologies, like hybrids.

Global competitors are quickly catching up and already leading in some areas. The fact that these rivals come from both Europe and Asia — and no longer from the U.S. — is a new twist that makes the situation harder to predict than ever before.


[OPINION]
Monday, June 1, 2009
Squeeze Pyongyang gently

By KEVIN RAFFERTY
Special to The Japan Times

HONG KONG — North Korea demonstrated last week that it knows how to blow an atomic-bomb-size hole through the hot air and pretensions of the so-called rulers of the world. U.S. President Barack Obama was exposed as the outraged huffer and puffer in chief against North Korea's nuclear test, but he was in good company with other leaders who condemned the North but did nothing practical to deter it.

Pyongyang's behavior is more serious than the tantrums of an unruly brat seeking attention. What is at stake is the peace and security of the whole world. China, just as much as the United States, Japan and South Korea, should take careful note and lead the search for a more realistic way to react.

While Obama was promising unspecified "international action" and U.S. Secretary of State Hillary Clinton was threatening unknown "consequences" against North Korea's "belligerence," old Korea hands were urging cool heads and caution.

One good reason is that sanctions against North Korea clearly have not deterred the regime. Other obvious options won't easily work. An invasion or military attack on North Korea would face the world's fourth-biggest armed forces, would probably lead to the devastation of Seoul, as well as send millions of already impoverished North Koreans fleeing to China.

Western Korea-watchers also fear to upset North Korea during a succession struggle. "Dear Leader" Kim Jong Il is visibly ailing: his paunch has shrunk and his trademark air-blown hairdo has lost some of its fuzz. He is either trying to clear the way through his own military for his youngest son to succeed or to bolster his own reputation before he dies.

Stephen Bosworth, U.S. President Obama's special envoy for Korea, had said before the latest crisis that "pressure is not the most productive line of approach" in dealing with North Korea and predicted that talks would resume after a "cooling-off period."

Some liberals also contend that North Korea is no threat to anyone. It has conducted only two nuclear tests against 1,030 by the U.S., and has not perfected even a short-range missile delivery.

North Korea reacted to the world outrage by moving cleverly between stepped up rhetoric and further provocations that demonstrated determination to acquire usable nuclear weapons. It followed its nuclear test by firing off several short-range missiles to demonstrate its delivery capacity. The message is that South Korea and Japan are within range of North Korean missiles and the U.S. soon will be.

When South Korea agreed to join the Proliferation Security Initiative to intercept vessels suspected of carrying weapons of mass destruction, the North declared that this amounted to an act of war and it no longer considered itself bound by the 1953 armistice that halted the bloody Korean war and divided the Peninsula. There is also growing evidence that Pyongyang has restarted its reprocessing plant at Yongbyon.

When the 1953 armistice stopped the carnage, all of the Korean Peninsula was devastated and impoverished. Today, the land to the north of the demilitarized zone contains 24 million people, most of whom are poor as dirt. The land to the south, with fewer natural resources, contains 48 million people with average income of $25,000 enjoying one of the world's most developed economies.

But Pyongyang is threatening more than peace on the Peninsula. Its actions are especially damaging to the United Nations and the tattered system of global governance. Yet again, a rogue nation has defied the world. What did the supreme conference of world rulers do? They went into a huddle to decide whether to sternly and solemnly rebuke North Korea or to give Pyongyang another chance. Days later, they were still huddled trying to agree on a plan.

North Korea's nuclear capacity makes its actions more dangerous than adolescent tantrums. Today, North Korea, tomorrow, some other more ambitious rogue state will be flexing its muscles. Equally dangerous is North Korea's ability to export its nuclear knowhow. North Korea and Iran have complementary needs and deficiencies in their nuclear knowhow, with Pyongyang possessing the uranium metallurgy and plutonium technology and nuclear test data that Tehran lacks, and Tehran, the uranium centrifuge materials and technology that Pyongyang lacks.

Another chilling report was that North Korea resumed its nuclear activity because there were potential buyers waiting in Syria and the Middle East.

Pyongyang has been able to flaunt its nuclear activities because sanctions have proved empty, principally because it was left to individual countries to decide how and to which goods to apply sanctions. Russia allows watches under $2,000, and fur coats under $10,000 to go freely to North Korea. The U.S. has virtually no links with Pyongyang and, therefore, no capacity for arm-twisting.

China has, but China has chosen to keep its hand off North Korea's jugular, and off the Dear Leader's jugular too. China is the main supplier of North Korea's food and oil and energy as well as the conduit for the Mercedes cars, XO brandy and other goodies that indulge Kim Jong Il.

U.S. rightwing critics claim that China prefers to keep North Korea as its puppet state and would fear a strong reunified Korea. But they should acknowledge Beijing's fears that if North Korea fell apart, China, along with South Korea, would be left to pick up the pieces. It would be far messier and more costly than to unite Korea under the best of circumstances than it was to achieve German reunification.

Now, surely, it is time for Beijing to reassess its policies. The longer the evil day of reckoning for North Korea is postponed, the messier it will be. China should apply the squeeze of sanctions gently but determinedly to bring Pyongyang to its senses and persuade Kim Jong Il or his successor that the way to become a true National Hero is to develop not the nuclear industry but the whole economy. Obama could help by encouraging Beijing and promising that whatever happens, U.S. troops will not face China across the Yalu River.

Japan also has a part of play in trying to encourage Beijing to think of regional and global peace and prosperity and of the world tomorrow as well as today. In this regard, it is a continuing tragedy for Japan and Asia and the world that conservative Japanese politicians are still imprisoned by their own tragic history.

The experience of old enemies in Europe has been that friendly competition is good for the prosperity of everyone, and that prosperity sets up its own barriers to deadly and costly war.

The consequences for China of a North Korea that implodes or explodes would be devastating. The consequences of a rejuvenated North Korea would be challenging but could be so encouraging that China might wish to revisit its attitudes toward its clients in Myanmar.

news20090601lat1

[Today's Newspaper] from [Los Angeles Times]

[Business News]
GM to file for bankruptcy protection
President Obama will announce the bankruptcy filing in a speech Monday morning, the end result of a 60-day restructuring challenge for what was once the world's largest company.

By Jim Puzzanghera and Ken Bensinger
June 1, 2009

Reporting from Washington and New York -- General Motors Corp., long the symbol of American might and lately a stark reminder of the nation's failings, will file the largest industrial bankruptcy in U.S. history today, according to senior Obama administration officials.

The move, part of a government-led restructuring, ends months of anxiety and uncertainty about the legendary automaker, which only a decade ago was the world's largest company. GM will formally succumb to years of missteps, changing consumer tastes and a historic collapse of global auto sales, and will leave the government with a 60% stake in the company.

To keep GM afloat, the Obama administration will add $30.1 billion in taxpayer funds to the $20 billion already provided. That will make GM the second-largest recipient of bailout money, behind insurance giant American International Group.

GM will join Chrysler as the bankrupt duo of Detroit's once-formidable Big Three.

Chrysler, which filed April 30, received court approval late Sunday to transfer most of its assets to a new entity run by Italian automaker Fiat, paving the way for the company to emerge from bankruptcy as soon as this week.

The Obama administration is touting the GM filing as a painful but necessary court-supervised restructuring that will make the company profitable again and a leader in producing fuel-efficient vehicles. The only other option, the government has said, would be a liquidation that could put tens of thousands out of work throughout the industry and deal a severe blow to the economy.

It also will leave the federal government in the unusual -- and potentially uncomfortable -- position of holding a majority stake in GM, which is the top carmaker in the U.S. by volume and No. 2 globally. Administration officials said they hoped to shed the investment as soon as possible, and meantime pledged to keep their hands off daily operations.

President Obama will announce the bankruptcy filing in a White House speech this morning, the end result of a 60-day restructuring challenge he gave to GM this spring, senior administration officials said Sunday. GM Chief Executive Fritz Henderson then will hold a news conference in New York, where the company will submit its filing in Bankruptcy Court.

Like Chrysler, GM would transfer its viable business lines to a new GM company created in bankruptcy, leaving much of its debt and unwanted assets to be liquidated in the old GM.

Unlike the sudden bankruptcy of Lehman Bros. last September, which helped trigger the severe financial crisis and launched the government's unprecedented intervention into corporate America, GM's Chapter 11 reorganization is a carefully planned and long-telegraphed petition spearheaded by the administration. It aims to help the automaker emerge from bankruptcy in two to three months as smaller, leaner and more competitive.

The administration doesn't expect to provide GM with any taxpayer money beyond the amount currently planned.

"One never says never . . . but this is it in respect to support for GM," said a senior official, who spoke on condition of anonymity because the bankruptcy had not been filed.

Although the filing has been expected, the fact that GM has been reduced to bankruptcy is a startling development.

The century-old automaker was for decades the very symbol of American corporate power, selling about half the cars on the road in the United States in the 1950s and 1960s. Today, GM's U.S. market share has dropped below 20% as the company has steadily ceded ground to Japanese brands. And Toyota Motor Corp. last year edged GM in global sales, dethroning the Detroit automaker after 76 years on top.

GM used to employ more than half a million American workers; today, fewer than 100,000 get their paychecks from the company affectionately known as "the General."

"This is a historic and important moment," said Ronald Seeber, a vice provost at Cornell University and specialist in industrial history. "It's very, very significant and truly the last stage of the decline of the American auto industry."

Senior administration officials took pains Sunday to say the government intended to be "passive investors" with its 60% ownership stake. The Canadian government will get a 12% equity stake in exchange for providing $9.5 billion in bankruptcy financing to GM.

The U.S. government "will only vote on core governance issues, including the selection of a company's board of directors and major corporate events or transactions," according to the White House.

One senior administration official added, "The government will not interfere with or exert control over day-to-day operations."

But the Obama administration took an activist role in forcing out former GM CEO Rick Wagoner this spring, replacing him with Henderson. And some lawmakers have raised concerns about government involvement in decisions about which GM plants to idle. Administration officials would not comment on any GM operational issues Sunday.

