Thursday, April 23, 2009
GM May Attempt a “Surgical” Bankruptcy
Unless there is a major change in the financial status of General Motors during the next few months, it is likely that the auto manufacturer will have to file bankruptcy by June 1. Over the past few weeks, there have been several discussions between GM officials and President Obama's automotive task force regarding this likelihood.
At the beginning of April, the task force gave GM 60 days to come up with a restructuring plan for the company. They are currently evaluating whether the auto manufacturer can once again become a viable company.
GM's strategy seems to be to prepare for a quick, "surgical" bankruptcy. This strategy will most likely be challenged by bondholders who would stand to lose a great deal of money as a result.
GM's plan would split the company in two: one part would include their strong assets, such as Chevrolet and their Chinese operations; the other part would include their underperforming assets and billions of dollars in debt that they currently owe.
While proceeds from the government's sale of equity in the better half of the company would help repay parties owed money by the weaker half, this sum would most likely not come close to settling all of GM's massive debts.
General Motors is hoping to make it through bankruptcy court in a few months instead of the typical year it takes many companies. However, it will be up to a judge to decide if the auto manufacturer can move forward with their accelerated bankruptcy plan.