Daily Auto News Reports: GM in “Intense” Bankruptcy Preparation
Daily Auto News
Executives at General Motors, several media reports say, are heavily engaged in preparation for a possible bankruptcy filing.
Reuters reports, “GM edged closer to preparations for possible bankruptcy on Wednesday, a source familiar with the company’s plans said.” The source, never identified in the Reuters report, called the company’s bankruptcy preparations “intense,” and “earnest.” GM “has until June 1 to complete a reorganization plan,” or face the end of federal aid, and almost certain bankruptcy.
The Detroit Free Press reports, “A plan to split the corporation into one made up of the most successful units and another with its less-profitable units is gaining momentum and is seen as the most sensible configuration, said another source familiar with the talks.” That plan would leave GM’s most troubled brands for the courts to restructure or liquidate, while creating a new, leaner company out of the brands with the best survival odds. It would, however, mean that “GM bondholders are likely to lose substantial value in bankruptcy and that certain GM dealer and litigation claims would be hurt.”
New GM CEO Fritz Henderson seemed open to the idea in an interview with Motor Trend. Henderson told MT, “I’ve watched some bankruptcies work. I’ve found them to be generally sloppy and value-destructive so I think I’ve learned about, you know, what are the risks of bankruptcy.” He went on to say, “I think the issues will be how do we work together to make it more successful.” He added, “If I didn’t want to be part of a bankruptcy, I would have said ‘no’” when offered the chance to replace former CEO Rick Wagoner late last month.
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