Wednesday, April 15, 2009

U.S. government directs GM on quick bankruptcy filing: report

The U.S. government is directing General Motors in preparations for a quick "surgical" bankruptcy filing with a June 1 deadline, the New York Times reported Sunday, citing unnamed sources.

The newspaper said the filing is being prepared in case the automaker cannot reach a deal with its debt holders to convert $28 billion US in current debt into equity in the company, and reach a deal on concessions with the United Auto Workers.

Members of U.S. President Barack Obama's automotive task force are due to meet with GM this week, following meetings and conference calls last week.

One plan being suggested would see the "good" assets of GM quickly put into new company in the event of a bankruptcy filing. The remaining "bad" assets, including weak brands, factories and health-care obligations, would remain in the old GM and be liquidated over time.

The Times said new, "good" GM might require between $5 billion and $7 billion in financing from the U.S. government, while estimates say the remainder of GM — the "bad" assets — might need up to $70 billion US in government backing.

GM CEO Fritz Henderson has said a bankruptcy filing is a possibility, although the company has also said it would prefer to restructure without going to court. He said last week the company is preparing for either course.

"If we need to resort to bankruptcy, we have to do it quickly,” Henderson said last week in an interview with CBC.