Z284ever

Richard Truett
Automotive News
November 22, 2008 - 12:23 am ET


General Motors directors are considering a Chapter 11 bankruptcy filing, the Wall Street Journal and Detroit television stations reported.

According to local TV reports, GM's board was meeting late Friday night in the company's downtown Detroit headquarters and had added court protection to the list of actions that may be taken as the company's cash supplies dwindle and the prospects for immediate federal aid dim.

The Journal attributed the information to people familiar with outside board members' thinking. The paper said such a move would put directors at odds with CEO Rick Wagoner, who has maintained that a Chapter 11 filing isn't feasible because consumers would shun vehicles made by a bankrupt company.

GM is burning through its cash reserves and is seeking government loans to stay solvent amid the weakest U.S. auto sales in 25 years.

Wagoner and the CEOs of Ford Motor Co. and Chrysler LLC appealed for help before the House and Senate this week. They now must submit plans by Dec. 2 to show how they would put any federal money to good use.

GM said Nov. 7 that its cash could fall below minimum amount needed to pay its bills within months.

The Journal said GM provided a statement saying the board had discussed bankruptcy but didn't view it as a ``viable solution to the company's liquidity problems.'' The paper also cited GM spokesman Tony Cervone saying management is considering everything possible to avoid a filing.

Robert_Nashville

Well here is another elephant in the room.

Let’s say GM (and/or Ford and/or Chrysler) lays out a brilliant restructuring plan that really looks like it will work for them long-term and then they get the $25B or whatever the final number turns out to be. At that point, things might be looking pretty ‘good”…good enough that someone might just swoop in and buy up a more than controlling interest in GM.

Here’s another scenario…if you are a supplier and GM owes you tens or hundreds of millions; you know that if GM files for bankruptcy without a plan, the chance of you getting more than a few pennies on the dollar (if you get anything at all) is pretty slim and you never know what Federal bankruptcy judge is going to do.

BUT, if there is a restructuring plan in place, it's far more likely the judge will go along and with that plan plus some CA$H from the taxpayers…well, now it might well be that if you force them into bankruptcy (lot’s of people like to forget that entering bankruptcy isn’t always the idea of the company going bankrupt); you might just get 40 or 50 or even 60% of what is owed to you…now suddenly, forcing them into bankruptcy doesn’t look like such a bad idea (for this unnamed supplier, anyway).