GM is preparing to close at least 11 more plants, idle three others, sell or eliminate four of its brands and end its relationship with more than 40% of its franchised dealers.

It will be an automaker with no major European presence -- GM is selling German-based Adam Opel unit to Canadian parts supplier Magna International -- and thus one with a renewed focus on the crucial North American market.

The goal, administration officials said, is for the automaker to be able to make a profit in a U.S. market where only 10 million vehicles sell, industrywide, per year. As recently as 2007, U.S. consumers bought 16.1 million cars and trucks. Through the first four months of this year, they're on an annual pace to buy only 9.5 million.

Last November, with auto sales plummeting because of the economic downturn, the chief executives of GM, Chrysler and Ford initially asked Congress for a combined $25 billion. But their pitch fell flat, setting off six months of wrangling over the industry's fate.

At the end of March, Obama gave Chrysler 30 days to arrange a merger with Italy's Fiat. At the same time, Obama ousted GM's Wagoner and gave the company 60 days to undergo drastic restructuring. The president began laying the groundwork for a bankruptcy by promising the government would guarantee the warranties of GM and Chrysler vehicles.

Chrysler, the No. 4 U.S. automaker, paved the way for GM's bankruptcy filing, revamping its contract with the United Auto Workers union and obtaining concessions from many bondholders before entering Chapter 11.

GM is expected to exit bankruptcy with less than half its current debt load. The government will swap most of the $50 billion it will have lent GM for the equity stake, leaving only $8.8 billion in debt to the Treasury. GM also will owe $9 billion to the UAW in preferred shares and secured notes.

By striking deals with key constituencies, GM could move through Chapter 11 as smoothly as Chrysler has, officials said. They estimated GM would emerge from bankruptcy protection in 60 to 90 days.

GM last week reached a new accord with the UAW that will cut the company's liabilities to a trust for retiree healthcare by half, while also cutting production costs significantly and setting the stage to reduce its workforce by 21,000 more.

In exchange, the union's healthcare trust will receive a 17.5% stake in GM, along with warrants to purchase an additional 2.5% share in the future.

GM was also able to persuade the majority of holders of $27.1 billion in its bonds to swap their debt for a 10% share in the company, plus warrants to buy 15% more down the road.

The automaker said Sunday that 54% of those bondholders, by value, agreed to the swap, a sufficient amount to allow the plan to continue.

news20090601lat2

[Today's Newspaper] from [Los Angeles Times]

[Top News]
When cars were America's idols

Dan Neil
June 1, 2009

If you were to walk up to a typical New York executive in the 1960s -- think Don Draper in AMC's "Mad Men" -- and tell him that General Motors Corp. would be in bankruptcy by 2009, he would have thought you were delusional, or perhaps a Communist. GM was more than just the world's largest and most admired corporation; it was the final vindication of the American Way, the perfected and even divinely inspired example of democratic capitalism that stood opposed to the airless atheism and nullity of the Soviet system.

Or imagine that you were somehow able to drag Nikita Khrushchev from the United Nations podium into the street to confront -- no, behold -- a 1959 Cadillac Eldorado Biarritz. Nearly 19 feet long from its Jayne Mansfield-like bumpers to its rocket-like tail lamps, a lyric in steel and mirrored chrome, as bright and beautiful as a ripe plum is sweet, and yet just ever so slightly obscene. Khrushchev would have dropped his shoe.

Surely a company, a country, that could produce such an object would last forever.

At the height of its power, GM represented 10% of the national economy. It controlled more than 50% of the light-vehicle market. Its products, research and management methodologies were the standard of the world. Along the way, GM had, rather accidentally, invented American consumerism. Longtime Chairman Alfred Sloan's program of "planned obsolescence" -- making annual, often minor changes in the products in such a way as to make last year's model hopelessly unfashionable -- put Americans on the acquisitive treadmill they are panting on yet today.

Another of Sloan's big ideas was the "Ladder of Success," whereby the company's brands -- Chevrolet, Pontiac, Oldsmobile, Buick and Cadillac -- corresponded to ascending social status. The Ladder of Success was, in fact, an automotive caste system, a program of class stratification. Armed with the power of modern scientific marketing and advertising, GM was able to weld an existential link between who we are and what we drive.

A society obsessed with mobility had found its muse. Chollos and homeboys cherished that '62 Impala. Redneck country boys had to have that 400-cubic-inch Trans Am. Texas moms loved their blot-out-the-sun Suburban. Playas rode up on Escalades and Hummers with 22-inch wheels. The diversity of GM's product offerings became a lens through which to diffract American life, which is another way to say GM traded in automotive identity politics.

When GM President Charles Wilson lightly said in 1953 (during his confirmation hearings for secretary of Defense) that "what was good for the country was good for GM, and vice versa," he synthesized a very big idea: GM and the U.S., each vast conglomerates, each general and united in their own ways, had undergone a de facto merger.

The final chapter of that merger plays out this week as GM weathers a reorganization that will leave the federal government owning 70% of the company. In the midst of the deepest recession since the 1930s, it's hard not to see GM's bankruptcy as a signal moment in a larger history. If mighty GM can fail, cannot also the United States? And the answer is, absolutely.

This is the lesson of GM's bankruptcy, and it has little to do with market share and miles per gallon. It's a rebuff of the notion of exceptionalism. Any organization that fails to sufficiently safeguard its means of self-correction and reform, that forsakes long-term investment for short-term gain, that piles up debt year after year, will eventually fail, no matter how grand its history or noble its purpose. If you don't feel the tingle of national mortality in all this, you're not paying attention.

Many will step forward this week to recite the familiar litany of complaints against GM: It treated its customers poorly; it built boring and awful cars that alienated generations of buyers; it built binge-drinking dinosaurs and murdered the electric car. It bet the farm -- or at least southern Michigan -- on America's lust for big iron, trucks and SUVs, which left GM undefended when gas prices peaked at around $4 a gallon last year. Its executive leadership was myopic and insular, its board packed with thumb-twiddling cronies. If corporate mismanagement were a crime, you could lock up every one of these guys and throw the key in the Detroit River.

In his book "The Fifties," David Halberstam described what many regard as the moment of GM's original sin: In 1958, after a long-standing prohibition, it became permissible to discuss the company's stock price in management meetings.

From there, it was only a matter of time before the company twisted in Wall Street's wind and strategic decisions were calibrated according to dividend pennies.

I have my own theory. In 1999-2000, GM had a golden opportunity to right its ship by backing Democratic presidential candidate Al Gore. This might seem counter-intuitive, at least, since the auto industry has long postured against Democratic candidates as being pro-regulation and anti-business. Gore himself is an avowed enemy of the internal-combustion engine.

And yet, by backing Gore, who had the support of organized labor, GM would have gained enormous goodwill with the United Auto Workers, goodwill it desperately needed as it attempted to downsize in the new century.

Gore also argued for universal healthcare, a program that, had it become reality, might have relieved GM and the other domestic carmakers of that burden. In testimony before Congress in 2006, GM's former chairman, Rick Wagoner, said the company had spent $5.3 billion on healthcare in 2005 alone, more than it had spent for steel. Elsewhere, Wagoner said healthcare was the single biggest competitive disadvantage the company faced, amounting to a $1,500 handicap on every vehicle produced.

A Gore administration also would have raised fuel economy standards for carmakers and instituted a significant tax on gasoline; either move would probably have blunted GM's continuing and foredoomed reliance on the full-size truck and SUV market.

As it was, the board's pro-business patricians actively opposed the Gore candidacy. The irony is that the Big Government Democrat might have saved GM from the eventual ignominy of bankruptcy and government ownership.

It's not that GM hasn't tried to reform. It has. The alarming fact is that GM has done so much right and still failed.

In the last decade the company has slashed its white-collar and blue-collar work forces, closed plants, expanded in Asian markets and -- after an agonizing bit of backroom brinkmanship -- struck a deal with the UAW in 2007 that largely brought its labor costs in line with those of foreign manufacturers assembling cars in non-union shops. In the same agreement, GM and the UAW agreed to establish a union-run healthcare trust that would take much of the company's so-called legacy costs off its books.

Meanwhile, GM's cars and trucks have got vastly better and some -- the Corvette, the Cadillac CTS, the Saturn Vue and Aura -- are world class. One of the miserable consequences of the government-mandated restructuring is the sale of German subsidiary Opel, which makes cars for Saturn, and the loss of the Saturn division itself, which builds exactly the kinds of cars GM needs going forward. At the same time the company has poured $1 billion into a range-extended electric vehicle program, the Volt, as ambitious as anything in the company's history.

In the midst of turning the ship around, GM hit not one but three icebergs: the sudden collapse of the U.S. auto market, the sharp spike in gas prices and the crisis in credit. U.S. auto sales contracted from around 16 million vehicles a year in January 2008 to fewer than 10 million in March. GM's sales plummeted by roughly half, which meant it burned through its cash reserves much more quickly than anyone could have imagined and sent its total debt soaring to more than $60 billion.

Bankruptcy was not inevitable, until it was.

From a certain historical altitude, GM's problem is fairly simple to appreciate: Call it a prosperity hangover. The company acquired enormous momentum in the postwar boom when the United States was the world's only functioning economy. With no domestic peers and no overseas rivals, in a society frantic for mobility and flush with cash, GM became the colossal incumbent it was.

In the decades since 1962 -- the peak of its market dominance -- GM's singular dilemma has been servicing its own over-scaled nature as it competed against a succession of younger, smaller and more agile companies, primarily from Japan. To cite but one example: For years, critics of the company called for the elimination of the Oldsmobile division and the GMC truck division, which sold clonal versions of Chevy trucks. But GM found itself handcuffed to its obstreperous network of dealers who were protected by state franchise laws. It cost GM more than $1 billion to buy out Oldsmobile dealers when, at last, the division was closed in 2004.

