US government prodding General Motors into partial bankruptcy: report
13 Apr 2009
President Barack Obama's automotive task force is directing General Motors to prepare for a partial bankruptcy by 1 June, even as the ailing auto major is trying to negotiate concessions from bondholders and the United Autoworkers Union.
Government officials are continuing talks with GM management and advisors to lay the groundwork for bankruptcy filing even as the Treasury is extending $13.4 billion in aid to GM, The New York Times reported citing people familiar with the matter.
The Company will keep a bankruptcy petition ready for filing if it cannot reach agreement with bondholders and labor unions, the Times said.
The plan, according to the report, is to establish a company that would be able to purchase the assets of "good" assets quickly in the event of a bankruptcy, leaving the old GM in possession of less attractive assets - such as unpopular brands, manufacturing facilities and healthcare obligations -- that could be liquidated at a slower pace.
GM could go through a two-week bankruptcy protection process in perhaps two weeks, even though the automaker has publicly stated it could reorganise outside of court, the Times quoted a source as saying.
GM, which is operating under emergency US government loans, has been told by the automobile task force that it must cut costs and reduce debts in order to continue to receive aid.
Cash-strapped GM has 60 days to come up with a restructuring plan and it is trying to determine whether the automaker can be a viable company.
GM is in negotiations with bondholders to restructure around $28 billion in debt into equity in GM and with the United Automobile Workers union.
