GM Chief Says Bankruptcy Is More Probable' Now Than Ever Before
Friday, April 17, 2009; 11:58 PM
General Motors chief executive Fritz Henderson said a bankruptcy filing is "more probable" than before given the concessions the company must achieve before the end of May, although it is working to avoid that outcome.
GM, which has received $13.4 billion in government loans, is working on parallel strategies: one that would restructure the automaker outside of bankruptcy court and another that would reorganize it inside.
"We are on a two-track plan," Henderson told reporters yesterday. "We have contingency planning underway."
In a push to be more transparent, yesterday's GM conference call was the first of a series of updates on the auto giant's decisions and actions aimed at remaking itself, which must be completed by June 1.
GM will need a $4.6 billion cash infusion in the second quarter to keep the company running, in keeping with a previous plan submitted to the Treasury Department.
"It would be premature to say there has been an approval for further funding, but the size that has been discussed has been consistent with what we have laid out in our plan on February 17th," Henderson said.
GM has not yet made a request for the funds, and last month the company announced it would forego its urgent request for $2 billion in federal loans because it was making progress reducing costs.
"We are working closely with GM to monitor those near-term working capital needs, and will provide resources as needed," an administration official said.
President Obama has pledged that his administration would provide the money necessary to keep GM operating as it revises its restructuring plans.
Henderson, who was appointed last month to replace G. Richard Wagoner Jr. as chief executive, reiterated that the company's revised plan will "go deeper and faster," while trying to skirt bankruptcy.
"I felt several weeks ago that it would be more probable that we would need to go through a bankruptcy process," he said. "I certainly feel that way. That continues today. But I wouldn't be able to hazard a guess as to what the probabilities would be."
GM is working on getting a "stable, sustainable" cash flow, as well as a "clean and healthy" balance sheet. It has also been talking to the ad hoc committee of bondholders, which is leading negotiations to swap debt for equity, and the United Auto Workers, which must reduce GM's large cash obligation toward retiree health care benefits.