GM bankruptcy becoming more likely, CEO says

[Dragon]

http://business.theglobeandmail.com/servle...y/Business/home

TOM KRISHER

The Associated Press

May 11, 2009 at 11:44 AM EDT

DETROIT — Bankruptcy protection for the U.S.'s biggest auto maker is becoming more probable with a deadline just over two weeks away, the company's top executive told reporters Monday.

General Motors Corp. [GM-N] chief executive officer Fritz Henderson is still holding out hope that the company can restructure without court protection, but he says the tasks to complete before a June 1 government-imposed deadline are large.

The auto maker, Mr. Henderson said, is looking at its operations country-by-country to determine where it might have to file for bankruptcy, but he says a U.S. bankruptcy doesn't necessarily mean that GM would file in other locations.

“Certainly the task that we have in front of us is large,” Mr. Henderson said during a conference call updating the company's restructuring efforts. “There is still an opportunity and still a chance for it to be done outside of a court process.”

Fritz Henderson

General Motors CEO Fritz Henderson says any U.S. bankruptcy filing by the auto maker doesn't necessarily mean that GM would file in other locations.

General Motors

General Motors has received $15.4-billion (U.S.) in federal loans, and the government deadline to restructure or seek Chapter 11 protection is just over two weeks away. But the company must reach concessionary agreements with unions, persuade thousands of bondholders to exchange $27-billion in debt for 10 per cent of GM's stock, cut thousands of dealers, close plants and lay off more salaried workers.

Under Chapter 11 reorganization, a company can stay in operation under court protection while it sheds debts and unprofitable assets to emerge in a stronger financial position.

Also Monday, Mr. Henderson left open the possibility that GM would move its corporate headquarters out of Detroit. The company, he said, is looking at everything within its business.

“It's not like we have that queued up at the top of our list,” he said, adding that GM has a large number of people in Detroit and is proud to be here.

He would not comment about reports about Fiat Group SpA's interest in obtaining 80 per cent of GM's European Opel operations, saying that any structure must address the needs of both partners.

Mr. Henderson said GM has an urgent need for funding from the German government, so any partner for its European operations would have to be suitable to the government.

“We have a need for funding, actually, in our European business, that's important and urgent and the German government hasn't indicated an interest in running our business,” Mr. Henderson said. “We're going to make sure that any partner we pick in this business is going to be suitable for them, so that if we need their support, we obviously want them to find any partner to be reasonable and acceptable.

Mr. Henderson cast doubt on reports that GM may sell its Latin American operations, saying they have consistently brought great returns to the company.

“This is a business that we know and like very much,” he said.

GM is still in the process of negotiating with the United Auto Workers about six factories that the company intends to close, Mr. Henderson said, and it is negotiating with both the UAW and Canadian Auto Workers about concessions.

The company also plans to notify dealers later this week about its plans to reduce their ranks by about 2,600 by 2010. The company has 6,246 dealerships, many of which are not profitable because of lower sales volumes.

Mr. Henderson said GM has said the number of parties interested in its Hummer brand has dropped to two from three, and he expects a decision by the end of May. For GM's Swedish Saab unit, there are a number of interested parties, he said, adding that a resolution will take a month or two.

Negotiations are still under way to sell the Saturn distribution network, but GM would be open to selling factories to make the products if someone were interested, Mr. Henderson said.

“To date, haven't seen any specific proposals in that regard, but this is something we would be open to,” he said.

[gm4life]

Its about damn time. But this needs to be a TRADITIONAL bankruptcy not a pre-packaged deal. The only hope is the current bond holders tell the government to f***-off, and if they don't it will be a mess and I could be done with GM.

Edited May 11, 2009 by gm4life

[A Horse With No Name]

Trust me, this whole thing will be a mess for a long time to come.

You know my politics, GM4life...and this whole thing with the auto industry is just about enough to make me vote Republican in 2012 if we get a decent candidate.

I am just mad as hell about what's happening...and again, trust me, it's going to be a mess.

Your liberal buddy in Ohio,

Chris

[gm4life]

Trust me, this whole thing will be a mess for a long time to come.

You know my politics, GM4life...and this whole thing with the auto industry is just about enough to make me vote Republican in 2012 if we get a decent candidate.

