By Shawn Langlois
SAN FRANCISCO (Dow Jones) -- General Motors Corp. has toiled
over the past couple months to slash its workforce, curb employee
benefits and highlight a rosier, fuel-efficient future -- all in
attempt to remain viable and keep the money flowing in from
Washington.
Next week, GM (GM), along with struggling rival Chrysler LLC,
will see if its federal benefactor approves so far. Anything short
of a thumbs-up and the promise of more funding could lead to an
even more uncertain future for Detroit's ailing industry.
GM spokesman Greg Martin said the plan will be submitted to the
Treasury Department on Tuesday afternoon with a press conference to
follow. He declined to comment on the specific issues that remain
to be hashed out, other than to say GM is on track.
"Our sleeves are rolled up and we're working on it," Martin
said, "We're confident that we'll deliver a good, solid plan that
shows a roadmap to viability."
Still, the flexibility of bondholders and the United Auto
Workers continues to be seen as a major sticking point. According
to J.P. Morgan analyst Himanshu Patel, a bankruptcy filing could be
the eventual outcome if GM fails to hammer out the necessary
concessions.
In fact, GM bondholders are threatening to push the company into
bankruptcy if they don't get more money in exchange for forgiving
debt, the Detroit News reported Thursday.
GM is working on a debt exchange that would slash its unsecured
debt by two-thirds to $9.2 billion. The company is seeking to halve
its $62 billion in total debt under the terms of the $13.4-billion
loan package, with bondholders required to accept about 30 cents on
the dollar.
But creditors are looking for 50 cents on the dollar, which they
say mirrors the value of concessions being negotiated with the
United Auto Workers, the Detroit News said.
In the meantime, the pace of the industry deterioration has not
slowed. GM's January U.S. vehicle sales plunged 49% to headline the
worst sales month in decades. Chrysler's results were even worse,
down 55% as none of the major automakers were spared.
GM's stock price has shown no sign of a rebound, either, having
lost 19% since the start of 2009. The spiraling Dow component has
shed more than 90% of its value in the past year.
On the jobs front, the carnage is piling up. GM is currently
offering buyouts to its entire hourly workforce and also said
earlier this week that it will cut 10,000 salaried positions.
Bankruptcy is no foregone conclusion, however, considering the
Obama administration's apparent willingness to keep the ailing
industry on life support and to avoid putting further pressure on
an economy that has already seen the loss of almost 3 million
jobs.
"I honestly don't think bankruptcy is on the table any more,"
auto industry analyst Erich Merkle said. "In the end, if the White
House allows GM to go into bankruptcy, the government could
eventually end up owning the whole company. We don't want
that."
He added that there is still a lot of work to be done to get
creditors and the union on board, and that "we're not going to see
concessions fall from the sky."
"This is a game of chicken and my gut says we're going right
down to the wire," Merkle said, alluding to March 31 -- the final
deadline for GM and Chrysler to prove their painful restructuring
and cost-cutting measures have put them on the road to
viability.