General Motors would have to provide adequate warning if it planned to file for bankruptcy protection or it would risk bringing further distress to the automotive industry, Canada’s industry minister has said.
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His comments came after GM chief executive Fritz Henderson told reporters on Monday the automaker had already informed bondholders it would miss a US$1bn debt payment on 1 June and that bankruptcy protection was looking more probable.
“One of the options that is clearly on the table is a scheduled, surgical Chapter 11/CCAA process where they go in, some changes are made, and they go out again,” Canada’s industry minister Tony Clement told Reuters.
CCAA, or the Companies’ Creditors Arrangement Act, is Canada’s counterpart to Chapter 11 bankruptcy protection in the United States.
“What we’ve always said is that if Chapter 11/CCAA is inevitable, what we don’t want to see happening is that that process just happens all of a sudden without warning, because that’s the biggest risk for our auto parts suppliers and dealers and so forth,” Clement said.
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By GlobalDataWith or without bankruptcy protection, GM would need to prove its viability in order to receive government loans, Clement said.
Reuters noted that the Canadian Auto Workers union had said recently, after a meeting with GM and the Canadian government, that the automaker was likely to seek both US Chapter 11 bankruptcy protection and CCAA bankruptcy protection in Canada. Chrysler, in contrast, has so far filed only in the US.
Clement said that the longer the uncertainty at Chrysler and GM continues, the longer consumer confidence in the auto industry would suffer.
He added the Canadian government was looking at the possibility of implementing a “cash for clunkers” program, similar to what the US government is considering.
A US plan currently going through Congress would give consumers up to US$3,500 for cars at least eight years old to be used towards the cost of newer, more fuel efficient vehicles.
Clement said his office was also looking for ideas in scrappage plans operating in France, Germany, and Australia, according to Reuters.