GM also struggled with its vast and unresponsive, self-perpetuating bureaucracy. When Chairman Roger Smith -- the "Roger" in Michael Moore's skewering "Roger & Me" documentary -- attempted to streamline GM's back-of-the-house operations in the 1980s, the result was chaos.

Divisional managers openly subverted the reorganization, hiring new people and reestablishing the old chains of command until they had created a weird rump parliament inside the company. GM's capital outlays soared, while sales and quality plunged.

CONTINUED ON 20090601lat3

news20090601lat3

[Today's Newspaper] from [Los Angeles Times]

[Top News]
When cars were America's idols

Dan Neil
June 1, 2009

CONTINUED FROM 20090601lat2

To justify its own size, GM's bureaucracy was neurotically preoccupied with scale, market share and volume, while seemingly agnostic regarding profit. In 2002, GM execs took to wearing lapel pins with "29," indicating their goal to maintain a 29% U.S. market share (GM sales now represent about 20%). Lotus. Hummer. Saturn. Saab. Daewoo. All of these companies were purchased or established in an attempt to increase global volume. Add to that a series of wobbly strategic alliances with Fiat, Fuji Heavy Industries (Subaru), Suzuki and others, designed to help broaden its reach overseas even as the North American market was deteriorating.

In 1992, GM's revenue was $132 billion on sales of 7.7 million vehicles, with a net loss of $23.5 billion; in 2007, revenue was $181.1 billion on sales of 9.37 million vehicles with a net loss of $38.7 billion. In other words, the company was selling millions more cars and losing more money.

Large and mature, capital-intensive corporations can achieve a lot, but none ever downsizes gracefully. GM didn't, and Toyota won't when its time comes.

It will be painful, it will be ugly and there will be many losers, but GM will emerge out of bankruptcy, in all likelihood before the end of 2009. When it does, it will have shed many of its historical burdens and will still possess a talented workforce, significant physical assets and some of the best minds in the car business. A restructured GM will be a force to reckon with. If I worked for Ford or Toyota, I might be getting a little insomnia by now.

This could still be a great company, the company of Harley Earl and Bill Mitchell, of Olds Rocket 88s and Pink Cadillacs and Little Red Corvettes, the company that put a car on the moon, that killed and then resurrected the electric car. The post-imperial GM will be smaller, leaner, smarter and hungrier. I hope. Bankruptcy's purifying fire will burn away debt and, as important, a legacy of comfortable arrogance. And it will be truer than ever: What's good for GM is good for America.

news20090601nyt

[Today's Newspaper] from [The New York Times]

[Business]
G.M. to Seek Bankruptcy and a New Start

By DAVID E. SANGER, JEFF ZELENY and BILL VLASIC
Published: May 31, 2009

WASHINGTON — President Obama will push General Motors into bankruptcy protection on Monday, making a risky bet that by temporarily nationalizing the onetime icon of American capitalism, he can save at least a diminished automaker that is competitive.

The bankruptcy, to be filed in New York, is a moment of reckoning for an industry that was once at the heart of the American economy. It culminates a remarkable four months of confrontation between Washington and Detroit that is expected to result in a drastic downsizing of the company.

It also places the government in uncharted territory as a business owner, as it takes a 60 percent ownership stake in the company during its restructuring.

Reflecting the government’s extraordinary intervention in industry, aides say, Mr. Obama plans to tell the nation on Monday that he believes G.M. can be brought back from the brink of insolvency, even if the company looks almost nothing like the titan of old.

Meanwhile, a federal judge late Sunday night cleared a path for Chrysler to get out of bankruptcy by approving a sale of most of that carmaker’s assets to a new entity to be run by Fiat of Italy.

Administration officials briefed reporters on the G.M. plans Sunday night, as President Obama began to inform members of Congress. But the White House insisted that the aides who talked to reporters could not be named.

In his remarks on Monday, Mr. Obama will spell out a strategy in which a shrunken G.M. can make money even if new car sales remain at a sluggish 10 million a year in the United States and even if G.M., once the giant of the industry, drops below its current 20 percent market share in this country.

But to get there, American taxpayers will invest an additional $30 billion in the company, atop $20 billion already spent just to keep it solvent as the company bled cash as quickly as Washington could inject it. Whether that investment will ever be recovered is still an open question.

The company will also have to shed 21,000 union workers and close 12 to 20 factories, steps that most analysts thought could never be pushed through by a Democratic president allied with organized labor.

Forty percent of the company’s 6,000 dealers will close, the workers’ union will be forced to finance half of its $20 billion health care fund with stock of uncertain value in the restructured G.M., and bondholders, including many retirees, will be forced to take stock worth 10 cents for every dollar they lent the company.

The company’s last steps toward bankruptcy took place over the weekend as a majority of G.M. bondholders agreed not to challenge the filing in court and to exchange their debt for stock.

Lawrence H. Summers, who as head of the National Economic Council serves as one of the co-heads of the auto task force, argued in an interview on Sunday that the bailout of the auto industry was fundamentally different from the Mexican bailout in 1994, the Asian economic crisis in the late 1990s, and the continuing banking crisis.

General Motors and Chrysler, he said, were “clear cases of insolvency,” in which mere loans would not accomplish the goal of getting the automakers past a temporary crisis. “There was no argument that they were solvent, no argument they could meet their obligations.”

He said that left the Obama administration to decide whether to allow “a laissez-faire, uncontrolled bankruptcy, which would have had an enormous cost,” or a “controlled process,” in which the goal was to make sure that the auto companies not only restructured, but were not overburdened with debt. So, in return for what amounted to debtor-in-possession financing, Mr. Obama chose to accept equity in the new company — while insisting that he had no intention of exercising day-to-day control over the company.

“It’s a fine line,” Mr. Summers said, “but we think it is manageable.”

To assist in the restructuring, the automaker is expected to hire the consulting firm Alix Partners, which has worked on several major bankruptcies, including those for Enron and Kmart. One of the firm’s partners, Al Koch, is expected to manage the liquidation of corporate assets that G.M. will shed during its Chapter 11 restructuring, people with knowledge of the strategy said.

Mr. Obama is taking several risks under the plan. None may be bigger than the decision that the United States government will take its 60 percent share of the stock in a new G.M., leaving taxpayers vulnerable if the overhaul is not successful. (Canada, for its part, is taking a 12 percent stake.)

“We don’t think that after this next $30 billion, they will need more money,” one administration official said. “But the fact is there are things you don’t know — like when the car market will come back, and how much Toyota and Honda and Volkswagen will benefit from the chaos.”

On Monday, Mr. Obama is expected to argue that any alternative to his plan would be worse, and that a liquidation of G.M. — the only other real option — would send the unemployment rate soaring over 10 percent and would radiate damage throughout the economy.

But aware of the hardships the plan will impose on regions across the country that depend on auto production, the White House is dispatching a dozen Cabinet members and other officials across four states this week to reassure residents.

Aides say Mr. Obama will portray himself on Monday as a reluctant shareholder, eager to sell the company back to private investors, perhaps within 6 to 18 months.

Officials say the president will insist that once the government sets up new management and a board of directors, it will remove itself from G.M.’s day-to-day operations. But even his aides anticipate intense pressure as the company’s managers are called to testify in Congress and face questions like why they decided to build new cars in Mexico and South Korea, rather than in Michigan or the South.

“Congress and many Americans are going to say, if we own it, why can’t we make these decisions?” one of Mr. Obama’s top economic aides said, “and it’s going to be a challenge to answer that.”

To ease the way, the White House on Sunday briefed reporters on a new set of principles for how the government should behave as a majority shareholder. It argued that the government’s role should be limited primarily to the beginning of the process, but that it should then recede, becoming a passive investor, one seeking to sell its stake quickly.

At the same time, Mr. Obama has laid out goals for all the Detroit automakers that will presumably affect their major strategic decisions. He has urged them, for example, to build smaller cars with significantly better fuel efficiency.

Six months ago, even the suggestion of such deep intervention into G.M.’s operations would have raised huge objections. But by the time the denouement came, the company seemed almost relieved. Robert Lutz, G.M.’s vice chairman, said that “for the first time in our history, the American auto industry has the ear of the administration. Their number one goal is to make us successful.”

Nonetheless, Michael Useem, a professor of management at the Wharton School at the University of Pennsylvania, said the decision would “mean a new chapter in the history books on American capitalism.” He added, “How we think about American free enterprise is really hanging in the balance.”

For Mr. Obama, whose ascent to the White House depended on carrying states across the industrial Midwest, the political risk is significant.

The G.M. bankruptcy will ripple across several states where hundreds of parts suppliers and car dealerships face imminent closings.

Indeed, the four states where Cabinet secretaries are focusing their efforts this week — Indiana, Michigan, Ohio, Wisconsin — all were carried by Mr. Obama last November. It was the first time Indiana has supported a Democratic presidential candidate in 44 years.

These Main Street political challenges will almost certainly be an issue for Democrats on the ballot in next year’s midterm election campaign and in the president’s own re-election effort in 2012. If those jobs shift to nonunion plants in the South, where German and Japanese carmakers have built their facilities, or overseas, Mr. Obama could face criticism inside his own party.

“It is unacceptable to ask U.S. workers to subsidize the exportation of their own jobs,” said Representative Dennis Kucinich, Democrat of Ohio, whose district includes Cleveland. “The taxpayers’ investment should be used to protect American plants so that American workers can build the next generation of automobiles.”

In his presidential campaign speeches last year, often delivered in the shadow of closed manufacturing plants, Mr. Obama bluntly conceded that most of the jobs would not come back. Instead, his administration is pointing to investments that the economic recovery act will make in communities.