I am just mad as hell about what's happening...and again, trust me, it's going to be a mess.

Your liberal buddy in Ohio,

Chris

I agree it is going to be a mess. Government should take care of the things they need too, like the economy and such. Not fixing the auto industry! I am mad as hell too, lets hope for the best and hope GM can get the fresh start and have the freedom they deserve.

[A Horse With No Name]

...agree 100 percent plus. Just stopped by the local Pontiac dealer on my way home, GM4life...have you seen the Solstice Targa in the flesh...er..um...sheet metal?

That thing has got to be one of the best looking cars ever, IMHO. If we could just get GM on the right track....AGHHHHHHH.

Suppose we could go rob a bank to the tune of 66 Grand so both of us could have a Sosltice GXP Targa in the garage, GM4life?

Chris

[Robert Hall]

Trust me, this whole thing will be a mess for a long time to come.

You know my politics, GM4life...and this whole thing with the auto industry is just about enough to make me vote Republican in 2012 if we get a decent candidate.

Your liberal buddy in Ohio,

Chris

It is a frustrating time, but I don't think I could ever vote Republican..I'd have to have a lobotomy first. I'm think had the other side won, things for the auto industry would be worse now...

[gm4life]

...agree 100 percent plus. Just stopped by the local Pontiac dealer on my way home, GM4life...have you seen the Solstice Targa in the flesh...er..um...sheet metal?

That thing has got to be one of the best looking cars ever, IMHO. If we could just get GM on the right track....AGHHHHHHH.

Suppose we could go rob a bank to the tune of 66 Grand so both of us could have a Sosltice GXP Targa in the garage, GM4life?

Chris

I'd like that alot, but would rather have a G8 GT/GXP or Camaro SS. I have seen them in the flesh once and loved it. If I were rich I would be buying Pontiac's up so fast it make your head spin.

[Robert Hall]

I'd like that alot, but would rather have a G8 GT/GXP or Camaro SS. I have seen them in the flesh once and loved it. If I were rich I would be buying Pontiac's up so fast it make your head spin.

The CTS, G8 GT/GXP, and Camaro SS are the only GMs I'd seriously consider buying in the near future..they are all so appealing. The Solstice and Sky are neat, but too impractical for me.

[gm4life]

The CTS, G8 GT/GXP, and Camaro SS are the only GMs I'd seriously consider buying in the near future..they are all so appealing. The Solstice and Sky are neat, but too impractical for me.

I like the CTS too, but if were going Caddy it would be a FWD luxo-barge that I always wanted a loaded DTS Platinum Performance in White Diamond!

[Robert Hall]

I like the CTS too, but if were going Caddy it would be a FWD luxo-barge that I always wanted a loaded DTS Platinum Performance in White Diamond!

Nothing wrong with that... the DTS does look awfully good in White Diamond. I'm more of a sports sedan fan, but I like the old school luxo boats, like the Town Car and the late Fleetwood Brougham..

[CSpec]

They should have gone into bankruptcy a few months ago.

[ZL-1]

Its about damn time. But this needs to be a TRADITIONAL bankruptcy not a pre-packaged deal. The only hope is the current bond holders tell the government to f***-off, and if they don't it will be a mess and I could be done with GM.

With bondholders, the UAW and management fighting each other, and adding the US Government to the circus, if a GM Ch11 filing goes the 'traditional' route, the company will end up in Ch7 in no time...

[Teh Ricer Civic!]

With bondholders, the UAW and management fighting each other, and adding the US Government to the circus, if a GM Ch11 filing goes the 'traditional' route, the company will end up in Ch7 in no time...

Yeah that's generally why there is a judge who presides over it.

It is no different than any other company who goes Ch. 11

Edited May 11, 2009 by Teh Ricer Civic!

[daves87rs]

They should have gone into bankruptcy a few months ago.

And it would have worked better too. Now it is going to be a bloodbath...

[David]

Dame greedy debt holders and the insurance they took out is why GM will be forced into Chapter 11.

Credit insurance hampers GM restructuring

By Henny Sender in New York

Published: May 11 2009 23:33 | Last updated: May 11 2009 23:33

Hedge funds and other investors stand to make billions of dollars on credit insurance contracts if GM de­clares bankruptcy, a prospect that is complicating efforts to persuade creditors to agree to a restructuring plan for the automaker, analysts say.

