It’s been talked about a lot in recent months but now it seems that General Motors headquarters in Detroit is seriously considering a Chapter 11 bankruptcy filing ahead of a deadline tomorrow for a plan to deal with the company’s current financial crisis.
A report on Reuters newsagency says that General Motors Corporation, nearing a Tuesday deadline to present a viability plan to the US government, is considering as one option a Chapter 11 bankruptcy filing that would create a new company.
The plan was also reported on in the highly reputable Wall Street Journal, which said in its Saturday edition: “One plan includes a Chapter 11 filing that would assemble all of GM’s viable assets, including some US brands and international operations, into a new company.”
The newspaper said: “The undesirable assets would be liquidated or sold under protection of a bankruptcy court. Contracts with bondholders, unions, dealers and suppliers would also be reworked.”
Citing “people familiar with the matter,” the story said that GM could also ask for additional government funds to stave off a bankruptcy filing.
GM declined to comment, the story said.
General Motors and Chrysler LLC face a Tuesday deadline to file restructuring plans to the government in exchange for receiving US$17.4 billion in federal loans.
Carmakers have struggled as US car sales have tumbled amid a recessionary economy. US car sales in January tumbled to a 27-year low.
GM has been in talks with bondholders and the United Auto Workers union to get an agreement on a restructuring that would wipe out about US$28 billion in debt for the auto maker, sources have told Reuters.
However, it appears unlikely a deal could be reached by the Tuesday deadline, they said.
GM has already announced plans to cut 10,000 salaried workers worldwide, or 14 percent of its staff, impose pay cuts for most remaining white-collar US workers and has offered buyouts to its 62,000 US workers represented by the UAW.
In addition, it is trying to sell its Hummer SUV and Swedish Saab brands and is reviewing the status of its Saturn brand.