GM Bankruptcy Clock Ticking Fast
GM appears likely to follow fellow carmaker Chrysler into bankruptcy court. The company lost $6 billion in the first quarter of the year, with no signs that sales will improve. The company faces a June 1 deadline imposed by the government to drastically reduce its liabilities and expenses, including persuading the United Auto Workers (UAW) to accept stock to cover the company’s $20 billion obligation to fund retirees’ health benefits, and bondholders to accept pennies on the dollar, again in stock, for $27 billion in current debt. The company must get both the union and 90% of the bondholders to agree to the terms or the government will withhold future loans, driving the company directly into bankruptcy where a judge can impose terms on all parties.
Bankruptcy would also ease the company’s plans to slash 2,600 of 6,246 dealerships over the next year.