GM, Task Force preparing for "surgical" bankruptcy
According to a lengthy report by the New York Times, the Treasury Department is directing General Motors to begin work on a bankruptcy filing by June 1. Based on sources close to the talks who were unable to officially discuss the process, the report outlines the "fast 'surgical' bankruptcy" of the automaker if GM is unable to reach an agreement with the UAW and bondholders to exchange some $28 billion in debt into equity in the automaker.The plan, which needs to address every aspect of the company, aims to make the bankruptcy filing as quick and painless as possible so the General can avoid tarnishing its already damaged image and stem the sales slide experienced over the last six months. One consideration is to break up GM into two separate entities after the filing, which would bundle and separate the automaker's good and bad assets. The positive portions of the automaker would "enter and exit bankruptcy protection in as little as two weeks, using $5 billion to $7 billion in federal financing." The bad bits, including lackluster brands (Hummer, Pontiac, Saab and Saturn), bloated dealer networks, extra manufacturing capacity and health care obligations would be left in the "old" GM and liquidated over the course of several years.
President Obama's automotive task force has been in close contact with GM officials over the last week and those talks will continue into this week. And in an about-face from the Wagoner administration, GM's new CEO, Fritz Henderson, has begun to indicate that bankruptcy is a strong possibility, going so far as saying during a Canadian Broadcasting Corporation interview, "If we need to resort to bankruptcy, we have to do it quickly."
[Source: NYT | Image: Bill Pugliano/Getty]
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Reader Comments (Page 1 of 4)
MastrCake 12:46AM (4/13/2009)
Whatever happens to GM, I wish them the best.
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A-style 7:08AM (4/13/2009)
I'm sorry for all of those who are going to lose their jobs when we finally get to chapter 7.
inteller 9:23AM (4/13/2009)
Chapter 7? Wow I might get a good deal on a Corvette if it comes to that.
Too bad it won't get to that.
jav 10:39AM (4/13/2009)
@inteller: youre such an idiot for joking around like that. you dont relealize the implications of this bankruptcy protections. i hope you realize as soon as GM gets rid of all these people and close down all these plants. they will too have to cut shorts of contracts such as IT, electrical, phone companies, travel, cleaning contracts, suppliers, and restaurants and other services surrounding GM, not to mention the workers who do the same in their own time by taking vacations and buying useless stuff thats made by companies in other states such as the one you may live in. so this ripple affect is going to be much greater than you think it is. and just because you may drive a honda, or live in california or whatever you do or live, its going to affect you too....
Julius 12:28AM (4/14/2009)
"Surgical Bankruptcy"? Where's Dr. Kevorkian when you need him?
D3LM3L 12:52AM (4/13/2009)
I think their image might actually improve after the bankruptcy, or at least that of the new brand based off their "good" assets; it will be seen as a brand with potential and reason to have survived.
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Ken 12:55AM (4/13/2009)
Honestly, I will feel better when they just file. As it is now, they are in a very bad place, and declaring bankruptcy will put them in a better position and make them stronger.
At least that is my opinion.
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BoxerFanatic 1:06AM (4/13/2009)
wow, is this GM or MG?
This has been tried before... and failed. Ask the British...
Who would want non-cashable equity in a company that is going from un-repayable government bailouts, going into bankruptcy, and subject to more and more governmental control, including CEO replacement.
This already is government motors, if not in actuality, then at least in functional aspects, with the illusion of shareholder ownership.
Stockholders, bondholders, and the taxpayer dollars already infused are likely to be gone, and the government isn't likely to let people cash out what "equity" they already have.
Stocks and bonds are already somewhat equity vehicles. What would it mean that they would be transferred to equity that is not able to be liquified into cash? It sounds more like, ummm.... taxes.
This sort of manipulation isn't going to end well, and is still prolonging, and worsening, the inevitable. The only way to fix the situation is for the government to get out, and the rest of the people involved to get a clue how to do business and make good cars. shuffling three empty shells is still a losing game, no matter which shell you pick.
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Kitko 9:40AM (4/13/2009)
Exactly.
Anyone remember British Leyland? Or the brands it used to comprise? The billions British governments poured in? What's left is Britain turned into manufacturing playground of German and Japanese companies with couple of other nations (India, Malaysia, Quatar, Russia) having their bits and pieces too. The only British car manufacturer is London Taxi Company.
GOT 11:54AM (4/13/2009)
Hopefully this will cause GM to start building cars worth desiring and the money they ask for.
PJ 2:16PM (4/13/2009)
I, too, fail to understand how so many conservative, capitalist individuals can rally around the creation, in essence, of a state car manufacturer.
Then again, I suppose "This is our country. This is our truck" is the sort of tagline ZAZ or Trabant would've used.
izorro 1:09AM (4/13/2009)
I feel bad for the brands that got tarnished during the fight most notably Pontiac, Saturn, and to some extent Saab
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Protzenegger 1:17AM (4/13/2009)
As much as I want GM to get out of this in as good a shape as possible, I won't miss Pontiac. Their only desirable cars right now are the Solstice (which is already several years old) and the G8, neither of which I've seen that often. I can hardly see a reason to keep Pontiac alive just to save 2 models.
Soccer Mom 8:57AM (4/13/2009)
Personally, I always found Pontiac to be more attractive than its Chevy siblings.
Nightcrawler 11:39AM (4/13/2009)
Well, if your desires run toward the practical, rather than toward performance, you'd have to include the Vibe as a desirable Pontiac as well. It's a good quality, reliable, fuel efficient vehicle even if it is rather boring.
PJ 2:14PM (4/13/2009)
Pontiac has always, at any given time, had one or two genuine attempts at good product, surrounded by a dumping ground of badge-engineered filler. The only reason for its existence, for 3+ decades now, has been the B-P-G dealership structure.
iQuack 1:17AM (4/13/2009)
Shareholders and taxpayers will get stiffed because the Democrat Party is owned by the labor unions (and also by trial lawyers).
So, expect the greedy, avaricious, corrupt, and overpaid unions to do relatively well in whatever kind of bankruptcy deal is created to save UAW jobs and benefits.
Unions are parasites that ultimately kill their hosts!
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ij70 1:59AM (4/13/2009)
In the past, the hosts have been known to kill the unionists. The existence of unions is necessary. I would not want to live in a world where only corporations have a say.
hokieman09 7:36AM (4/13/2009)
I understand what you mean iQuack, I do not completely agree with you on the parasite thing and hatred for the unions but I do think that if foreign auto makes produce cars here without unions that American car companies should too. It only make logical sense. Why show the big 3 have an unfair advantage in their own country. The unions have made it near impossible for the big three to change with the times like other manufacturers have. Honestly the industry would be better without them or if the foreign manufacturers unionized. This un-level playing field has to go.
caddy-v 1:18PM (4/13/2009)
One of my employees is retiring at the end of the month with 33 years as a teamster. His union pension will be around $2700.00 a month.
Hows your non-union 401K doing?