GM CEO: Suppliers Face Dire Consequences If Ch 11 Sale Fails
25 Juni 2009 - 10:32PM
Dow Jones News
General Motors Corp. (GMGMQ) Chief Executive Fritz Henderson
said auto parts makers face a "draconian" revenue drain if
bankruptcy court fails to approve a sale of GM's assets to a new
company next month.
Henderson, in an affidavit filed Thursday, said GM plants
shuttered during much of the summer may not reopen if the sale is
blocked.
With many auto suppliers either on the brink of bankruptcy or
already in protection, Henderson said a longer shutdown at GM could
deal a final blow to struggling companies.
"Many suppliers are already in the midst of a severe liquidity
crisis, which has only been exacerbated by the current shutdown of
GM production facilities," he said.
"Without prompt approval of the 363 transaction and the renewal
and ramp-up in production by New GM, the effect on certain
suppliers will be fatal."
Already this year, 13 major auto parts suppliers and two
indirect suppliers have filed for Chapter 11 protection, according
to the Original Equipment Suppliers Association.
Lear Corp. (LEA), a maker of seats and auto electronics, is
working to fashion a pre-packaged bankruptcy deal and could file
for Chapter 11 as early as next week, according to people familiar
with its plan.
Troubles have been mounting for years in the supplier industry,
which accounts for more than three-quarters of employment in the
U.S. auto sector.
Suppliers have struggled to adjust to the precipitous fall in
global auto demand, exacerbated by the shutdown of plants by GM and
Chrysler LLC.
Chrysler, which emerged from bankruptcy earlier this month, shut
down all of its U.S. factories for almost two months.
GM's bankruptcy plan separates the company's more attractive
operations from "bad" assets; the latter will be wound down or sold
in a lengthy liquidation. The "new GM" assets would be transferred
to an entity owned by the U.S. and Canadian governments, a health
care trust for members of the United Auto Workers union and the
company's unsecured creditors.
Henderson said in the affidavit that virtually all of the
company's dealers have agreed to either stay in business with the
company or accept offers to wind down their business.
GM wants to trim about 1,900 of its 6,000 outlets. Around 4,100
dealers received offers to stay with GM, and 99.6% have agreed, he
said. Among those earmarked for closure, GM reversed its decision
in 64 cases. Some 98.8% of those given wind-down offers have
accepted them, he said.
-By Sharon Terlep; 248-204-5532; sharon.terlep@dowjones.com.