GM in "intense" preparations for bankruptcy

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 Quote:
NEW YORK/DETROIT (Reuters) - General Motors Corp is in "intense" and "earnest" preparations for a possible bankruptcy filing, a source familiar with the company's plans told Reuters on Tuesday. A plan to split the corporation into a "new" company made up of the most successful units, and an "old" one of its less-profitable units, is gaining momentum and is seen as the most sensible configuration, said another source familiar with the talks. The sources requested anonymity because they were not authorized to speak on the record. Shares of GM fell almost 14 percent on the New York Stock Exchange and its bond prices declined. If the plan goes through, the new GM would be expected to assume some previous creditor debt from bankruptcy proceedings, such as secured debt, said the second source, adding that GM bondholders were likely to lose substantial value in bankruptcy. Certain GM dealer and litigation claims would also be hurt if the new company structure is used as part of a company bankruptcy, said the second source. GM declined to comment. GM Chief Executive Fritz Henderson has said the company prefers to restructure out of court but that it could go to court if needed. GM, operating on $13.4 billion of government loans since the start of the year, has until June 1 to complete a reorganization plan. The government has warned that the alternative would be bankruptcy. The company is under pressure to cut unsecured debt by two-thirds, turn half its remaining payments into a union healthcare trust in the form of equity rather than cash, and reduce hourly wages and benefits to match those paid by foreign automakers. Chrysler, owned by Cerberus Capital Management LP, is also facing possible bankruptcy. The automaker has until April 30 to complete an alliance with Italian automaker Fiat. Moody's Investor Service said in a note dated Monday that it maintains its view for a 70 percent risk of bankruptcy for Detroit's three automakers given the difficulty of restructuring out of court. BANKRUPTCY NOT AN EASY ROUTE Canadian Industry Minister Tony Clement said on Tuesday that the Canadian government must be prepared for GM or Chrysler to enter bankruptcy protection. Some bankruptcy experts say a Chapter 11 bankruptcy filing could help GM reorganize by allowing it to restructure its debt and force changes to contracts with dealers, unions, and suppliers. But the process could be disruptive, or derailed, said Patrick Carothers, a partner at Thorp, Reed & Armstrong LLP. For example, if auto-parts makers lose the ability to collect money owed, the industry as a whole could suffer. In addition, GM could lose control over its restructuring as the formation of a new company would be in the hands of a bankruptcy judge, not corporate executives or their advisers. "The dangers of a bankruptcy are significant," said Carothers, who has parts suppliers and car dealers as clients. "I don't believe a bankruptcy is inevitable. There's still a lot of political pressure to save it." GM shares were down 13.66 percent, or 31 cents, to $1.95 in midafternoon trading on the New York Stock Exchange, after reaching a session low of $1.95 earlier in the day. GM's bonds were steady to slightly lower in late morning trading. GM's benchmark 2033 bond slipped, with the 8.375 percent bond trading at 12 cents on dollar, compared with 12.75 cents before the news came out, according to MarketAxess data. The bonds closed at about 11 cents on Monday, according to MarketAxess data. Last month, GM offered bondholders 8 cents on the dollar in cash, 16 cents on the dollar in new unsecured debt, and a 90 percent stake in the automaker, one person with knowledge of the term sheet told Reuters. (Reporting by Chelsea Emery in New York and Soyoung Kim in Detroit; Additional reporting by Dena Aubin, Walden Siew in New York; Editing by Derek Caney, Matthew Lewis, Toni Reinhold)
http://finance.yahoo.com/news/GM-in-intense-bankruptcy-prep-rb-14870456.html Let's get this over with and move on.
 

Bill in Utah

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Another 13.4 billion wasted.. I agree, get on with it. Allow the system to work. It is what it is... Bill PS: Firing the CEO really helped.
 
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Canada
I agree, this is needed. But you two don't own a vehicle that just became worthless. In six months, you won't be able to GIVE a GM vehicle away.....
 
