To prepare for events possibly leading to a bankruptcy filing, automaker General Motors Corp. (GM) said it continues to evaluate its in-court restructuring options as part of contingency planning activities, if it cannot restructure out of court. In a regulatory filing, the company said Thursday that though it continues to strongly believe that out-of-court restructuring provides the highest value outcome for its customers, if the changes needed for long-term restructuring cannot be obtained out of court, the company is prepared and would consider in-court options.
The company said it is on target in implementing many elements of the Restructuring Plan submitted to the Treasury Secretary on February 17. However, Loan and Security Agreement or LSA requirements for equitization of health reimbursement arrangement VEBA, and public, unsecured debt have not been met. These agreements are essential for a successful, out-of-court restructuring, and related overall debt reduction. GM is prepared to consider in-court options as necessary if the out-of-court process is not successful.
In-court options would be enhanced by the Obama Administration's commitment to back GM customer warranties, and to provide support for a rapid emergence from any in-court process. The company believes that the impact of a bankruptcy filing on its business would be substantial, on both wholesale and retail levels.
GM is fighting hard for survival, thanks to the global economic slump and its own follies. The company has received $13.4 billion in federal loans from the U.S. Treasury, as part of Troubled Asset Relief Program, and has sought another $16.6 billion. While receiving the aid, the company was asked to present plans of long-term viability by mid-February. The Obama Administration said Monday that the restructuring plans offered by GM and Chrysler do not go far enough to warrant additional government assistance.
Rather, the embattled automakers will be allowed a limited period of time to fundamentally restructure, Obama said and added that an organized bankruptcy could be the best option for GM and Chrysler. The president noted that the government has no interest in running GM and would instead give the company 60 days to restructure.
GM's newly appointed CEO Fritz Henderson had said Tuesday that if agreements could not be reached with the unions, bondholders and other parties, a decision on bankruptcy would be made in consultation with the auto task force.
Meanwhile, the Wall Street Journal reported Thursday that if GM is not able to secure help from a third-party investor, it might need more drastic government intervention to save its European operations.
Dwelling on its European operations, GM had said in the regulatory filing that the company has proposed a reorganization of its European entities to facilitate German Government and/or third party funding which, if successfully concluded, would likely result in General Motors retaining a minority stake... Final resolution may not be achieved until mid-year, and the company is developing contingency plans in the event of prolonged negotiations. GM has sought government assistance of 3.3 billion euros in credit or credit guarantees for its European unit.
The filing also said that GM does not expect Swedish Government support for its Saab business and that in Thailand, GM is discussing financial support with the EXIM Bank of Thailand and potential partners. The company maintains both manufacturing and distribution operations in Thailand.
Additionally, the automaker said in the filing that the U.S. GDP forecast for 2009 has changed since the February 17 submission. On December 2, the GDP forecast called for a drop of 1%, which was revised to 2% on February 17. On March 30, the forecast suggested a decline of 2.6%.
In the meantime, reports said struggling auto supplier Delphi Corp., GM and the auto task force members have scheduled a meeting for Monday to get Delphi out of bankruptcy protection.
GM closed Thursday's regular trade at $2.09, up $0.16 or 8.29%, on 30.67 million shares.
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