General Motors Corp (GM) chief executive Fritz Henderson said on Friday that a bankruptcy filing was “probable” because of the restructuring goals GM must meet to get more government loans, but that wasn’t the company’s preferred option.
In a conference call with reporters, Henderson said GM was working on two parallel plans: one that involves bankruptcy and one that doesn’t.
“Contingency planning is under way,” he said. “We are on several tracks.”
Henderson also said GM would need more government aid sometime in the second quarter, although the timing has yet to be decided. In its viability plan filed on Feb. 17, the company said it would need US$4.6 billion in the quarter, and that hasn’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,” Henderson said.
GM has already received US$13.4 billion in government loans, and it must meet strict requirements to cut labor costs and debt by a June 1 deadline. 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 is not pressuring GM to file, Henderson said.
“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,” Henderson said.
If GM does file for bankruptcy, he said speed is 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.”
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 LLC, which faces an April 30 deadline to restructure and forge an alliance with Italy’s Fiat Group SpA.
Henderson said that GM’s restructuring plan calls for the automaker to keep four core brands — Chevrolet, Cadillac, GMC and Buick.
He added that GMC and Buick are highly profitable for the firm.
He said the company would not sell its ACDelco parts division, despite having potential buyers.
Henderson also said GM was expecting final bids from three potential Hummer buyers by next week, with a decision expected by the end of this month.
Several parties are interested in GM’s troubled Saab unit, he said.
More than six parties are interested in buying a stake in GM’s Opel unit in Germany, and Henderson said he expected work to be done on a possible deal in the next two to three weeks.
“These are serious people. Many of them are financial players, some of them industrial players,” he said, adding that GM’s performance in Europe has performed better than expected.
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