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New GM CEO prepared to bankrupt the companyUPDATE #2 The U.S. Treasury Department is advising General Motors to prepare for a possible bankruptcy filing by June 1, the New York Times is reporting. GM's new chief has expressed a desire to restructure outside of bankruptcy, but some experts tell the Times there's little chance of that. The plan is being made in case GM is "unable to reach agreement with bondholders to exchange roughly $28 billion in debt into equity in G.M. and with the United Automobile Workers union," according to the article.
04/07/09 General Motors Corp. is speeding up preparations for a possible bankruptcy filing even as directors seek deeper savings this week to avoid that outcome, people familiar with the plans said. The bankruptcy readiness focuses on forming a new company from GM’s best assets if necessary, said the people, who asked not to be named because the matter is private. The cost-cut discussions center on how to go beyond GM’s proposal to slash debt by 46 percent and shed 47,000 jobs in 2009, and will include talks with Treasury officials, the people said.
The moves are a response to President Barack Obama’s March 30 rejection of GM’s bid to keep $13.4 billion in federal loans. With bondholders and the United Auto Workers balking at concessions, a push for more savings makes bankruptcy more “probable,” Chief Executive Officer Fritz Henderson has said.
GM’s board met today and yesterday, and more discussions are planned inside GM and with the Obama administration, the people said. Obama gave the biggest U.S. automaker 60 days to restructure, without specifying what steps were needed to stem $82 billion in losses since 2004.
Planning for a court filing was ratcheted up in February as a precaution against a defeat for GM’s bid to keep its U.S. loans, the people said. Detroit-based GM said it prefers to restructure outside bankruptcy court.
GM’s preparations include looking at a so-called 363 sale, a reference to a section of the Chapter 11 bankruptcy code that would help create a new automaker from the assets and brands of GM, boosting the company’s survival chances, the people said. More at Bloomberg
04/01/09 New General Motors Corp. CEO Fritz Henderson is willing to take the struggling automaker into bankruptcy if necessary and signaled such a move could come quickly if GM determines it can't meet the government's 60-day deadline for more aggressive restructuring.
Henderson's candid comments Tuesday during his first press conference as GM's chief executive were in stark contrast to his predecessor, Rick Wagoner, who steadfastly maintained that bankruptcy would put GM out of business. Henderson said bankruptcy is not his preferred option but GM will do "whatever it takes" to reinvent itself as a competitive automaker. "We will get the job done," he said. "We will do it out of court, or we will do it in court."
A bankruptcy filing would allow GM to take dramatic steps to wipe out debts and slash costs, affecting an array of stakeholders including shareholders, bondholders, suppliers, dealers and the United Auto Workers.
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