US President Barack Obama’s administration on Wednesday reiterated support for a major restructuring of stricken General Motors (GM) rather than the auto giant going into bankruptcy.
“The preferred option remains a significant restructuring that does not involve bankruptcy,” a White House spokesman said in response to media reports suggesting the administration was planning a breakup of the company if it files for Chapter 11 bankruptcy protection.
“If the bankruptcy code is required, there are some thoughts about how to do that,” he said.
Asked whether GM, once the world’s top automaker but now surviving on a government bailout, can be restructured without bankruptcy protection, the spokesman said: “That is correct. That has been the president’s position since we laid out this policy on Sunday night the first time.”
The New York Times reported on Wednesday, citing people familiar with the matter, that the US government was considering a “controlled” bankruptcy for GM that would require approval by some creditors of a plan to break up the troubled automaker.
Under a plan being developed by the government, GM would file for “pre-arranged bankruptcy” and then use a special legal provision to promptly sell off desirable assets — which could include Cadillac and Chevrolet — to a new, government-financed company, the Times said.
Meanwhile, GM said it expected to save US$1.1 billion a year in labor costs this year and next year, through modifications in its contract with the United Auto Workers union.
GM submitted a progress report to the Treasury Department this week as part of the requirements for the US$13.4 billion in aid it has already received. The report was made public on Wednesday.
The company has lowered annual labor costs by 59 percent since 2003, when its total cost for hourly workers was US$18.4 billion. GM said in the report costs were expected to drop to US$6.5 billion this year and US$5.4 billion next year.
By 2014, GM said it would spend US$4.8 billion on hourly workers.
The Detroit automaker reached a tentative agreement with the United Auto Workers union in February that would save money by modifying wages, benefits and work rules, as it tries to be more competitive with foreign automakers’ facilities in the US.
Union members have yet to vote on the contract modifications, but Obama said on Monday that GM’s efforts must go further to cut costs and prove viability. He’s giving the company 60 days to come up with a better plan in exchange for another US$21.6 billion in loans.
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