General Motors to File Chapter 11?

[HuskyCaucasian]

I guess this belongs int he Fillibuster given its political remifications...

GM considering Chapter 11 filing, new company

CHICAGO (Reuters) - General Motors Corp, nearing a Tuesday deadline to present a viability plan to the U.S. government, is considering as one option a Chapter 11 bankruptcy filing that would create a new company, the Wall Street Journal said in its Saturday edition.

 

"One plan includes a Chapter 11 filing that would assemble all of GM's viable assets, including some U.S. brands and international operations, into a new company," the newspaper said. "The undesirable assets would be liquidated or sold under protection of a bankruptcy court. Contracts with bondholders, unions, dealers and suppliers would also be reworked."

 

Citing "people familiar with the matter," the story said that GM could also ask for additional government funds to stave off a bankruptcy filing.

 

GM declined to comment, the story said.

 

General Motors and Chrysler LLC face a Tuesday deadline to file restructuring plans to the government in exchange for receiving $17.4 billion in federal loans.

 

Automakers have struggled as U.S. auto sales have tumbled amid a recessionary economy. U.S. auto sales in January tumbled to a 27-year low.

 

GM has been in talks with bondholders and the United Auto Workers union to get an agreement on a restructuring that would wipe out about $28 billion in debt for the auto maker, sources have told Reuters. However, it appears unlikely a deal could be reached by the Tuesday deadline, they said.

 

GM has already announced plans to cut 10,000 salaried workers worldwide, or 14 percent of its staff, impose pay cuts for most remaining white-collar U.S. workers and has offered buyouts to its 62,000 U.S. workers represented by the UAW.

 

In addition, it is trying to sell its Hummer SUV and Swedish Saab brands and is reviewing the status of its Saturn brand. (Editing by Eric Walsh)

 

Well, it would be a rather bold move. I'm not sure of the economic impact, but sometimes situations call for bold action and in their eyes, the only way to save the company is basically to start from scratch in a sense. At least they are trying something.

[Balta1701]

Well, it would be a rather bold move. I'm not sure of the economic impact, but sometimes situations call for bold action and in their eyes, the only way to save the company is basically to start from scratch in a sense. At least they are trying something.

The problem is going to be surviving the chapter 11 process rather than winding up with the entire company closing its doors. That was the problem in December, it's still a problem now. Would you buy a car from a company in bankruptcy? If you were a bank, would you extend a bridge loan to an auto company in bankruptcy?