To stave off bankruptcy, General Motors must rework its union contracts, drastically cut its capacity, workforce and dealer networks – and convince creditors to take 10 cents on the dollar on $27 billion in unsecured debt. In two months. That's a herculean task for any company, much less for a monolith the size of The General.

While GM is publicly working to avoid bankruptcy, some experts feel the largest of the Detroit automakers is simply lining up its creditors to expedite its Chapter 11 bankruptcy plans. In a new report by The Associated Press, the chorus of doubters is getting louder: "'I just don't see how it's possible, given all of the pieces,'" the AP quotes bankruptcy specialist Stephen J. Lubben, a professor at Seton Hall University School of Law.

For its part, the Auto Task Force and the Obama administration seem to think that a "surgical" bankruptcy could last only one to two months, a feat that many bankruptcy lawyers think is optimistic at best. One sticking point of negotiations with creditors is the apparenly disproportionate allocation of GM shares. The current plan is for the US government to receive 50%, while the UAW receives 39% to pay for retiree health care. That leaves just 1% for shareholders, and 10% for creditors. $27 billion doesn't seem to buy much these days. If creditors ultimately don't agree to the governments demands, though, bankruptcy is virtually guaranteed.

Bankruptcy could also make the most sense in dealing with GM's dealership problem. The General needs to cut thousands of retail stores; a move that will undoubtedly cost a fortune, especially outside of bankruptcy.

Others see the threat of bankruptcy as a ploy to make labor concessions and heavy bondholder concessions sound like a gift from above. GM can point to the situation with Chrysler as proof of how fast chapter 11 can happen, giving creditors plenty of reason to see things the General's way. With GM's deadline to meet the terms of the government's terms for financial assistance less than three weeks away, we'll know all too soon whether or not GM is bluffing.

[Source: The Associated Press via Mlive | Image: Bill Pugliano/Getty]

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