General Motors (GM) is finally ready to accept the inevitable:
WSJ: Top General Motors Corp. executives are more open to a speedy bankruptcy reorganization financed by the government, pushing aside earlier concern that such a move would scare away so many customers the company wouldn’t survive, said a person familiar with the matter.
While the company still wants to avoid bankruptcy, the new view represents a reversal from GM’s position late last year, when it sought a federal bailout. The change in thinking, combined with the disclosure Thursday that GM’s auditor has raised “substantial doubt” about the car maker’s ability to keep going, appears to move GM closer to the possibility it will file for reorganization.
This leak is likely in part a negotiating ploy designed to force bondholders into making concessions. But it’s also finally an acknowledgement of reality. The company is also now finally acknowledging that bankruptcy won’t make much of a difference to car sales.
[A]fter months of research, including analysis done by top bankruptcy advisers, the company has come to believe it could emerge from what is known as a prepackaged bankruptcy, said the person familiar with the matter.
Under a prepackaged bankruptcy, the various constituents — unions, suppliers, bondholders — would agree in advance to concessions. Prepackaged bankruptcies typically take just a few months to accomplish.
A bankruptcy of any sort could be far more effective than the type of out-of-court restructuring GM is undergoing. For instance, the company’s entire debt load could be reworked, rather than a majority of it as it currently is trying to do, and the auto maker could circumvent state franchise laws that have long protected its dealers from GM’s restructuring knife.
Under a prepackaged bankruptcy, said the person familiar with the matter, “We’d have 60 days of havoc and chaos, but the view is, if it was supported by the government and supported by the constituents, included the bondholders, the VEBA [retiree health-care trust] was negotiated, labour was in, that…we would be able to manage it.”
Wonder if the $8 billion (?) taxpayers have already thrown down the drain can be saved.