US prepares GM for fast surgical bankruptcy: NYT

April 13th, 2009 - 7:02 pm ICT by IANS  

Barack Obama By Arun Kumar
Washington, April 13 (IANS) The US government has asked General Motors to make all necessary preparations for a possible bankruptcy filing by June 1, even though the troubled automaker insists it can restructure its business on its own, a media report said Monday.

Citing unnamed people “with knowledge of the plans”, the New York Times said the goal is to prepare GM for a fast “surgical” bankruptcy.

Members of President Barack Obama’s automotive task force spent last week in meetings and on conference calls with GM officials and its advisers in Detroit and Washington, it said. Those talks are expected to continue this week.

The automaker already has been granted $13.4 billion in federal aid and its managers are insisting the company’s image should not be damaged.

The preparations are aimed at assuring a GM bankruptcy filing is ready should the company be unable to reach agreement with bondholders to exchange roughly $28 billion in debt into equity in GM and with the United Automobile Workers union, which has balked at granting concessions without sacrifices from bondholders, The Times said.

Obama, who was elected with strong backing from labour, remained concerned about potential risk to GM’s pension plan and wants to avoid harming workers, the daily said citing unnamed people.

One plan under consideration would create a new company that would buy the “good” assets of GM almost immediately after the carmaker files for bankruptcy.

Less desirable assets, including unwanted brands, factories and health care obligations, would be left in the old company, which could be liquidated over several years.

Treasury officials are examining one potential outcome in which the “good GM” enters and exits bankruptcy protection in as little as two weeks, using $5 billion to $7 billion in federal financing, the Times said citing an unnamed “person who had been briefed on the prospect”.

The rest of GM may require as much as $70 billion in government financing, and possibly more to resolve the health care obligations and the liquidation of the factories, according to legal experts and federal officials cited by the Times.

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