Task Force Tells GM to Prepare for 'Surgical' Bankruptcy
Sources close to the plans say that President Obama’s auto task force has ordered GM to prepare the groundwork for a “surgical” bankruptcy, even as GM executives publicly stand by their out-of-court restructuring plans.
Fritz Henderson, GM’s Obama-ordained CEO, has openly admitted that bankruptcy is very much an option on the table if the automaker is unable to make progress with the UAW and bondholders. Last week, he said that GM is looking at both deepening and quickening the measures from the restructuring plan it submitted to Congress, while preparing for a filing at the same time.
“If we need to resort to bankruptcy, we have to do it quickly,” Henderson said in an interview with the Canadian Broadcasting Corporation.
One plan the task force is looking into was mentioned last week by GM Chairman Kent Kresa. In that plan, a new company would be created with all of GM’s “good” assets, such as the Chevrolet, Cadillac, GMC and Buick brands, while the old company would be saddled with the “bad” ones, like Saab and Saturn. Eventually, the company with the undesirable assets would be liquidated.
In one of the considerations, the “good G.M.” would get through the bankruptcy process in as little as two weeks, using federal funding in the $5 to $7 billion ballpark. The company with the other assets could require up to $70 billion or more in government financing to resolve health care obligations and factory liquidation.
Sources also said that Delphi has been given an April 17 deadline to iron out a deal with GM over the automaker’s financial support of its former parts maker. The deadline could be pushed back to April 24, but if an agreement is not made, Delphi – which has been under bankruptcy protection for the last three years – could be forced to liquidate.
On March 30, President Obama said GM would have 60 days to re-negotiate the terms of its restructuring plan with the UAW and bondholders, or else the Treasury would call back its loans and force the automaker into bankruptcy.
Source: The New York Times