Rob McNabney, chairman of the Madison County Democratic Party in Anderson, Ind., a onetime booming automotive center, said the problems for Mr. Obama were severe. “He’s going to be judged by what he does,” Mr. McNabney said.

news20090601wt

[Today's Newspaper] fom [The Washington Post]

[Business Policy]
U.S. Gets Majority Stake in New GM
Firm's Investors Cry Foul Over Bankruptcy Plan

By Peter Whoriskey
Washington Post Staff Writer
Monday, June 1, 2009

The Obama administration plans to take the next step toward resuscitating the American auto industry today, sending General Motors, the storied manufacturer, into bankruptcy protection.

The court filing will mark the end of financial independence for the 100-year-old industrial leviathan that once conflated its interests with the country's and that employed well over 1 million people, counting jobs at the company and at its suppliers.

The purpose of the bankruptcy is to restructure the automaker, as the government has been attempting do with Chrysler, having GM emerge from the process smaller, with fewer workers and brands, less debt, but also more viable.

The United States will invest another $30 billion during and after the GM bankruptcy process, bringing the U.S. commitment to $50 billion.

Following that infusion, "the U.S. Treasury does not believe or anticipate that any additional assistance to GM will be required," a senior administration official said Sunday night, calling the restructuring a "permanent" solution.

Under the proposed restructuring, about 60 percent of the new GM would be owned by the United States, about 12 percent by the governments of Canada and Ontario, a union health trust would own 17.5 percent, and the company's current bondholders would get 10 percent.

But as the administration builds the case for another massive infusion of government money into the automaker, it is also dealing separately with accusations that its plan unfairly favors the United Auto Workers at the expense of the company's investors.

The fairness issue will be central as the GM bankruptcy case goes before a judge this week: Does the government-sponsored restructuring plan equitably accommodate all of the company's stakeholders?

It is a legal and a political question, pitting company workers against investors, and it will be debated in and out of court.

Similar complaints arose from Chrysler's creditors, mainly banks and hedge funds, but Obama dismissed some of the lenders as mere "speculators," and their legal claims have failed to gain traction in court.

GM's creditors, however, consist of thousands of investors, individuals as well as institutions. One group of individual investors, calling themselves the Main Street Bondholders, have already organized to protest their treatment. And their claims have been echoed by some in Congress.

"The proposal seems to favor the rights and claims of the UAW, a political ally of the current administration and a powerful lobbying force in Washington, over the rights and claims of the company's diverse group of bondholders," according to a letter from 20 House members, led by Rep. Jeb Hensarling (R-Tex.), to Treasury Secretary Timothy F. Geithner. "Contractual rights of investors are being trampled by the government under the rationale of 'extraordinary circumstances.' "

After the governments, there are two primary GM stakeholder groups to which the company owes $20 billion or more: the bondholders and the union's retiree health-care trust.

As the company has leaned toward bankruptcy, the union and the bondholders have regarded one other warily because in any restructuring their claims will be weighed side by side.

About $27 billion in GM bonds are held by institutions and individuals. They have been asked to give up those bonds in exchange for 10 percent ownership in the restructured company, along with the right to buy a larger stake later.

The retiree health fund of the United Auto Workers, by comparison, is owed $20 billion by GM. In exchange for that claim, the retiree health trust is being asked to accept a 17.5 percent stake in the company, as well as $9 billion in notes and preferred stock.

Critics say it is unfair that the restructuring plan gives the union health trust a larger share of the new GM than the bondholders. But administration officials defend the plan, offering several justifications.

First, they note that the terms of the proposed GM restructuring echo the terms laid out by the Bush administration in December, when it extended $13.4 billion in loans to GM.

The Bush administration's loan agreement required a 50 percent reduction or "haircut" for the union trust, but a 66 percent cut for the bondholders. The Obama deal requires larger cuts for both sides, though more for the bondholders.

Administration officials assert moreover that it makes business sense that different creditors are treated differently.

They note, for example, that the government has taken steps to protect customers who hold GM warranties, pledging to stand behind those agreements, as well as providing assurances to the company's suppliers. The GM restructuring plan deems it important to favor those two classes of creditors.

"If you eliminate the warranty holders' claims, those individuals are not likely to buy another GM car," an administration official said. "If you don't pay the suppliers and you put them out of business, well, it's hard to build cars without steering wheels. The union workers are no different. They don't have to show up again in the morning."

For the same reasons, there are a number of precedents for retiree health funds getting preferential treatment during bankruptcies, particularly in the steel industry in recent years when Bethlehem Steel and others were sold off.

"We felt that we needed the strong support of the union going forward," said Wilbur Ross, who ran the private-equity firm that acquired Bethelem after its 2001 bankruptcy filing. "It's one thing to compromise a union contract. It's another thing to get them working with good morale.

"The only difference here is that you have the government playing the role of the vulture investor," Ross added. "They are the only ones willing to make this investment, so they're calling the shots."
A critical legal issue is whether the bondholders might be able to get more for their debt if the company were simply liquidated, the proceeds distributed among those with claims.

But administration officials say that the bondholders would receive even less for their investments if GM were liquidated. In that case, the company's other creditors, such as the government, would be paid off first, they note. Yesterday, it was announced that 54 percent of bondholders had approved the deal.

"By the time you finished liquidating GM, there would be nothing for them," an administration official said yesterday.

The Chrysler bankruptcy has gone far faster than many in the industry had predicted. Obama administration officials say the case of GM, a much larger and more global company, will probably take longer.

GM will close 11 factories and idle another three.

The president plans to speak this morning about the automaker's prospects, perhaps echoing a former GM president, who during his confirmation hearings to become defense secretary in the 1950s, testified that he saw little difference between the national interest and GM's.

"For the better part of a century, The General Motors Corporation has been one of the most recognizable and largest businesses in the world," the Obama administration said in a statement released last night. Monday "will rank as another historic day for the company -- the end of an old General Motors, and the beginning of a new one."

news20090601gdn1

[News > Environment] from [The Guardian]

[Environment > Deforestation]
Amazon rainforests pay the price as demand for beef soars
Inquiry highlights concerns over ranching in heartland of Brazil

David Adam in Maraba
guardian.co.uk, Sunday 31 May 2009 22.33 BST
Article history

Four-year old Daniel Santos da Silva and his older brother Diego Mota dos Santos, 10, heard their first gunshots in April. Their father was shot in a dispute over land on a cattle ranch near the Brazilian town of El Dorado, in the Amazonian state of Para. The boys heard he was taken to hospital, but they have not seen him since.

The ranch is called Espirito Santo, holy spirit, though goodwill to all men is hard to find there. Heavily armed guards protect the thousands of cattle that roam its lush pastures and the hacienda-style complex built on a hill at the farm's centre, complete with swimming pool.

Daniel and Diego live on the muddy fringe of the farm in a hastily erected collection of palm frond-roofed huts to shield them and a hundred-odd other families from regular tropical downpours. They are squatters, but squatters rights are rarely observed in Para.

Espirito Santo and thousands of farms like it raise cattle on Amazonian pasture that was once rainforest. The farms are huge, and so is their impact. The cattle business is expanding rapidly in the Amazon, and now poses the biggest threat to the 80% of the original forest that still stands. Where loggers have made inroads to the edge of the forest in the states of Para and Mato Grosso, farmers have followed.

A report today from Greenpeace details a three-year investigation into these cattle farms and the global trade in their products, many of which end up on sale in Britain and Europe. Meat from the cattle is canned, packaged and processed into convenience foods. Hides become leather for shoes and trainers. Fat stripped from the carcasses is rendered and used to make toothpaste, face creams and soap. Gelatin squeezed from bones, intestines and ligaments thickens yoghurt and makes chewy sweets.

Greenpeace says it has lifted the lid on this trade to expose the "laundering" of cattle raised on illegally deforested land.

The environment campaign group wants Brazilian companies that buy cattle to boycott farms that have chopped down forest after an agreed date. To get the industry onside, it is seeking pressure from multinational brands that source their products in Brazil, and, ultimately, from their customers. Three years ago, a similar exposure of the trade in illegally grown Brazilian soya brought a rapid response from the industry, and a moratorium on soya from newly ­deforested farms that still holds.

Last month, the Guardian joined Greenpeace on an undercover visit to the cattle farming heartland around the town of Maraba, deep inside the Amazon region. While saving the rainforest is a fashionable cause in faraway developed countries such as Britain, in Maraba it is a provocative and even ­dangerous ideal.

Many people in Maraba work at the slaughterhouse perched on a hill that overlooks the town. The facility is owned by the Brazilian firm Bertin, one of the companies targeted by Greenpeace for buying cattle from farms linked to illegal deforestation. After slaughter, Greenpeace says Bertin ships the meat, hides and other products to an export facility in Lins, near Sao Paolo. From there, they are shipped all over the world. The firm is Brazil's second largest beef exporter and the largest leather exporter. It is also the country's largest supplier of rawhide dog chews.

Bertin denies taking cattle from Amazon farms associated with deforestation. The company says it "makes permanent investments in initiatives that minimise impacts resulting from its activities" and that it seeks "to be a reference in the sector". It says it has already blacklisted 138 suppliers for "irregularities".

Brazilian government records obtained by Greenpeace show that 76 cattle were shipped to the Bertin slaughterhouse in Maraba from Espirito Santo farm in May 2008. Another 380 were received in January this year.

Standing on Espirito Santo's shady veranda, Oscar Bollir, the farm manager, insists they do nothing wrong.

Under Brazilian law, such farms inside the Amazon region must retain 80% of the original forest within their legal boundary. So why is there pasture for as far as the eye can see? The farm is very big, Bollir says, and most of the required forest is on the other side of some low-slung hills in the distance.

The squatters on the farm, part of a political movement to settle landless people on illegally snatched farmland, are troublemakers, he says. "They don't want land they just want trouble. They want to take all the farms." Earlier that day, he says, he and his men had been forced to visit a neighbouring farm where squatters had killed cattle. Unlike the previous incident on Espirito Santo, when Daniel and Diego's father was shot alongside several others, Bollir says, this time there had been no trouble.

He adds that he is aware of environmental concerns, but that his priority is to produce food and jobs. "Why are these other countries looking at Brazil and telling us what to do?"

