GM CEO says bankruptcy ‘probable’
April 20, 2009 by David Twomey
General Motors Corporation chief executive officer, Mr Fritz Henderson, says a bankruptcy filing is “probable” because of the restructuring goals GM must meet to get more US government loans, but that isn’t the company’s preferred option.
In a conference call with journalists, Mr Henderson said GM was working on two parallel plans: one that involves bankruptcy and one that doesn’t.
“Contingency planning is under way,” he says. “We are on several tracks.”
Mr Henderson also said GM would need more government aid sometime in the second quarter of 2009, although the timing had yet to be decided.
In its viability plan filed on February 17, the company said it would need $US4.6 billion in the quarter, and that hadn’t changed, he said.
“At this point, it would be premature to say that there has been an approval for further funding, at least from a GM perspective.”
GM has received $US13.4 billion in government loans, and it must meet strict requirements to cut labour costs and debt by June 1.
Mr Henderson said the company would be prepared to file for bankruptcy if it was unable to reach those goals out of court.
The decision to file for bankruptcy would be made with the Treasury Department and GM’s board of directors, but the government was not pressuring GM to file, Mr Henderson added.
“I felt several weeks ago that it would be more probable that we would need to go through a bankruptcy process,” he told reporters.
“I certainly feel that way. That continues today, but I wouldn’t be able to hazard a guess as to what the probabilities would be.”
If GM does file for bankruptcy, Mr Henderson said speed was important. GM would seek agreements with creditors and union before filing, or go through a fast in-court process.
“It’s all about speed,” he said. “This environment is not helpful for us.”
Mr Henderson said GM has been focused on rebuilding its viability strategy so it hasn’t yet launched intensive discussions with its bondholders.
Talks with the United Auto Workers, he said, are second in line to Chrysler, which faces an April 30 deadline to restructure and forge an alliance with Italy’s Fiat Group.
Mr Henderson emphasised that GM’s restructuring plan called for the carmaker to keep four core brands, Chevrolet, Cadillac, GMC and Buick, adding that GMC and Buick were highly profitable.
Mr Henderson did not comment on the future of overseas subsidiaries, such as GM Holden in Australia, but the company has said in the past that Holden was a viable part of its future plans and has indicated it would remain within GM.
He also said the company would not sell its ACDelco parts division, despite having potential buyers.
“It’s a highly profitable business for us, it’s creating good, strong cash flow,” Mr Henderson said. “Our conclusion was that we weren’t going to get the value for the business. We’d rather keep it and grow it.”
Mr Henderson also said April sales were “OK”, but he did not elaborate.
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Well I’ve got news for you Mr Henderson. Bankruptcy is never a “prefered option”. It’s what you do when you’ve stuffed up somewhere and there’s nowhere else to go. Can’t they just get it over with? They know it’s going to happen.
Gee Alex, I’m glad you are so up on the US environment for business.
GM will surely fly you over there as their saviour without delay.
I think that the US expression “bankruptcy” can mean one of different options, which can be different from liquidation or winding up over here – it could be more like our version of being in administration (but I really am not sure).
My mum always told me if you have nothing nice to say dont say it at all so im taking her advice.
GO FORD
So GM cant make a profit, but it’s “Spare Parts” division can? There’s definitely a line there …..
Here we go again im sick of seeing it all just get it all over with, do what you got to do
I don’t think they will file for bankruptcy. Don’t get me wrong GM are not in a good position, but I think it GM playing up to US government, their buyers, and the US tax payer.
In all nothing new is really been siad in this story.
Frenchie,
Not sure how GM is ‘playing it up’ with the US goverment?
The US goverment is heavily involved with GM currently to help them avoid bankruptcy!
GM bond holders have also forced GM’s hand in not taking GM’s first offer therefore pushing further towards bankruptcy.
Ford bond holders accepted the deal Ford offered them hence converting 9 biilion or so of debt.
Interesting times ahead, Ford basically is getting a competitive edge on future product development over GM and Crysler.
Mind you if/when GM enters bankruptcy, they could emerge, depending on the length of time, quire strong and able.
Bankruptcy in this context means a court-controlled administration in which the company is given temporary relief from its creditors to allow it to negotiate new arrangements with some or all of them. Certain obligations can also be effectively disowned in the process.
How about making cars that people want, that dont break down and fall apart, and stop wasting money flying around stupid seppos with cheese-eating grins in corporate jets. Back to basics or bust.
Adam:
You are right the bond holders refuse GM’s first offer.
They have gone back to the Auto Task Force(US government) and told them the bond holders are holding up the process.
GM has to be as transparent through this process. So by placing there cards on the table publicly (as the US tax payer is paying for this) they are playing up to the ATF, by saying, “bankruptcy probable”. If the bondholders don’t take a deal then what they end up with may not be satisfactory to them.