In Bankruptcy Maneuver, GM May Split in 2

If GM faces Chapter 11, a splitting of the company could avert disaster
By Clay Dillow,  Newser Staff
Posted Mar 26, 2009 10:36 AM CDT
Lee Henderson, left, of Alvarado, Texas, directs an instrument panel into a waiting GM vehicle during assembly at the General Motors Assembly Plant in Arlington, Texas, Thursday, Feb. 19, 2009.   (AP Photo/Tony Gutierrez)
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(Newser) – General Motors executives and Treasury officials alike seem adamant that the company should avoid Chapter 11 bankruptcy at all costs, but bankruptcy scenarios are already crystallizing behind the scenes, BusinessWeek reports. One option calls for splitting the company into a “good GM,” which would emerge from bankruptcy with brands like Cadillac and Chevrolet, and a “bad GM,” which would encompass Hummer and Saturn—and likely be liquidated.

Under this plan, debt would become equity in the “good” company and bondholders would receive cash from any liquidation. The United Auto Workers would also likely negotiate or face the termination of contracts. Having ensured the survival of one healthy company, GM might even deflect the stigma of bankruptcy. "Bankruptcy is like war," said a legal expert. "You think you know about it until you go through it."