The US government would work to pave the way to bankruptcy at General Motors, as it did with Chrysler last month, if GM’s restructuring effort falls short this month, US treasury secretary Timothy Geithner has said.
Go deeper with GlobalData
“There is a range of ways to achieve this. You saw what we did in the Chrysler context as one way to do it. and if that proves necessary in the GM context, we’ll do that,” Geithner told Reuters during an interview. “But we’re not at the point where we need to make that judgment yet.”
Separately, he told US broadcaster PBS’s ‘Newshour’ programme that the administration was “quite confident now that we’re going to be able to put together something” that would allow GM to survive and be viable, the report said.
After posting a US$6bn net loss for the first quarter last Thursday – its seventh straight quarterly loss – on top of $82bn in combined annual losses since 2004, GM is trying to cut more than US$40bn in debt. Talks over further concessions from the United Auto Workers union are under way.
Some analysts have said GM’s problems are too complex to be dealt with out of bankruptcy, and the company’s new CEO, Fritz Henderson, has said the automaker would file for court protection if it fails to win necessary givebacks, Reuters added.
How well do you really know your competitors?
Access the most comprehensive Company Profiles on the market, powered by GlobalData. Save hours of research. Gain competitive edge.
Thank you!
Your download email will arrive shortly
Not ready to buy yet? Download a free sample
We are confident about the unique quality of our Company Profiles. However, we want you to make the most beneficial decision for your business, so we offer a free sample that you can download by submitting the below form
By GlobalDataHenderson on Monday afternoon provided an update on GM progress, suggesting that bankruptcy was “more probable”.
Earlier, Peter Kaufman, a restructuring expert and president of New York investment bank Gordian Group LLC, told Reuters GM most likely would follow Chrysler into bankruptcy.
“This is not playing by the rules, but the government has shown it’s not terribly interested in playing by the rules,” Kaufman said. “I think this will embolden the government to do what they’re already contemplating for GM.”
Obama administration officials told the news agency no decisions have been made on any plans for an equity stake in a restructured GM, but president Barack Obama has said he does not want the government running auto companies.
“Where that is necessary in the context of this, we’re going to try to make sure that we get out as quickly as possible and that our role is limited to protect the taxpayers’ interest,” Geithner told Reuters.
“We don’t want to be involved in day-to-day decisions at these companies. And it will be a difficult balance to strike, but we’ll be able to find the right balance,” he said.
He said it would be “hard to judge” how quickly an auto stake might be unwound.
Meanwhile, Senator Robert Corker, a Tennessee Republican and banking committee member, said in an interview with the news agency that any government equity stake in GM would likely be held for more than one year though another report said the government would likely hold the stake for at least two years.
Corker said even if GM restructured, it would emerge with sizeable debt and likely would need more debt forgiveness or additional government aid.
GM operates a manufacturing facility in Tennessee, and Corker has met with Henderson to discuss the future of that operation, in Spring Hill, Reuters added.