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Indiana, USA
 Originally Posted By: Cutehumor
bye bye UAW!
As GM's biggest supplier by far you'd think the UAW would be working hard to get things back on track. Their inaction speaks volumes about their mindset. That the UAW doesn't see themselves as a supplier in the first place is their whole problem.
 

Win

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Bankruptcy is a creditor driven process, so if there is a bankruptcy filing, there is no assurance that it won't turn into a liquidation proceeding. If I held a large portion of GM bonds, and I thought I could get more than 8-12 cents on the dollar by having the company liguidated, then that would be my position in the bankruptcy court. And if enough other creditors feel the same way, a bankruptcy judge would pay attention to that, especially in light of the Obama administration experts having already pronounced that GM's present reorganization plan is not viable. Even the lowliest federal judge can completely ignore or even thwart the wishes of a presidential administration, as nearly all presidents have found out at some time or another. So, President Obama's pronouncement that it will be a short and quick bankruptcy proceeding has no real basis in fact ( and is no more likely to be true than any of his other wild promises ) and is the kind of utopian fantasy that you get from lawyers that have never actually troubled themselves to practice law in the real world. Trying to keep everybody in line will be like herding cats, except a lot of these cats will be vicious predators, that will drop in and out of factions as their interests may dictate. GM is likely already riding creditors as hard as it can to conserve cash, and not paying anything it does not absolutely have to, to keep the assembly lines running. Once they file, they likely won't pay anything other than payroll. If a supplier is hard pressed, that may tip them into bankruptcy. I don't know how you can reorganize something to make it possible for UAW workers to live in overpriced, decaying, northern cities on southern wages. Bankruptcy would be a good way to shut down all of those old rust bucket northern plants and put their clean up costs off on the taxpayers. Maybe there will be a North GM (hopeless and destined to be liquidated) and a South GM (viable) if they take the two company approach. Once started, where the process will end, nobody knows.
 
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 Originally Posted By: addyguy
But you two don't own a vehicle that just became worthless. In six months, you won't be able to GIVE a GM vehicle away.....
Our car was built this past Friday and literally as we speak this brand spankin' new GM vehicle is on a train winding its way to north of the 49th . I expect to take delivery within about 10 business days....not sure what to think. I am hoping those fine men and women at Spring Hill did their best assembling our car in these difficult times.
 
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The Gov. will not allow a open bankruptcy. They have too much capital, both cash and political (unions) to let that happen. They want to keep control of the industry and protect the unions. They will move to some type of prepackaged bankruptcy that protects it's interests. This is worrisome on many levels.
 
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 Originally Posted By: Drew99GT
 Originally Posted By: Billy007
GM makes great vehicles.
They're great for mechanics!
GM makes fun vehicles! Fun to fix!
 
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Central Arkansastan
 Originally Posted By: wapacz
Right now the bond holders and the uaw are playing chicken. Which is pretty much pushing GM into bankruptcy.
And why shouldn't they play (UAW)? Everyone that works at GM has been brainwashed that the UAW is the greatest thing in the world. And I am sure the UAW see's itself as they are now in the 'New' GM --A regular player once more....
 
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 Originally Posted By: toytundranator
 Originally Posted By: Drew99GT
 Originally Posted By: Billy007
GM makes great vehicles.
They're great for mechanics!
GM makes fun vehicles! Fun to fix!
Typical responses here...
 
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Oahu, Hawaii
I was just kidding. I don't get the "American vehicles are fun and imports are dull" comments I seen around in vehicle reviews. They should refine "fun", becuase I have an F-250 and I don't see the "fun" in it, other than changing the oil on it.
 
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 Originally Posted By: toytundranator
I was just kidding. I don't get the "American vehicles are fun and imports are dull" comments I seen around in vehicle reviews. They should refine "fun", becuase I have an F-250 and I don't see the "fun" in it, other than changing the oil on it.
Then you aren't driving it right ;\) Seriously, Jon and I have more fun in his '05 Diesel F-250 than we have on our ATV's. Random off-roading, burying it in frozen swamp land then winching it out...etc.
 
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