The next day, Greenpeace investigators flew over Espirito Santo – the group has a single-engined plane donated by an anonymous British benefactor. Bollir's promised bonanza of forest was not there. GPS data combined with satellite images show that just 20% to 30% of the farm is forested. A local lawyer also reported that during the nearby dispute over the killed cattle, three squatters had been shot and injured.

The Greenpeace report identifies dozens of farms like Espirito Santo that it says break the rules across Para and Mato Grosso to supply Bertin and other slaughter companies. Campaigners say there are probably hundreds or even thousands more.

Cheap pasture from clearing and seeding rainforest is very attractive to farmers without easy access to the expensive agrichemicals and intensive land management techniques used in more developed countries. Within a few years, the planted pasture becomes overrun with native grass, unsuitable for cattle. Many farmers then take the cheap option and knock down adjoining forest to start again, leaving swaths of unproductive deforested land in their wake.

Andre Muggiati, a campaigner with Greenpeace Brazil based in the Amazon town of Manaus, says efforts to protect the forest in frontier regions such as Para are crippled by a lack of effective governance. Government inspections are inadequate and many farms are not even registered so checks cannot be carried out. Casual violence and intimidation are common. "It's totally unregulated and many people behave as if the law does not apply to them. It's like the old US wild west," he says.

Illegal deforestation is not the only problem: farms are regularly exposed as using slave labour, and, like many tropical forest regions, there are regular and violent clashes over land ownership.

The problem is clear a three-hour flight across the patchy forest from Maraba, where a clearing on the side of the river is home to a few hundred Parakana people, a tribe with no contact with the outside world until 1985.

Greenpeace can only reach the village because its plane is equipped to land on the sluggish water, but cattle farmers are steadily intruding. Hundreds of farms have been set up in the surrounding reserve, and they are not welcome.

"Since the invaders arrived there have been many problems," says Itanya, the village chief. Food is harder to find, he says, and discontent is growing. "If the government don't find a solution we will solve it ourselves. We know how to make poison arrows and we are ready to kill people." It is not an idle threat: in 2003 the bodies of three farmers were discovered in the jungle not far from the village. Itanya says it was the work of a neighbouring group.

"We asked them many times to stay away," Kokoa, the chief of the neighbouring group, told the Guardian through an interpreter. "They wouldn't, so one time we said to them that you will never go back and you will stay here forever. We killed them. We are proud that we defended our land."

Food for thought

How much of the Amazon rainforest has been lost and how quickly?

Since the 1970s, when satellite mapping of the region became available, around a fifth of the rainforest has been destroyed, an area the size of California. Greenpeace US estimates that, between 2007 and 2008, another 3m acres (1.2m hectares) have been destroyed.

What is driving the destruction?

Logging, cattle farming and soy plantations are key, plus the increased construction of dams and road, and shifting patterns of farming for local people and mining (for diamonds, bauxite, manganese, iron, tin, copper, lead and gold). These factors are often interlinked – trees are cut down for timber and the cleared land can be used for grazing cattle. Soybeans are then cultivated on the same land. Land is also cleared for biofuel crops. According to Greenpeace, around 80% of the area deforested in Brazil is now cattle pasture. Brazil's biggest export markets for beef are Europe, the Middle East and Russia. Friends of the Earth Brazil estimate that cattle farming in Brazil has been responsible for 9bn-12bn tonnes of CO² emissions in the past decade, almost equivalent to two years worth from the US. Infrastructure projects such as hydroelectric dams also threaten the forests because they cause large areas to be flooded. Currently, the biggest planned project is the Tocantins River basin hydroelectric dam, the effects of which stretch over a distance of 1,200 miles.

CONTINUED ON 20090601gdn2

news20090601gdn2

[News > Environment] from [The Guardian]

[Environment > Deforestation]
Amazon rainforests pay the price as demand for beef soars
Inquiry highlights concerns over ranching in heartland of Brazil

David Adam in Maraba
guardian.co.uk, Sunday 31 May 2009 22.33 BST
Article history

CONTINUED FROM 20090601gdn1

Why are cattle a particular problem?

In 2006, the UN Food and Agriculture Organisation found that the livestock industry, from farm to fork, was responsible for 18% of all anthropogenic greenhouse gas emissions. In addition, livestock-rearing can use up to 200 times more water a kilogram of meat compared to a kilo of grain. Furthermore, global meat consumption is on the rise, having increased by more than two and half times since 1970.

Who is trying to stop the destruction?

At this year's climate change negotiations in Copenhagen, governments will consider the "Redd" mechanism. This is the idea that richer countries could offset their carbon emissions by paying to maintain forests in tropical regions. The idea has roots in the 2006 review of the economics of climate change by Nicholas Stern, who said £2.5bn a year could be enough to prevent deforestation in the eight most important countries. But Friends of the Earth says the proposals seem to be aimed at setting up a way to profit from forests, rather than stop climate change, and fail to protect the rights of those living in the forests.

In 2007, Greenpeace also came up with a plan to stop deforestation in the Amazon by 2015. It included creating financial incentives to promote forest protection; and increased support for agencies to monitor, control, and inspect commercial activities. So far, only some of these proposals have been taken up by the Brazilian government. Alok Jha


[Environment > Travel and Transport]
Rail industry urges shorter trains off-peak to cut carbon emissions

Dan Milmo
The Guardian, Thursday 28 May 2009
Article history

The rail industry is urging the government to run shorter trains in order to meet Britain's climate change obligations. Removing carriages outside rush hour would conserve energy and reinforce rail's reputation as one of the greenest modes of transport, says an industry manifesto published today.

Network Rail, owner of rail infrastructure, and the Association of Train Operating Companies (Atoc) argue they can help reduce carbon dioxide emissions by 20% by 2020 by running shorter trains at off-peak times. Network Rail said: "It's about matching supply to demand and not transporting carriages full of air around the country."

Train operators have also mooted cutting carriages in response to the recession, which is depressing passenger numbers and threatening the future of franchises that have pledged billions of pounds worth of payments to the government. Ministers have so far rejected the idea.

The rail industry also raises funding concerns in the planning document, entitled Britain's Railway from 2014. It warns that the latest five-year plan for the railways, which runs until 2014, might have overestimated passenger numbers.

Railway funding over the next five years is predicated on farepayers footing three-quarters of the bill by 2014. However, Atoc has warned that total passenger numbers could fall over the next two years, contradicting expectations in the five-year plan of 3% annual passenger growth. Industry commentators have said that could result in franchises handing back contracts.

The document advocates an ambitious five-year plan from 2014 onwards, including a high speed line linking London to Birmingham and the north; more station improvements; electrification; and a bigger push for rail freight. It warns that urban rail services in south-east England are reaching capacity, even with the longer trains due by the middle of the next decade. Ministers will have to consider building new lines or changing timetables.


[Environment > Wilelife]
Bumblebee extinct in Britain to be reintroduced from New Zealand
Short-haired bumblebee first transported on lamb boats makes return trip to Britain to stem decline in species vital for pollination

Press Association
guardian.co.uk, Monday 1 June 2009 10.10 BST
Article history

A bumblebee which died out in the UK, but survived in New Zealand after being shipped there more than a hundred years ago, is to be reintroduced here under plans announced today.

Small populations of the short-haired bumblebee were established on the South Island of New Zealand after being transported there on the first refrigerated lamb boats in the late 19th century to pollinate crops of red clover.

The bees will not suffer from jet lag as they will be in hibernation whhen they are transported on planes in cool boxes, according to Natural England.The short-haired bumblebee became extinct in this country in 2000, but the populations on the other side of the world have clung on — although conservationists say they are unprotected and under threat.

Now Natural England, along with the Bumblebee Conservation Trust (BBCT), the RSPB and bee research charity Hymettus, have launched a scheme to bring the species home.

Poul Christensen, Natural England's acting chairman, said: "Bumblebees are suffering unprecedented international declines and drastic action is required to aid their recovery.

"Bumblebees play a key role in maintaining food supplies — we rely on their ability to pollinate crops and we have to do all we can to provide suitable habitat and to sustain the diversity of bee species.

"This international rescue mission has two aims — to restore habitat in England, thereby giving existing bees a boost; and to bring the short-haired bumblebee home where it can be protected."

Insects will be collected in New Zealand and a captive breeding plan established, with a view to releases of the bees from 2010 at Dungeness, Kent, where they were last seen.

The scheme's project officer Dr Nikki Gammans said the bumblebee was a "keystone species" which was vital for ecosystems and were key to pollinating around 80% of important crops here.

And she said: "By creating the right habitat for these bumblebees, we are recreating wildflower habitat that has been lost, which will be good for butterflies, water voles and nesting birds."

Gammans said the main reason for the declinein bumblebee species in the UK, where many are under threat and several are "on the brink", was the destruction of habitat and wildflowers.

"Over the last 60 years, we've lost 98% of our wildflower meadows," she said.

"Since the Second World War, grants were given to farmers to dig up the countryside and use more intensive methods such as pesticides, which has dramatically affected bumblebees."

But using agri-environmental schemes which reward farmers for taking bee-friendly measures such as leaving wildflower strips at the side of crop fields and grazing land less intensively, it is hoped the species can make a comeback.

Gammans said she had received a fantastic response from local farmers in Romney Marsh, near Dungeness, who recognised the value of the bumblebee as a key pollinator of crops.

The RSPB reserve at Dungeness, one of the last remaining areas where the short-haired bumblebee existed before extinction, had lots of native wildflowers and been managed for red clover which is "fantastic" for bees.

Gammans has already been over to New Zealand to collect some bees which are now at London Zoo being assessed for the risk they may bring back diseases.

She plans to return to the other side of the world in December and collect as many as 50 to 100 bees, which can be used in a captive breeding programme to support multiple releases of the species back in England over several years.

