GM CEO: Bankruptcy probable, but he hopes to avoid it

ByABC News
May 11, 2009, 5:21 PM

DETROIT -- General Motors' top executive says bankruptcy is becoming more probable but there is still hope that the company can restructure and avoid court protection.

CEO Fritz Henderson says the automaker is looking at its operations country-by-country to determine where it might have file for bankruptcy. He says a U.S. bankruptcy doesn't necessarily mean GM would file in other countries.

Henderson told reporters on a conference call Monday that the company would prefer to avoid bankruptcy but he realizes the tasks it must accomplish are large.

General Motors is living on $15.4 billion in taxpayer loans and faces a June 1 government deadline to restructure or seek bankruptcy protection.

The task at hand is so difficult that experts say a Chapter 11 bankruptcy filing is all but inevitable.

To remake itself outside of court, GM must persuade bondholders to swap $27 billion in debt for 10% of its risky stock. On top of that, the automaker must work out deals with its union, announce factory closures, cut or sell brands and force hundreds of dealers out of business all in three weeks.

"I just don't see how it's possible, given all of the pieces," said Stephen J. Lubben, a professor at Seton Hall University School of Law who specializes in bankruptcy.

In Ohio, the automaker employs thousands at a number of plants, including a major assembly complex in Lordstown, near Youngstown.

Although company executives said last week they would still prefer to restructure out of court, experts say all GM is doing now is lining up majorities of stakeholders to make its court-supervised reorganization move more quickly.

"If we need to pursue bankruptcy, we will make sure that we do it in an expeditious fashion. The exact strategies I'm not getting into today, but we'll be ready to go if that's required," Henderson said last week.