GM rushes to avoid bankruptcy filing

DETROIT (AP) — Bankruptcy protection for the biggest US automaker is becoming more probable with a deadline just over two weeks away, the company’s top executive told reporters Monday.

General Motors Corp. CEO Fritz Henderson is still holding out hope that the company can restructure without court protection, but he says the tasks to complete before a June 1 government-imposed deadline are large.

The automaker, Henderson said, is looking at its operations country-by-country to determine where it might have file for bankruptcy, but he says a US bankruptcy doesn’t necessarily mean that GM would file in other locations.

“Certainly the task that we have in front of us is large,” Henderson said during a conference call to update the company’s restructuring efforts. “There is still an opportunity and still a chance for it to be done outside of a court process.”

General Motors has received $15.4 billion in federal loans, and the government deadline to restructure or seek Chapter 11 protection is just over two weeks away. But the company must reach concessionary agreements with unions, persuade thousands of bondholders to exchange $27 billion in debt for 10 percent of GM’s stock, cut thousands of dealers, close plants and lay off more salaried workers.

Under Chapter 11 reorganization of the US bankruptcy code, a company can stay in operation under court protection while sheds debts and unprofitable assets to emerge in a stronger financial position.

Also Monday, Henderson left open the possibility that GM would move its corporate headquarters out of Detroit. The company, he said, is looking at everything within its business.

“It’s not like we have that queued up at the top of our list,” he said, adding that GM has a large number of people in Detroit and is proud to be here.

He would not comment about reports about Fiat Group SpA’s interest in getting 80 percent of GM’s European Opel operations, saying that any structure must address the needs of both partners.

Henderson said GM has an urgent need for funding from the German government, so any partner for its European operations would have to be suitable to the government.

“We have a need for funding, actually, in our European business, that’s important and urgent and the German government hasn’t indicated an interest in running our business,” Henderson said. “We’re going to make sure that any partner we pick in this business is going to be suitable for them, so that if we need their support, we obviously want them to find any partner to be reasonable and acceptable.

Henderson cast doubt on reports that GM may sell its Latin American operations, saying they have consistently brought great returns to the company.

“This is a business that we know and like very much,” he said.

GM is still in the process of negotiating with the United Auto Workers about six factories that intends to close, Henderson said, and it is negotiating with both the UAW and Canadian Auto Workers about concessions.

The company also plans to notify dealers later this week about its plans to reduce their ranks by about 2,600 by 2010. The company has 6,246 dealerships, many of which are not profitable because of lower sales volumes.

Henderson said GM has said the number of parties interested in its Hummer brand has dropped to two from three, and he expects a decision by the end of May. For GM’s Swedish Saab unit, there are a number of interested parties, he said, adding that a resolution will take a month or two.

Negotiations are still under way to sell the Saturn distribution network, but GM would be open to selling factories to make the products if someone were interested, Henderson said.

“To date, haven’t seen any specific proposals in that regard, but this is something we would be open to,” he said.

GM cannot modify its stock exchange offer to bondholders because the company has been told by the Treasury Department that it cannot go above 10 percent of the company’s equity, Henderson said.

A committee representing the bondholders has counteroffered seeking a 58-percent ownership stake.

“The guidance given to us by Treasury when we launched the bond exchange remains in effect today, and there’s really no changes from that,” Henderson said. “So we don’t have any plan to make modifications at this point.”

The deadline for the bond exchange is May 26.

Under a capital structure proposed by GM but still under negotiation, the US government would get 50 percent of the company for its loans. GM has said it will need another $2.6 billion in May and $9 billion more for the remainder of the year.

A UAW-run trust that will take over retiree health care costs starting next year would get 39 percent of the stock, in exchange for half of the $20 billion that the company owes the trust.Existing shareholders would get roughly one percent of the stock.

To accommodate the new stakeholders, GM plans to issue 62 billion new shares, then simultaneously do a 100-for-one reverse split to bring the number of shares down to roughly the present number of 611 million.