It is hoped the reintroduced bees will not go the way of those which disappeared from this country, because of the efforts to restore habitat on farms in the South East and on the reserve at Dungeness.

Malcolm Ausden, an ecology adviser at the RSPB, said that as the reserve was the last place the short-haired bumblebee was seen — in 1988, before being declared extinct in 2000 — it was fitting there should be attempts to reintroduce it there now.

And he said: "The site is a haven for bumblebees and a huge amount of work has been done to improve the site for them and encourage the flowering plants they love."

news20090601slt

[Today's Paper] from [Slate Magazine]

GM Bankruptcy: An American Revolution

By Daniel Politi
Posted Monday, June 1, 2009, at 6:39 AM ET

This is it. After months of speculation, General Motors will file for Chapter 11 bankruptcy early this morning. The iconic automaker, once seen as synonymous with American capitalism and only 10 years ago was the world's largest company, will be nationalized. The United States will invest $30.1 billion in the company, on top of the $20 billion it has already spent on propping up the automaker. The Los Angeles Times (LAT) points out that GM will now be "the second-largest recipient of bailout money, behind insurance giant American International Group." USA Today (USAT) notes that GM, unlike Chrysler, will not announce a companywide plant shutdown. Under the current restructuring plan, the U.S. government would get about 60 percent of the new GM, the governments of Canada and Ontario would get 12 percent, 17.5 percent would go to a union retiree-health trust, and bondholders would get 10 percent. The Washington Post (WP) devotes much of its piece to looking, once again, at how the government will have to deal with claims that its restructuring plan favors the United Auto Workers at the expense of regular investors. "The fairness issue will be central as the GM bankruptcy case goes before a judge this week," notes the Post.

The New York Times (NYT) points out that the restructuring plan "places the government in uncharted territory as a business owner," while the Wall Street Journal (WSJ) says that it sets up "a high-stakes gamble for U.S. taxpayers." Administration officials insist they don't plan on putting any more money into the company, even as they recognize that there are still unknowns, such as when the car market is going to stage a comeback, that could change the equation. In his speech today, President Obama is expected to argue that the government had no choice but to get involved because a GM liquidation would have reverberated across the wider economy and sent the unemployment rate soaring. At the same time, he will insist that the government doesn't want to get involved in the automaker's day-to-day operations.

The WSJ notes that filing for bankruptcy protection "should allow GM to pull off one of the most expedient downsizings in the industry's 120-year history." The country's largest automaker has often been accused of moving slowly when faced with problems, but now the goal is that a smaller GM will emerge in two to three months and will be more competitive in the marketplace. "Today will rank as another historic day for the company," the White House said in a statement, "the end of an old General Motors and the beginning of a new one." But even after this new GM emerges, the government will still have to deal with the parts of the company that nobody wants, which could take years and might cost taxpayers even more money.

All the papers take pains to point out that while GM's bankruptcy filing had been expected, it is still "a startling development," as the LAT puts it. In a front-page look at how the country's largest automaker got into the situation it's in today, the NYT declares that "[r]arely has a company fallen so far and so fast as General Motors." The automaker often used "its sheer size … as a trump card to end debates," notes the NYT. Executives "became practiced at the art of explaining their problems, attributing blame to everyone but themselves" while ignoring growing problems in the company's business strategy.

The LAT's Dan Neil writes that "it's hard not to see GM's bankruptcy as a signal moment in a larger history. If mighty GM can fail, cannot also the United States? And the answer is, absolutely." The company's stark decline is "a rebuff of the notion of exceptionalism," notes Neil. "Any organization that fails to sufficiently safeguard its means of self-correction and reform, that forsakes long-term investment for short-term gain, that piles up debt year after year, will eventually fail, no matter how grand its history or noble its purpose."

Everyone fronts the murder of George Tiller, one of the few doctors in the country who provided late-term abortions. Tiller, who had survived numerous attacks throughout the years, was shot and killed yesterday in the lobby of his church in Whichita, Kan., where he was serving as an usher. Police later apprehended a 51-year-old man. Police believe the gunman acted alone, but they're still investigating to see whether he had any connections to any one the anti-abortion groups that frequently protested outside Tiller's practice, one of only three in the country that, under certain conditions, provided abortions to women in their third trimester. Of course, prominent anti-abortion groups denied they had anything to do with this and condemned the act. Tiller, 67, provided abortions for more than three decades, and was often on the receiving end of threats and harassment from the most virulent opponents of the practice. His clinic was bombed in 1986 and he was shot in both arms in 1993. Tiller also successfully defended his practice in a number of legal challenges.

Tiller is the fourth abortion provider to be killed in the United States since 1993, and the first since 1998. The LAT notes that the murder, "plunges the debate over legalized abortion back in time," to an era when attacks on abortion providers were distressingly commonplace. Attorney General Eric Holder said last night that the U.S. Marshals Service will move to protect abortion providers and facilities to "help prevent any related acts of violence." Some note that while attacks may have dropped when abortion foes had an ally in the White House with President Bush, that doesn't mean it couldn't increase again now that there's a pro-choice president. "When social movements feel they're not getting anywhere, they get desperate," one sociology professor tells the LAT. "This is deeply tragic but unsurprising." Others caution against tying the acts of radical extremists to political trends.

Slate's Emily Bazelon writes in Double X that the killing of Tiller "is a reminder, as if we needed one, of why so few doctors dare to become abortion providers outside big cities, why even fewer perform late-term abortions, and of the bravery it takes to be a member of these small bands."

The WP fronts word that officials are optimistic that Pakistani military offensive against the Taliban around the Swat Valley, coupled with the continuing drone attacks along the border with Pakistan, could offer new opportunities to disrupt the al-Qaida network. One U.S. counterterrorism official tells the paper that al-Qaida militants "seem to be feeling a heightened sense of anxiety." The offensive against the Taliban in Swat is likely to force al-Qaida to come out from hiding and communicate more openly. But it's unclear whether Pakistani forces will be able to take advantage of these opportunities "before they vanish," notes the Post. Even though cooperation between the United States and Pakistan has improved lately, relations remain tense. And Pakistan remains reluctant to accept too much U.S. assistance to track down militants using drones.

The WSJ fronts a look at how the U.S. command in Afghanistan has been releasing numbers of every enemy fighter killed in combat. It marks the first time the military has released such detailed body counts since the Vietnam War, when the practice was common. But there's still great debate within military circles about the value of keeping close track of these numbers, particularly in a war that is not being fought over clear front lines and that has more to do with getting the allegiance of the local population. Some think that advertising the dead might turn Afghans against Western service members; they argue it takes attention away from rebuilding efforts. But proponents of the practice insist it's a useful tool to counter Taliban propaganda and make it clear to the American people that they're making progress. It has also become a contentious issue with allies, who are against releasing body counts, which means the NATO-led forces almost never release tallies of dead enemy fighters.

The NYT says that when Conan O'Brien officially takes over The Tonight Show, "it will mark an unusually peaceful transition of power in Hollywood." The "revolution" will come when Jay Leno begins his own 10 p.m. show, which "may be among the most pivotal changes since the network evening newscasts were expanded to 30 minutes, from 15, in 1963." If it's successful, The Jay Leno Show could change the face of prime-time and motivate networks to nix scripted programming in favor of less expensive shows. One television expert tells the paper that prime time has long "looked pretty much the same," but putting Leno's show against an expensive scripted program "is the biggest sign yet that we're really, finally entering a whole new ballgame."

news20090601abc

[News > International] from [abcNEWS]

Air France Jet Missing Over Atlantic
Air France Plane With 228 on Board Goes Missing Over the Atlantic

By AMMU KANNAMPILLY
June 1, 2009

The lost Air France plane that left Rio de Janeiro for Paris Sunday night is still missing this morning and authorities worry that the plane crashed somewhere in the Atlantic Ocean. "We can fear the worst," Dominique Bussereau, France's transportation minister, told Europe-1 radio today.

An Air France spokesperson told ABC News today that the airline was "without any news from Air France flight 447 from Rio to Paris with 216 passengers on board and a crew of 12 people ... three pilots and nine flight attendants. Air France is very concerned about the emotions and worries of the families involved."

The plane lost contact with air traffic controllers in the early hours of the morning. An airport official told the news agency Agence France Presse (AFP) that the flight had been expected to land in Paris today at 11:10 a.m. local time.

The Brazilian air force confirmed to ABC News that the plane was missing and said they had two planes out -- a P95 and a C-130 Hercules -- on a search-and-rescue mission near Fernando de Noronha Islands, off the coast of North East Brazil and 1,500 miles from Rio. French reconnaissance planes are also said to be involved in the search operation, with one of them leaving from Dakar, Senegal, earlier today.

An Air France spokesperson told the Associated Press that the flight left Rio Sunday night around 7 o'clock local time.

The head of Air France, Pierre Henri Gourgeon, told reporters at a news conference that the plane's last radio contact with Brazilian air control was at 1:30 a.m. GMT. After experiencing turbulence and thunderstorms over the Atlantic at 2:15 GMT, an automated message was sent to air traffic controllers saying the plane had experienced an "electrical short circuit."

France's Environment Minister Jean Louis Borloo brushed off rumors of a hijacking, telling reporters that the plane probably suffered an accident of some kind.

An Air France spokesperson told AFP that the plane was probably struck by lightning and suffered an electrical failure as it flew through a storm in the Atlantic.

In an interview with the AP, aviation expert Chris Yates of Jane's Aviation said that the likely "conclusion to be drawn is that something catastrophic happened on board that has caused this airplane to ditch in a controlled or an uncontrolled fashion."

He added, "I would suggest that potentially it went down very quickly and so quickly that the pilots on board didn't have a chance to make that emergency call."

Hope Fading for Missing Passengers, Crew

Hope is now fading for the passengers and crew of the missing aircraft, which include seven children, a baby, 126 men and 82 women.

The plane's manufacturer, Airbus, released a statement saying it would be "inappropriate for Airbus to enter into any form of speculation into the causes of the accident.

