Idea of quick GM bankruptcy filing meets with skepticism
DETROIT -- On Friday, Fritz Henderson said he came into his new position as GM's CEO three weeks ago believing a bankruptcy filing was more probable than not.
"I feel the same way today," he says. Henderson said GM is working on two scenarios: one that involves bankruptcy and one that doesn't. The plan that does not includes looking at each GM brand to see if it's needed. USA TODAY reported Thursday that dropping Pontiac and GMC was being looked at, along with Hummer, Saab and Saturn, which are already on the block.
GM has resisted filing for bankruptcy court protection, saying the process would be messy and long and would scare away customers. But some in the government have argued that GM could enter a "prepackaged" bankruptcy that could take a few weeks and result in a healthier company.
Not so, says Doug Bernstein, an attorney who heads Plunkett Cooney's banking, bankruptcy and creditors' rights practice. He looked at recent prepackaged bankruptcies and saw that none took less than six months.
That's because bankruptcy law allows every interested party to be heard by a judge, which can take weeks, months or years. Auto supplier Delphi filed in October 2005. It is still in bankruptcy court, and more than 16,000 documents have been filed.
"The process of bankruptcy cannot be rushed," Bernstein said.
GM has received $13.4 billion in federal loans, and President Obama said it must offer a more aggressive restructuring plan by June 1 to get more aid. Henderson says GM will be prepared to file for bankruptcy if it can't reach its goals in other ways.
Talks with bondholders are going slowly. Henderson said the company is having talks but nothing he would classify as "intense negotiations." GM is looking to cut two-thirds of its debt by swapping bonds for GM shares. Bondholders have resisted, saying GM's plans won't make it profitable any time soon.
