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Is GM Restructuring Gridlocked?

Though some movement, key union, debt issues remain snags

by on Apr.17, 2009


"The clock is ticking," said GM CEO Fritz Henderson, but efforts to craft a "faster...deeper" viability plan may be running into gridlock.

With “the clock ticking,” General Motors Corp.’s efforts to “go faster and go deeper” with a revised restructuring plan may be facing gridlock that could push the automaker into bankruptcy.

During a call-in news conference, Friday, GM CEO Fritz Henderson offered a status update on the troubled automaker’s desperate race for survival.  In a bluntly candid tone, the new chief executive made it clear that time is running out for GM, which President Barack Obama gave until June 1st to fix its survival plan if it is to get additional federal aid.

Even if the company does meet its deadline, Henderson confirmed, there will be further plant closings and significant additional job cuts.

“Our preference is still to try to accomplish this outside the bankruptcy process,” said Henderson, in a call-in discussion that drew so many participants many journalists were unable to access the news conference.  “But the clock is ticking.  We have to be ready in case we do have to go through the bankruptcy process.”

There are a variety of issues that appear to be stalling GM’s effort to provide the White House with a convincing plan for recovery.  The two key issues involve the United Autoworkers Union, which is being asked to reduce the amount of cash needed for its VEBA health car fund in return for GM stock, and corporate bondholders who are being asked to trade much of their debt for equity.

The UAW, Henderson noted, is currently focusing its attention on negotiations with Detroit’s other failing automaker, Chrysler LLC.  That maker was given only until the end of April to revise its viability plan – and pull off a strategic alliance with Fiat SpA.

Considering the timetable facing Chrysler, Henderson said, “I would expect (GM) could pick up the pace in the next couple weeks.”

The situation with bondholders appears less certain.  Industry insiders contend the various banks and other parties holding GM debt are pushing towards the 11th hour in the hope of gaining maximum value.  Some may even see the opportunity to get their debt covered – with a higher return – in the event of a GM bankruptcy.