French President Nicolas Sarkozy also shared his "extreme worry" over the missing plane and has sent ministers to Paris' Charles de Gaulle airport to monitor the situation. Sarkozy himself is due to arrive at the crisis center this morning.


Out of Gas: GM Files for Bankruptcy
The Government Will Take a 60 Percent in the Automaker, Which Will Begin a Chapter 11 Bankruptcy Restructuring

By MATTHEW JAFFE and CHARLIE HERMAN
WASHINGTON, June 1, 2009

General Motors has filed for bankruptcy, becoming the country's second automaker after Chrysler to go under in just over a month.

GM president and CEO Fritz Henderson said in a statement issued by the company this morning that the nation's largest automaker now has an opportunity to "reinvent" its business.

"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," he said.

The Obama administration has agreed to provide GM an additional $30.1 billion in federal assistance to support the company's restructuring. The administration announced the funding on Sunday night, on the eve of a 60-day period that the Obama administration gave GM to come up with a successful viability plan.

The administration said yesterday that it had accepted GM's viability plan, which includes entering into Chapter 11 bankruptcy protection. GM is expected to emerge as a new company in 60 to 90 days.

According to its bankruptcy filing, the automaker currently has $172.8 billion in debts and nearly $82.3 billion in assets.

"The U.S. Treasury does not believe or anticipate that any additional assistance to GM will be required," a senior administration official said. "We intend for this to be a permanent resolution of the GM situation and an ability for the company to go forward and be profitable."

GM revealed more details today about its plans to become profitable. Much of the company's plans entail transforming GM into a considerably leaner organization: The automaker, which has already announced tens of thousands in layoffs, will further slash its North American hourly workforce from 35,100 to roughly 27,200 and will reduce benefits for both salaried and non-union hourly retirees. GM also named 14 plants and three parts distribution centers that will close or be idled by 2014, including seven plants in Michigan.

The job cuts and factory closures are part of GM's efforts to shrink operations to meet a car sales environment in which just 10 million cars are sold annually in the United States, down from a 15 to 17 million in early years.

The company will also discontinue four brands -- Saturn, Saab, Hummer and Pontiac -- and close approximately 2,600 dealerships.

But not all operations at GM are shrinking: The company also announced today that a "re-tooled" assembly plant staffed by UAW workers will produce a new, small GM car. The company said it has not yet decided which plant that will be.

"The economic crisis has caused enormous disruption in the auto industry, but with it has come the opportunity for us to reinvent our business," Henderson said. "We are going to do it once and do it right."

Playing a key role in GM's reorganization will be Albert Koch, who has been named the company's chief restructuring officer. Koch, a managing director at the turnaround firm AlixPartners, helped steer Kmart through its Chapter 11 restructuring in 2002.

Government Gets Majority GM Stake
Under GM's restructuring plan, the U.S. government will receive $8.8 billion in debt and preferred stock in the new company and nearly 60 percent equity in return for its $30 billion in funding.

In addition, the government will have the right to appoint initial directors to GM's board except for two members, one to be appointed by the Canadian government and the other selected by the trustees of the United Auto Workers union retiree health care fund.

The governments of Canada and Ontario will provide $9.5 billion to GM and will receive $1.7 billion in debt and preferred stock and 12 percent equity in the company.

The independent trust established for GM retiree health care benefits will receive $2.5 billion paid in three installments ending in 2017 as well as $6.5 billion in 9 percent preferred stock.

The trust -- referred to as the VEBA -- will also receive 17.5 percent equity in the new GM and the right to purchase an additional 2.5 percent stock.


Changes to GM's Labor Contracts
The UAW has agreed to significant changes to its existing labor contract and union retirees will see their health care cut.

Finally, bond holders representing nearly 54 percent of GM's $27 billion unsecured debt have agreed to swap out the debt for 10 percent equity in the new GM as well as the right to purchase an additional 15 percent equity in the new company.

"UAW members have once again stepped up to make necessary and painful sacrifices to preserve U.S. manufacturing jobs," UAW president Ron Gettelfinger said in a statement Friday. "This settlement agreement will give GM a chance to survive the worldwide collapse of industry sales and return as a viable company once the economy recovers and consumers begin purchasing vehicles again." While the government will now be the majority shareholder in the new GM, senior administration officials stressed that the government will not interfere in the day-to-day operations of the new company.

Speedy Bankruptcy Seen as Critical to GM's Survival
As a shareholder, however, the administration said it would only vote on core government issues including selecting the board of directors and other major corporate issues in order to protect taxpayer dollars. No government employee will be allowed to serve on the board or work for the company.

"The equity ownership of the U.S. government is not something we sought or desired," a senior administration official said. "It was simply a necessary outcome of the restructuring process out of the desire to have GM with a substantially deleveraged balance sheet and able to be competitive."

"There are a number of principles that are going to govern our behavior as a shareholder in this company and others -- one of which is no involvement in day-to-day business matters and that will be a continuing principle for us," another official added, noting that "we certainly intend to maximize taxpayer proceeds ... but we also intend to exit as soon as possible."

CONTINUED ON news20090601cnn

news20090601cnn

[News > International] from [abcNEWS]

Out of Gas: GM Files for Bankruptcy
The Government Will Take a 60 Percent in the Automaker, Which Will Begin a Chapter 11 Bankruptcy Restructuring

By MATTHEW JAFFE and CHARLIE HERMAN
WASHINGTON, June 1, 2009

CONTINUED FROM news20090601abc

Bankruptcy always appeared to be the most likely option for the automaker. The company and the administration alike now hope that a speedy restructuring will ultimately result in a leaner, more profitable automaker. Obama will give remarks on GM's bankruptcy filing today at noon in Washington, quickly followed by a news conference from GM's senior leadership in New York.


[Detrot's Downfall] from [cnnNEWS]

GM bankruptcy: End of an era
After years of losses, the troubled automaker is forced into bankruptcy. GM is set to close a dozen facilities and cut more than 20,000 jobs.

By Chris Isidore, CNNMoney.com senior writer
Last Updated: June 1, 2009: 10:24 AM ET

NEW YORK (CNNMoney.com) -- General Motors filed for bankruptcy protection early Monday, a move once viewed as unthinkable that became inevitable after years of losses and market share declines which were capped by a dramatic plunge in sales in recent months.

In the end, even $19.4 billion in federal help wasn't enough to keep the nation's largest automaker out of bankruptcy. The government will pour another $30 billion into GM to fund operations during its reorganization.

Taxpayers will end up with a 60% stake in GM, with the union, its creditors and federal and provincial governments in Canada owning the remainder of the company.

Owners of GM cars should see little change as a result of the bankruptcy since warranties will still be honored. But there will be plenty of pain caused by the bankruptcy and the company's efforts to stem losses.

GM will shed its Pontiac, Saturn, Hummer and Saab brands and cut loose more than 2,000 of its 6,000 U.S. dealerships by next year. That could result in more than 100,000 additional job losses if those dealerships are forced to close.

0:00 /1:17American motorists sound off
A dozen facilities were identified for closure, resulting in 20,000 job losses. Assembly lines in Pontiac, Mich., which make full-size pickup trucks, will be closed later this year. A Wilmington, Del.-based plant that makes roadsters for the Pontiac and Saturn brands, will also close later this year.

Three parts distribution warehouses are set to close at the end of this year, while five engine plants and a stamping plant are due to close in 2010. An additional stamping plant is set to close in 2011.

Three more plants. including assembly lines in Spring Hill, Tenn., and Orion, Mich.,are set to be idled and put on stand by status in hopes for a rebound in sales that may never come.

Pain for retirees, investors
More than 650,000 retirees and their family members who depend on the company for health insurance will experience cutbacks in their coverage, although their pension benefits are unaffected for now.

Investors in $27 billion's worth of GM bonds, including mutual funds and thousands of individual investors, will end up with new stock in a reorganized GM worth a fraction of their original investment.

Owners of current GM (GM, Fortune 500) shares, which closed at just 75 cents a share on Friday, will have their investments essentially wiped out.

Officials from the Obama administration and the United Auto Workers union both have said they hope to sell their stakes in GM as soon as possible, but it is likely that shares of the new GM will not be publicly traded for at least a year or two.

The bankruptcy filing will also spark the removal as of June 8 of GM from the Dow Jones industrial average, a distinction it has held since 1925. The company will be replaced in the Dow by technology giant Cisco Systems (CSCO, Fortune 500), Dow Jones said.

President Obama is due to address the nation later Monday to make the case why the bankruptcy and the additional federal help was necessary. CEO Fritz Henderson, who is expected to continue running the company, will speak in New York shortly after the president finishes his remarks.

GM and the Treasury Department were able to get key concessions from the unions and major bondholders in the past two weeks. Those deals paved the way for a cleaner bankruptcy process, one that a senior administration official said Sunday could allow GM to emerge from the bankruptcy process in only two to three months.

GM faced a deadline from the Treasury Department to come up with a plan to turnaround the company or file for bankruptcy by June 1. The company also owed its bondholders $1 billion in interest payments on June 1, money it did not have available to pay.

According to GM's bankruptcy filing , the company has assets of $82.3 billion, and liabilities of $172.8 billion. That would make GM the fourth largest U.S. bankruptcy on record, according to Bankruptcydata.com, just behind the 2002 bankruptcy of telecom WorldCom.

Three of the largest bankruptcies in history - GM, Wall Street investment bank Lehman Brothers and savings and loan Washington Mutual, have occurred in the last nine months.

Plans for a 'new' GM
GM will use the trip into bankruptcy court to shed the plants, dealerships, debt and other liabilities it can no longer afford. Emerging out of bankruptcy quickly will be a "new GM," made up of the four brands that GM will keep in the U.S. market -- Chevrolet, Cadillac, GMC and Buick -- as well as many of its more successful overseas operations.

