White House Lays Groundwork For GM Bankruptcy
28 Mai 2009 - 9:55PM
Dow Jones News
The White House began laying the groundwork Thursday for a
historic bankruptcy filing by General Motors Corp. (GM), prodding
the company's lenders for support and preparing a major campaign to
reassure struggling communities in auto-manufacturing states.
President Barack Obama is expected to deliver remarks on GM on
Monday. The White House offered few details, but his comments would
coincide with the government's deadline for GM to reach agreements
with stakeholders or face being forced into bankruptcy, which now
appears all but certain.
White House Press Secretary Robert Gibbs told reporters that any
announcement would first come from GM.
"It's not my job to prejudge or speculate on what the end-game
of this might be," Gibbs said. "I do expect that whatever happens
... as a result of the restructuring process that the president
will make comments on that, presumably on Monday."
Throughout next week, Obama will dispatch eight cabinet
secretaries and other top administration officials to Ohio,
Michigan, Indiana and Wisconsin to discuss the federal response to
the auto-industry crisis. The involvement of so many high-level
administration officials in such an effort is rare. It reflects the
administration's concerns about the impact of such a large
bankruptcy filing on already-hard-hit Midwestern communities with
large numbers of auto-industry jobs.
The Obama administration's auto task force sought to ensure a
smooth bankruptcy process by pushing a deal between the Detroit
auto maker and its lenders, who had rejected an earlier
debt-for-equity swap. The administration Thursday backed a new,
sweetened deal, which lenders have until 5 p.m. Saturday to accept.
The deal already had received support from key lenders, GM
said.
Briefing reporters on a conference call, an administration
official said the task force hoped a GM bankruptcy could be wrapped
up in 60 to 90 days. But he warned that the company is bigger and
far more complicated than its rival, Chrysler, which is expected to
emerge from bankruptcy sooner than anticipated.
The official said GM would almost certainly cease to exist as a
publicly traded company for a period after bankruptcy. The company
would probably spend about six to 18 months being privately held,
with the largest stakes going to the U.S. and Canadian governments
and the United Auto Workers. The company would then likely go
public again, said the official, who spoke to reporters on the
condition of anonymity because of the sensitivity of the
discussions.
The Obama aide cast doubt on the ability of the U.S. government
to recoup its entire investment in GM, saying that initial loans
extended by the Bush administration were wasted.
"The money in the first quarter this year unfortunately didn't
accomplish anything," the official said, adding, "We never
envisioned there being a significant recovery."
The expected loss on some of the loans conflicts with the
initial claims of Bush administration officials and GM executives,
who contended the loans would be paid back.
The Obama aide said the money was wasted because it wasn't
immediately accompanied by the significant restructuring of the
auto maker that is currently taking place.
"We hope to recover as many taxpayer dollars as we can," the
Obama aide said.
Under the U.S. Treasury Department's bankruptcy plan for the
Detroit auto maker, a "new" GM financed by the U.S. government
would buy up the relatively healthy assets from an "old" GM.
"It is likely that there will be a period of time in which the
new GM would not be a public company unless it chose to do an
initial public offering" of its stock, the official said.
The new GM would likely be "viable" in the current depressed
car-sales market and become "highly profitable" if sales picked up,
the official said.
"GM should be highly, highly profitable given the new cost
structure that is being put in place, given the vast reduction of
liability that has been achieved," the official said.
The Obama administration won't make any final decisions on
whether to force GM into bankruptcy until after 5 p.m. EDT
Saturday, the deadline for the company's unsecured bondholders to
accept a new debt-for-equity exchange, he said. That offering was
estimated to have the support of holders of more than a third of
the company's unsecured debt, and those bondholders were
aggressively pushing other GM lenders Thursday to accept the deal,
the Obama aide said.
The official didn't say how many lenders the administration
hoped would agree to the deal.
The administration official didn't dispute figures, disclosed in
a new regulatory filing, that the U.S. government's assistance to
GM could grow to $50 billion during the bankruptcy, with much being
used for so-called debtor-in-possession financing to keep the
company afloat while in court. GM has received just over $19
billion in government loans this year.
-By Josh Mitchell, Dow Jones Newswires; 202-862-6637;
joshua.mitchell@dowjones.com