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Archive for Saturday, April 18, 2009

GM considers filingn for bankruptcy protection

April 18, 2009

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— A Chapter 11 filing might be the most effective way to overhaul General Motors Corp., but that doesn’t mean the sweeping changes that are possible in bankruptcy court are going to be quick or easy.

GM CEO Fritz Henderson said Friday that the company still would prefer to restructure out of court as it tries to prove it can survive to repay its $13.4 billion in government loans, but he conceded that bankruptcy protection is more probable than it was in the past.

Henderson said in a conference call with reporters that GM is simultaneously restructuring out of court and planning for Chapter 11. The company would either file a prearranged bankruptcy in which stakeholders agree to take cuts, or use a section of the federal code that allows companies to sell off bad assets and keep good ones.

Experts say there are many reasons why the quick, “surgical” bankruptcy that GM may seek won’t be as smooth or as fast as the company and U.S. government expect.

“It would be a mammoth undertaking,” said Jon Groetzinger, a visiting law professor at Case Western Reserve University in Cleveland. “It has been done, not on a scale quite as big as GM.”

In order for it to go quickly, GM would have to gain agreements from creditors to wipe out debts, unions to change contracts, and perhaps dealers to alter franchise agreements, experts said. There could be thousands of claims from employees, retirees, parts suppliers and others that would have to be heard by the court.

“The only way it would be speedy was if they had all the agreements in advance. But then why would you need it?” asked Doug Bernstein, a lawyer with Plunkett Cooney PC in Bloomfield Hills, Mich.

It’s overly optimistic to think GM can go in and out of bankruptcy for a “quick rinse” of its troubles in as little as two weeks to four months, according to Bernstein. The process, he said, could drag on because creditors could object to contract changes and be heard in court. Experts say six months would be considered quick.

Key to emerging quickly would be advance deals with the United Auto Workers union and holders of roughly $28 billion in GM bond debt. Bondholders are being asked to take stock for part of their debt, while the union is negotiating to accept stock for roughly $20 billion in payments GM must make to a trust that will take over retiree health care costs next year.

The decision to file for bankruptcy would be made with the Treasury Department’s autos task force and GM’s board.

Comments

Godot 5 years, 9 months ago

When the billions in loans were made to GM, the taxpayers were promised that they would not lose money in this deal, that the loans would be first to be repaid, ahead of the bondholders and other creditors, if GM failed.

Yesterday, this came out (in the UK, of course, not in the US)

"The U.S. Treasury, which has provided $13.4 billion in emergency funding to keep GM operating since the start of the year, has indicated that it could also convert those taxpayer-backed loans into GM stock, the sources told Reuters." http://uk.reuters.com/article/motoringAutoNews/idUKN1733369920090418

In a bankruptcy, stockholders stand at the back of the line when it comes to being repaid .

Obama and Geithner are planning to throw the taxpayers under the GM bus so that Goldman Sachs, AIG, and other institutional investors will be repaid first. This is just another conduit to take money from the taxpayers and transfer it to the big investment banks, Obama's biggest donors, and the former (?) employers of Obama's economic advisory team.

The unconstitutional looting of the American taxpayers continues, unabated.

Satirical 5 years, 9 months ago

Editor, youn mightn wantn to re-readn the titlen again

camper 5 years, 9 months ago

This is generally what happens when large corporations file for bankruptcy:

1) Creditors (those who are owed money from the corp) will not be able to collect money for the goods and services they have already provided. 2) Many of these creditors will also be driven into bankruptcy because they cannot collect on accounts receivable. 3) High priced consultants who often know nothing about the business (or what goes on in the "field") will make broad cuts and often eliminate jobs and employees who are experienced and otherwise provide positive contributions. 4) A high priced legal staff will come in and "try to steer the company out of bankruptcy" while raking in millions of bucks.

No doubt, at the end of each year, those with interest in GM will wonder what could have otherwise been done with the money they just disposed of to #3 and #4 above.

The best course of action for GM and its stakeholders would be to resolve its issues without going into bankruptcy. The 2nd best alternative would be to liquidate, and a) sell plants to competitors who have a better chance of keeping the operation going under a new name (and retain workers) or b) liquidate entirely so the creditors atleast have a chance of collecting what is owed to them.

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