General Motors’ interim chairman has acknowledged that the automaker was running out of time to reach a deal with stakeholders and the US government to restructure outside of bankruptcy.
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The New York Times said on Monday the US treasury was preparing to force GM into a fast-track bankruptcy that would split the automaker into ‘good’ and ‘bad’ companies by the administration’s 1 June restructuring deadline.
The paper’s sources said groundwork was being laid for a bankruptcy filing despite GM’s public contention that it could still reorganise outside court.
GM’s interim chairman Kent Kresa – appointed at the end of last month after President Obama’s autos task force forced former chairman and CEO Rick Wagoner to resign – told Dow Jones the GM board remained convinced that an out of court restructuring was the preferred option though several looming deadlines could affect that goal.
“The times are very, very short,” he said, adding: “This is a very difficult thing to do. We have some deadlines rapidly approaching and the probabilities are decreasing we can do [this] outside of bankruptcy.”
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By GlobalDataGM has so far received federal loans of $13.4bn and Kresa told the news agency the automaker would need another loan infusion “very shortly.”
He also said GM would welcome the government’s willingness to accept repayment of some of that loan in the form of equity rather than debt as bondholders and the union are being asked to do. “Certainly, that would be helpful,” he told Dow Jones.
Talks with the White House auto task force in Detroit this week had focused on seeking an agreement on what market assumptions GM can use, the report said.
Forecasts laid out for the US administration on 17 February – and reiterated at the end of March – remained unchanged, with the depressed market tracking where GM anticipated, Dow Jones said.
GM faces a 17 April deadline to agree a swap with bondholders that would eliminate much of the company’s debt while the government is also pressing it for a resolution to talks involving bankrupt supplier Delphi, the former GM parts unit that may be forced to liquidate if it can’t secure more funding to continue functioning in Chapter 11 [where it has now been for almost four years – ed], Kresa told Dow Jones.
The report said GM would like to break the company into two parts – one with stronger assets, such as its Chevrolet brand, that would be quickly restructured, while the other would group failing assets and obligations that could be liquidated over several years in bankruptcy court.
Kresa told Dow Jones a large team of lawyers and bankruptcy experts are working to develop a bankruptcy plan as the company works on a new out-of-court scenario.
“Time is not on our side on trying to get things done out of bankruptcy,” he said.