This is the same process that Chrysler LLC used in its bankruptcy process. Chrysler filed for bankruptcy April 30, and the judge in that case approved the creation of a new company that will be run by Italian automaker Fiat in a ruling Sunday.

GM, being a larger, more complicated and global company than Chrysler, is not expected to have its valuable units exit bankruptcy quite as quickly, though.

The new GM will have only $17 billion in debt, rather than the $54.4 billion it owed as of March 31. The unions' new contracts with the company and GM's underfunded pension funds will stay with the new company.

But for the turnaround to be successful, both outside experts and company officials agree there needs to be improvement in U.S. auto sales, which have fallen to a 26-year low this year.

Sales plunge the final blow
GM has been hit harder than most of its competitors during the sales slump. The company's U.S. sales through April were down 45% from a year ago, compared to a 37% decline for the overall industry.

GM also faces tough competition from Toyota Motor (TM) and Ford Motor (F, Fortune 500), which are both in much stronger financial condition.

Even though Ford has reported years of losses as well, it had far more cash on hand than GM or Chrysler going into this crisis. The same is true for Toyota, which reported a loss in its recently completed fiscal year.

GM's decision to shed its weaker brands and dealers is expected to lead to further market share losses, which could result in the company giving up its long-time position as the largest automaker in terms of U.S. sales.

The company already lost the global sales title to Toyota last year, and it could soon fall behind Toyota and possibly Ford in the U.S. as well.

news20090601rtr1

[Top News] from [REUTRS]

[News > Article]
GM files for bankruptcy, Chrysler sale cleared

Mon Jun 1, 2009 9:51am EDT
By Kevin Krolicki and John Crawley

DETROIT/WASHINGTON (Reuters) - General Motors Corp filed for bankruptcy on Monday, forcing the 100-year-old automaker once seen as a symbol of American economic might and dynamism into a new and uncertain era of government ownership.

The bankruptcy filing is the third-largest in U.S. history and the largest ever in U.S. manufacturing.

The decision to push GM into a fast-track bankruptcy and provide $30 billion of additional taxpayer funds to restructure the automaker, is a huge gamble for the Obama administration.

But in a sign of progress in the government's high-stakes effort, a bankruptcy judge approved the sale of substantially all of U.S. automaker Chrysler's assets to a group led by Italy's Fiat SpA in an opinion filed late on Sunday.

Chrysler's bankruptcy, also financed by the U.S. Treasury, has been widely seen as a test run for the much bigger and more complex reorganization of GM.

President Barack Obama hailed the decision, saying it "paves the way for the new Chrysler to successfully emerge from bankruptcy as a new, stronger, more competitive company for the future."

The administration's ambitious plan for GM is for a quick sale process that would allow a much smaller company to emerge from court protection in as little as 60 to 90 days.

"Now the hard part begins, which is making GM and Chrysler competitive. If they don't do that, then we'll be doing this all over again in a few years," said Christopher Richter, an auto analyst at CLSA Asia-Pacific Markets in Tokyo.

"The immediate implication is that the companies are going to get smaller and so market share is up for grabs, which means that rivals like Toyota, Honda, Nissan and Hyundai are going to gain share."

GOVERNMENT LIFELINE

Since the start of the year, GM has been kept alive with U.S. government funding as a White House-appointed task force vetted plans for a sweeping reorganization that will be undertaken with $50 billion in federal financing.

By taking a 60 percent stake in a reorganized GM, the Obama administration is gambling that the automaker can compete with the likes of Toyota after its debt is cut by half and its labor costs are slashed under a new contract with the United Auto Workers union.

The federal government of Canada as well as the province of Ontario agreed to provide another $9.5 billion to GM in a late addition to the plans for the bankruptcy.

GM plans to close 11 U.S. facilities and idle another three plants. It has not provided an updated target for job cuts but had been looking to cut 21,000 factory jobs from the 54,000 UAW workers it now employs in the United States.

The UAW would have a 17.5 percent stake in the "new GM." The Canadian government would own 12 percent and GM bondholders would get 10 percent.

RELUCTANT INVESTOR

Officials involved in the planning for GM said the White House was a "reluctant investor" in GM, but had to prevent a liquidation that analysts say would have cost tens of thousands of jobs at a time when the economy is mired in recession.

GM alone employs 92,000 in the United States and is indirectly responsible for 500,000 retirees.

"We want a quick, clean exit (from bankruptcy) as soon as conditions permit," U.S. Treasury Secretary Timothy Geithner told students at Peking University in Beijing. "We're very optimistic these firms will emerge without further government assistance."

Obama is due to speak on the auto industry shortly before noon (1600 GMT) on Monday. A news conference by GM Chief Executive Fritz Henderson is set to follow.

U.S. officials said there was no plan to provide any further funding for GM and insisted that all of the Detroit Three could survive. Ford Motor Co has not sought emergency federal aid.

In the case of GM, the goal of restructuring is to allow it to return to profitability if U.S. industrywide auto sales recover even slightly to near 10 million annually.

Until now, to stop losing money, GM had counted on a recovery to the 16 million mark the industry last saw in 2007, officials said.

CAREFULLY ORCHESTRATED FAILURE

GM's bankruptcy, which was approved by the automaker's board after a weekend of deliberations, is the most carefully orchestrated Chapter 11 filing in the history of American business.

The automaker's final descent started with President George W. Bush's administration's emergency aid announcement on December 19, and accelerated in late March when the new Obama government gave it 60 days to restructure.

While the "new GM" is expected to emerge quickly from court protection, its shuttered plants, stranded equipment and other spurned assets would be left to liquidation in bankruptcy.

Al Koch, a managing director at advisory firm AlixPartners LLP, will be appointed chief restructuring officer in charge of liquidating those GM assets.

A veteran restructuring adviser, Koch has had prominent roles in Kmart Corp's restructuring and other turnarounds.

Over the weekend, GM won support for the government's plan from investors representing 54 percent of the company's $27 billion in bondholder debt.

Bondholders could take up to 25 percent of GM if it recovers to be worth what it was in 2004.

Founded in 1908, GM rose to dominate the U.S. and global auto industries under the stewardship of pioneering Chief Executive Alfred Sloan, who famously pledged that the automaker would deliver "a car for every purse and purpose."

By the mid-1950s, at the peak of its success, GM had some 514,000 employees. It accounted for about half of U.S. car production and its sales were twice as large as the No. 2 corporation, Standard Oil.

GM's stock fell to 75 cents on Friday, a level last seen during the Great Depression.

Before U.S. financial markets opened on Monday, GM's stock was ejected from the Dow Jones industrial average.

The bankruptcy case is In re: General Motors Corp, U.S. Bankruptcy Court, Southern District of New York, No. 09-50026.

news20090601rtr2

[Top News] from [REUTRS]

[Top News]
Air France plane crashes into Atlantic with 228 aboard

Mon Jun 1, 2009 10:30am EDT
By Estelle Shirbon

PARIS (Reuters) - An Air France plane with 228 people on board was presumed to have crashed into the Atlantic Ocean on Monday after hitting heavy turbulence on a flight from Rio de Janeiro to Paris.

Air France said the Airbus flew into stormy weather four hours after its scheduled take-off from the Brazilian city and shortly afterwards sent an automatic message reporting electrical faults.

Company spokesman Francois Brousse said several of the plane's mechanisms had malfunctioned, preventing it from making contact with air traffic controllers.

"It is probably a combination of circumstances that could have led to the crash," he said.

The airliner might have been hit by lightning, he said.

The Brazilian air force said the plane was far out over the sea when it went missing. Military planes took off from both Brazil and Africa to hunt for it.

Flight AF 447 left Rio de Janeiro on Sunday at 7 p.m. (2200 GMT) and had been expected to land at Paris's Roissy Charles de Gaulle airport on Monday at 11:15 a.m. (0915 GMT).

The carrier said 216 passengers were on board, including seven children and one baby, and 12 crew members. Air France said the pilots were highly experienced.

Tearful relatives and friends were led away by airport staff after they arrived at Roissy expecting to greet the passengers.

About 20 relatives of passengers on board the flight arrived at Rio's Galeao airport on Monday morning seeking information after hearing news of its disappearance.

Bernardo Souza, who said his brother and sister-in-law were on the flight, complained he had received no details from Air France.

"I had to come to the airport but when I arrived I just found an empty balcony." he said. "With a lack of information, it is even more worrying."

Senior French government minister Jean-Louis Borloo ruled out the possibility of a hijacking.

"It's an awful tragedy," he told France Info radio.

If no survivors are found it will be the worst loss of life involving an Air France plane in the firm's 75-year history.

SCOURING THE OCEAN

The jet's last known location was unclear and Brazil's air force said it had no contact with the plane after 0133 GMT.

Brazilian air force planes had taken off from the island of Fernando de Noronha off Brazil's northeast coast to look for the Air France jet, a Brazilian spokesman said. The Brazilian navy said it had sent three ships to help in the search operation.

Jean-Christophe Rufin, France's ambassador in the west African country of Senegal, told French iTele that aircraft had also taken off from there to search for the missing Airbus.

Brazil's air force said that when the plane left its radar area at 0148 GMT it had been flying normally at an altitude of 35,000 feet and at 453 km per hour. It failed to make contact at the next attempt half an hour later at 0220.

An air traffic controller at ASECNA in Dakar, which covers Francophone Africa, said they did not take control of AF 447.

The plane was an Airbus 330-200 powered with General Electric engines. If the plane is confirmed to have crashed, it would be the first time an A330 has been lost during an operational airline flight.

Air France said the plane had 18,870 flight hours on the clock and went into service in April 2005. Its last underwent maintenance in a hangar in April this year.

The last major incident involving an Air France plane was in July 2000 when one of its Concorde supersonic airliners crashed just after taking off from Charles de Gaulle Airport, Paris, bound for New York.

All 109 people on board were killed along with at least four on the ground.

In August 2005, an Air France Airbus burst into flames after shooting off the runway at Toronto airport following a storm. No one died in the crash.