GM Aims for Fastest Possible Bankruptcy

Treasury directed GM to prep for Chapter 11 as options dwindle

By Clay Dillow, Newser Staff

Posted Apr 13, 2009 7:40 AM CDT

(Newser) – General Motors is in high gear, the New York Times reports, prepping for a possible bankruptcy that would allow the company to reorganize and emerge from protection in as little as 2 weeks. Since the Treasury Department instructed the automaker to prepare for a bankruptcy filing by June 1, in case other options for reorganization don't work out, the focus has been on a quick turnaround, so that the company's image and sales are damaged as little as possible.

“If we need to resort to bankruptcy, we have to do it quickly,” GM's new CEO Fritz Henderson said in an interview last week. A “surgical” bankruptcy would likely split the company in two, with the company that retains GM’s best assets becoming viable immediately. A host of problems must be solved for a bankruptcy to proceed. The company must show how it will save billions through concessions from bondholders and workers, deal with massive pension liability, and determine which dealerships and factories to retain.

[Images (2)]

[Quotes (1)]

In this 2008 file photo, General Motors headquarters is shown in Detroit. (AP Photo)

In this 2008 file photo, the General Motors logo is seen outside the GM headquarters in downtown Detroit. (AP Photo)

« Prev« Prev | Next »Next » Slideshow

The simplest way to frame it is that they took the loans, there were conditions on the loans, they didn’t prove their case for financial viability, and they didn’t meet the deadline, either.
- John Paul MacDuffie, associate professor at the University of Pennsylvania

« Prev« Prev | Next »Next » Slideshow

To report an error on this story, notify our editors.

More Newser Stories

Kodak Files for Bankruptcy

Future looks bleak for photography pioneer's workers, retirees

(NEWSER) - The once-mighty Eastman Kodak company has filed for bankruptcy. The 131-year-old firm, unable to reinvent itself quickly enough for the digital age, filed for Chapter 11 bankruptcy protection this morning after running out of cash to fund its turnaround, the Wall Street Journal reports. The company says it has secured a $950 million line of credit from Citigroup to allow it to keep operating during restructuring. More»

Hostess Files for Bankruptcy

Second Chapter 11 filing in recent years

(NEWSER) - Bad news for Twinkies lovers: Hostess filed for Chapter 11 bankruptcy protection today. But never fear, the company will continue operating during bankruptcy proceedings with help from a $75 million loan. "We remain hopeful that we can reach an agreement that will allow us to amend our labor contracts so that we can emerge from Chapter 11 as a highly competitive company that provides secure jobs for our employees," said the president and CEO. Not helping matters is the fact that sales are declining, particularly as consumers move away from Hostess' signature white bread to whole grains. More»

Saab Declares Bankruptcy

GM vetoes deal involving Chinese company

(NEWSER) - Saab finally threw in the towel today, after former owner General Motors once again vetoed a rescue plan involving China’s Zhejiang Youngman Lotus Automobile. Saab’s current owner, Swedish Automobile, filed for its bankruptcy, saying that "the company, without further funding, will be insolvent, and that filing bankruptcy is in the best interests of its creditors." Saab hasn’t made any cars since April, thanks to growing debts, Reuters reports. More»

American Went Bankrupt to Undercut Union

Healthy companies use bankruptcy to cut labor costs: Stephen Gandel

(NEWSER) - American Airlines has $4 billion in the bank, doesn’t need emergency financing, and feels quite confident it can keep paying its vendors, business partners, and creditors in full. So where was the crisis that pushed it into bankruptcy ? “It doesn’t appear there was any,” writes Stephen Gandel at Time . Well, according to its press release it was to “address our cost structure, including labor costs.” Translation: American is trying to force its union, which it’s been unsuccessfully negotiating with, to take pay and benefit cuts. More»

American Airlines Files for Bankruptcy

Parent firm says voluntary move best choice for firm

(AP) - American Airlines and American Eagle's parent companies are filing for bankruptcy protection. AMR Corp. and AMR Eagle Holding Corp. said today that they filed voluntary petitions to reorganize, saying it's in the best interest of the companies and its shareholders. American says it sought protection to reduce its costs and debt to remain competitive in the airline industry. American was the only major US airline that didn't file for bankruptcy protection after the 2001 terrorist attacks. American says labor-contract rules force it to spend at least $600 million more than other airlines. Fox News adds that rising jet fuel costs also contributed to the airline's massive debt. More»

NEWS FROM OUR PARTNERS

What is Newser?

Face it: there's too much news. At Newser, we choose the most thought-provoking and entertaining stories from hundreds of US and international sources and reduce them to a headline, picture, and two paragraphs. And we do it 24/7—you can come back morning, noon, night (and in between) for something new that matters. Read less, know more.

Learn more »

Partnering with: Slate

View Newser on the mobile website

GM Aims for Fastest Possible Bankruptcy