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.