Holders of $27bn in GM bonds have until June 1 to decide whether to swap their debt for a 10 per cent equity stake in the company as part of an offer that would give the US government 50 per cent of the shares, a United Auto Workers union healthcare fund 39 per cent and existing shareholders 1 per cent.

Gread always destroys companies.

[ZL-1]

Yeah that's generally why there is a judge who presides over it.

It is no different than any other company who goes Ch. 11

Well, Delphi went the traditional Ch11 route, and it still looks like it's in the ditch... if the procedure is somehow prepackaged (in the sense that major deals are done before the filing) it becomes much smoother, shorter in duration, and ideally much less disruptive.

[gm4life]

The traditional route will work mark my words, and it will be REALLY ugly, but the company that would emerge would be ready to be sucessful and have much reduced costs. If the bond holders dig in their heals and say "hell-no" to a pre-packaged deal they have ALOT of hope. If they take the government route I see nothing but the end, because with those kind of legacy costs per-car and high union wages (of older workers) it will run them into the ground again and again. Chapter 11 and a new company with no union is really GM's solution, also without big exec perks.

[A Horse With No Name]

I agree on the bankruptcy thing...a lean mean GM is in everyones interests...

Just want them to get it over with.

Chris

[ZL-1]

The traditional route will work mark my words, and it will be REALLY ugly, but the company that would emerge would be ready to be sucessful and have much reduced costs. If the bond holders dig in their heals and say "hell-no" to a pre-packaged deal they have ALOT of hope. If they take the government route I see nothing but the end, because with those kind of legacy costs per-car and high union wages (of older workers) it will run them into the ground again and again. Chapter 11 and a new company with no union is really GM's solution, also without big exec perks.

I see the UAW getting screwed in a pre-packaged bankruptcy that formally goes through Ch11, regardless of Washington's "we stand by workers" rethoric... Enter Ch11 w/ bondholders', Government's and management's blessings and screw the UAW by transferring legacy costs and liabilities somewhere else with part of the funding in new-GM stock...

[Daryl Z71]

I just wish they would do it already. It seems like the better way anyhow.

[gm4life]

I see the UAW getting screwed in a pre-packaged bankruptcy that formally goes through Ch11, regardless of Washington's "we stand by workers" rethoric... Enter Ch11 w/ bondholders', Government's and management's blessings and screw the UAW by transferring legacy costs and liabilities somewhere else with part of the funding in new-GM stock...

Fact of the matter is the UAW is screwed anyway you look at it. GM CANNOT afford the wages of the (older) UAW workers and the legacy costs. GM CAN make a car in this country and make a profit, but the structure of the current set-up will not work. If they go the pre-packaged route GM really will loose hardly any costs at all, and will back in the same spot they are in now. GM needs to do the hard things NOW, and with the economy tanking and new car sales down it is the perfect time. GM also needs to tell the execs to get real with their perks and and pay too, because people watching a company get run into ground don't do any good.

I will have hope for GM if the news I hear come June is good, and if they don't do what they need too do, they will die. The government and the UAW aren't going to save GM but a country ready to drive American again and investors that see hope and promise in what once was a great American company will. If I had no hope for GM or some sort of common sense solution with the debt holders/bond holders I would have left along time ago. GM's handling and the bond holders choice for what kind of bankruptcy they want could determine the ultimate fate of the company, and whether I countiune to buy GM products. (After the Camaro SS of course.)

Edited May 12, 2009 by gm4life

[A Horse With No Name]

...sad thing is, GM is going to see a lot of talent walk out the door any way you look at it.

Building cars ain't easy, and 30 year people are tough to replace.

Chris

[gm4life]

Sure some of the "old" GM will move on, but people have to be excited for the oppertunity that arises from that.

[A Horse With No Name]

....all I'm saying is that experience is worth a lot. GM will loose out regardless...

And +1 on the new Camaro thing. You need one, GM4life. I saw one today at the local Chevy dealer and had myself a look.

Pretty awesome!

Chris

[Robert Hall]

....all I'm saying is that experience is worth a lot. GM will loose out regardless...

Chris

Yes, as is Michigan..I read an article the other day on the 'brain drain' Michigan has been suffering from for a long time...