GM will threaten bankruptcy if it doesn’t get more aid

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The auto bailout helped to keep GM and Chrysler on life support, but GM will make it clear in it’s plan to be filed this week with the government that more money will be needed in order to avert bankruptcy.

General Motors Corp. will offer the government the choice of giving it billions more in bailout money or seeing it file for bankruptcy when it presents a restructuring plan next week, according to a report published Saturday.

The online edition of The Wall Street Journal, citing unnamed sources, said the competing choices present a dilemma for the Obama administration, which may fear seeing the industrial icon carmaker fall into bankruptcy and cut more jobs if it’s refused more aid.

The government has already committed $13.4 billion to GM as part of a federally-funded bailout. The automaker is expected to include its call for more funds in a restructuring plan it’s required to submit to the Treasury Department by Tuesday, though the company isn’t expected to include a dollar amount, according to the Wall Street Journal report.

However, Treasury Department officials believe GM needs at least $5 billion more in loans to keep operating beyond the first quarter, according to the report.

The key will be the plan laid out by GM. Will it have real concessions from bondholders and the union?

  

Bondholders starting to squeeze GM

The Detroit News is reporting the GM bondholers are driving a hard bargain and threatening to push GM into bankruptcy.

General Motors Corp. bondholders want more money in exchange for forgiving billions in debt and are threatening to push the struggling automaker into bankruptcy if they don’t get it, The Detroit News has learned.

GM has been negotiating with bondholders this week on a complicated debt exchange that would cut the automaker’s unsecured debt by two-thirds to $9.2 billion. To get there, bondholders would have to accept about 30 cents on the dollar, which is a requirement of the automaker’s $13.4 billion federal loan package.

But bondholders are demanding 50 cents on the dollar, which they say mirrors the value of concessions being negotiated with the United Auto Workers, said people familiar with the talks.

The demands illustrate the challenges GM is facing in its talks with bondholders and raise doubts about whether the company will succeed in cutting its debt and convincing the government it can repay the loans. If GM cannot reach a deal on concessions with bondholders, as well as with the UAW, the government could recall the $9.4 billion GM has already received and effectively force the automaker into bankruptcy.

  

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