The Obama administration is seeking to ease General Motors Corp into a controlled bankruptcy by persuading some creditors to agree to a plan that would divide the company into two pieces, the New York Times reported on Wednesday.
Citing people briefed on the matter, the Times said the plan is to push GM into a structured bankruptcy somewhere between a prepackaged bankruptcy and court chaos, using taxpayer financing for leverage.
The administration is drawing in part from its experience with troubled banks, seeking to create a new, healthier GM, but leaving behind its liabilities and less valuable assets, possibly for liquidation, the Times said on its website.
Under the plan, GM would file for prearranged bankruptcy, the report said, and would then use a sale authorized under Section 363 of the U.S. bankruptcy code to sell off desirable assets to a new company financed by the government.
These more valuable assets might include Cadillac and Chevrolet, as well as assets the company needs to run its business, the Times said.
Plans are still under discussion and details are subject to change, the report said.
GM officials warned on Tuesday there was a rising chance it could file for bankruptcy by June.
One plan under discussion would be to form a new company of the automaker's best assets, while laggard brands and money-losing assets would remain under bankruptcy protection, a person familiar with that strategy told Reuters.
President Barack Obama's thinking on the crisis facing GM has not changed since Monday, a senior administration official told Reuters on Tuesday.
Nothing has changed on this, the official said when asked about a Bloomberg report that the president has determined that a prepackaged bankruptcy is the best way for GM to restructure and become competitive. This report is not accurate.
The White House wants the 60-day period for GM and a 30-day period for Chrysler to play out, as announced by the president on Monday, the official said, speaking on condition of anonymity.
(Additional reporting by Kevin Krolicki and Jeff Mason in Washington and Soyoung Kim in Detroit; writing by Todd Eastham; editing by Lincoln Feast)