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General Motors and Chapter 11

Perhaps the most notable bankruptcy in the recent decade is that of the infamous General Motors. As the poster child of the recession, it perfectly showcased the economic decline of the United States and its strong recovery since. From its controversial government bailout to its vast company overhaul, GM has managed to emerge out of bankruptcy stronger than it ever has been.

General Motors filed for chapter 11 bankruptcy on June 1, 2009, and was the fourth largest filing in U.S. history. Chapter 11 bankruptcy also known as the “reorganization” plan, allows for a company to retain ownership as a debtor in possession so long as the company be restructured and revitalized. The company was then completely reorganization from the bottom up, selling 4 of its 12 brands as well as undergoing a major brand marketing overhaul. From there, GM was able to secure its famous 51 billion dollar government bailout. The U.S. Treasury used the money to buy GM stock and thus flood it with investment money, however, the Treasury only managed to receive back 39 billion of tax payer money upon selling its shares. According to Bradford Law Offices, PLLC, the debtors reorganization plan must be approved by the creditors committee before approval of the application. The government was clearly well aware of General Motor’s business plan and whether the Treasury should of offered GM a loan instead of buying stock is still a debated topic today. After only one year, GM was able to raise 20 billion dollars at its IPO which was the largest IPO launched in history at the time.

From the depths of bankruptcy, GM has now been able to see huge profits earning 22.6 billion only 5 years after filing for bankruptcy. The bailout was said to have saved 1.2 million jobs and 34 billion in tax revenue, according to USA Today. The GM bankruptcy does raise the question whether a business can be too big to fall and its implication on a free market. Regardless, GM has returned from bankruptcy as a fine-tuned money making machine, making cars faster and better than ever before.