General Motors gm may be inching towards bankruptcy, but the idea that the automaker will be able to get in and out quickly is facing increasing skepticism.
On Friday, GM CEO Fritz Henderson said he came into his new job as CEO of the company three weeks ago believing bankruptcy was more probable than not.
"I feel the same way today," he says. Henderson said GM is working on parallel plans: one that involves bankruptcy and one that doesn't.
GM has resisted filing for bankruptcy court protection, saying the reorganization process would be messy, long and scare away customers. But some lawmakers argue that GM could enter a "pre-packaged" bankruptcy that would take a few short weeks, and result in a much healthier company.
Not so, says Doug Bernstein, an attorney who heads Plunkett Cooney's banking, bankruptcy and creditors' rights practice. Bernstein looked at some recent pre-packaged bankruptcies and says none took less than six months.
That's because the federal bankruptcy code allows every interested party to be heard by a judge, which can take weeks, months or years. Auto supplier Delphi filed for bankruptcy court protection in October 2005; it is still there and has had more than 16,000 documents filed. Enron, a bigger and messier bankruptcy proceeding, has had nearly 32,000 filed.
"The process of bankruptcy cannot be rushed," Bernstein says. Any estimation that GM could get in and out of bankruptcy court in two weeks is wrong, he says.
GM has already received $13.4 billion from taxpayers, and it must meet strict requirements to cut its labor costs and its debt by a June 1 deadline. Henderson says the company will be prepared to file for bankruptcy if it can't achieve those goals in other ways.
He said while talks aregoing on with bondholders and the United Auto Workers, each side would wait for the other to act, and both want a better picture of what GM would look like on the other side of the process.
GM's original business plan was rejected by the Obama administration as not going far enough to deal with the company's intrinsic problems of heavy debt, high costs and shrinking market share.
Henderson also said Friday that the automaker would be forced to cut an unspecified number of jobs as part of its restructuring.
Henderson says the company will not sell its ACDelco parts division.
And he said the automaker plans to stick to its four core brands: Chevrolet, Cadillac, Pontiac and GMC, but is examining its brand strategy.
He called reports that GM will be dropping one or more of those brands "speculation."
He said GM has received three bids for the Hummer brand, and Henderson said GM will make a decision before the end of the month; he said several buyers have expressed interest in Saab.
GM has been operating under U.S. government emergency aid and was told in late March by the U.S. autos task force that it would have to dig deeper and move far faster in its turnaround plan in order to get that aid, and additional support.
If the automaker fails to complete its turnaround, which includes reaching agreements to make deep reductions in some $28 billion of unsecured debt as well as agreements to cut labor costs and rework the funding of a union healthcare trust, the automaker could be forced into bankruptcy.
In wide-ranging remarks in the first of what he said would be regular conference calls, Henderson said the automaker has reached out to more than six potential investors for its European Opel brand, including financial and industrial parties.
Henderson, who became CEO when the Obama administration ousted his mentor and predecessor Rick Wagoner, oversees a company that posted $82 billion of losses since 2005.