WASHINGTON — Facing a March 31 deadline for the government to accept its restructuring plan and provide more taxpayer rescue money, General Motors Chief Executive Officer Rick Wagoner said Tuesday that a forced bankruptcy could spell the end of the storied carmaker.
Wagoner, at a breakfast interview with a small group of Washington reporters, acknowledged that many industry analysts expect GM to be forced into a form of prepackaged bankruptcy from which it could emerge within months, but he warned that such a move would be risky and could prove disastrous.
"A lot of people who write about bankruptcy I don't think have ever been in bankruptcy. And what I've learned from studying it in detail is that it brings significant risks on and puts things out of the control of the board and management and the controls of other parties," Wagoner said.
He added, "You talk about fast prepacks that could work in 30 or 60 days, and what I've learned is it could work, and it might not work. And if it doesn't, it could mean in the end a long period of bankruptcy, which I believe would result in the liquidation of the company because . . . consumers will shy away from buying vehicles from companies in bankruptcy."
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Wagoner and other GM officials have been meeting regularly with members of a presidential task force as well as working with the United Auto Workers union, suppliers and investors to arrange some sort restructuring outside the courtroom.
GM would like another $4.6 billion in taxpayer support and a $12 billion line of credit. That's on top of $13.4 billion from taxpayers that it's already received. The new money is contingent on approval of its restructuring plans. Many Republicans in Congress, and a broad swath of industry analysts, argue that bankruptcy is necessary to get GM's costs under control.
"If we could accomplish 99 percent outside of court that we would inside of court, why in the world wouldn't we do it outside of court? You save the risk and, by the way, at a much lower expense from the standpoint of support," Wagoner said. "Because if we were to file for Chapter 11, there is no debt financing other than the U.S. government and that would be a potentially huge amount of financing required. So I think it makes sense from everybody's perspective to do this outside of court."
Given congressional and public reluctance to pay for more bailouts, analysts agree that the betting money remains on a structured bankruptcy, arranged, however, before GM files for protection from creditors, to minimize surprise. Still, a bankruptcy would send shock waves across the automotive supply network.
"We're still holding out some slim hope here. The weight of evidence seems to be mounting against the rescue loan package, and GM is becoming more resigned to that," said George Magliano, the director of North American auto-industry research for IHS Global Insight, an economic forecaster in Lexington, Mass.
A major obstacle to restructuring remains the bondholders, who stand to lose on reimbursement of their bonds as GM tries to shed two-thirds of its debt load, estimated at more than $27 billion. These investors are playing a game of chicken, holding out as long as possible for the best deal while trying to keep GM out of bankruptcy, where they could be left with far less.
When he was asked about the bondholders, Wagoner treaded carefully, noting that there are a lot of competing interests at play.
"Look, these are challenging issues, so I don't think you expect anybody to come in and say, 'Look, we'll just do everything you want and we don't care about what anybody else does,' " he said. "It is a triangulation, and we need to bring everybody to the table at the same time, and that's a work in progress."
The GM chief confirmed that growing outrage over bonuses paid by insurer American International Group, similarly rescued by taxpayers, could darken the public's mood for helping auto manufacturers more.
"I think it would be better for all of us if this wasn't playing out this way," Wagoner said.
There's a dramatic distinction, he said, between banking and finance rescues and aid to the automobile industry.
"We've been pretty clear on the amount of funding support we need, which is dramatically smaller. Second of all, the kind of business we are has a significantly greater footprint in Main Street versus Wall Street," Wagoner said, adding that the restructuring also requires GM to adopt energy-efficient technologies.
"The GM case, everybody has skin in the game. Everybody who could participate is, from executive salary reductions — involving all of our executives and almost all salaried people — to significant re-cutting of labor contracts with unions to dealers to suppliers," he said.
After almost nine years as the CEO of a company whose health long has been synonymous with the health of the U.S. economy, Wagoner was candid about his predicament.
"Let me tell you, living hand to mouth is no fun for anybody," he said.
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