David Kirkpatrick

May 11, 2009

GM closer to Chapter 11

Filed under: Business — Tags: , , , , — David Kirkpatrick @ 3:06 pm

Looks like General Motors will be declaring bankruptcy at some point. Despite all the noise to the contrary, this is — and has been for a while — the only real solution to what is going on in the Rust Belt. If done correctly GM will reemerge much leaner and ready to do business in today’s world. It’s been playing by its own unsustainable rules since the 80s.

From the link:

To remake itself outside of court, GM must persuade bondholders to swap $27 billion in debt for 10 percent of its risky stock. On top of that, the automaker must work out deals with its union, announce factory closures, cut or sell brands and force hundreds of dealers out of business — all in three weeks.

“I just don’t see how it’s possible, given all of the pieces,” said Stephen J. Lubben, a professor at Seton Hall University School of Law who specializes in bankruptcy.

GM, which is living on $15.4 billion in federal aid, faces a June 1 government deadline to complete its restructuring plan. If it can’t finish in time, the company will follow Detroit competitor Chrysler LLC into bankruptcy protection.

Although company executives said last week they would still prefer to restructure out of court, experts say all GM is doing now is lining up majorities of stakeholders to make its court-supervised reorganization move more quickly.

“If we need to pursue bankruptcy, we will make sure that we do it in an expeditious fashion. The exact strategies I’m not getting into today, but we’ll be ready to go if that’s required,” CEO Fritz Henderson said last week.

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