GM CEO: Bankruptcy Would Cause Liquidation
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DETROIT — If General Motors Corp. were forced into Chapter 11 bankruptcy protection, the company would end up being liquidated because a long bankruptcy would scare customers away, Chief Executive Rick Wagoner said Tuesday.
Speaking at a breakfast in Washington, D.C., Wagoner said restructuring the company out of court would accomplish 99 percent of what could be achieved in bankruptcy, but without the risk of losing customers or the huge expense of Chapter 11.
Wagoner's statements came as members of President Barack Obama's auto task force told Michigan lawmakers they would signal next week what direction they plan to take to restructure GM and Chrysler LLC.
Sen. Carl Levin, D-Mich., who met with members of the panel on Capitol Hill, said they would make "a significant statement" by the end of next week on the restructuring. Levin said it would not be definitive but would show "the direction that it needs to go."
Rep. Sander Levin, D-Mich., the senator's older brother, said the task force made clear they expect to present a "framework" that would take into account the companies, their debtholders, suppliers and the United Auto Workers union.
The panel members said they want to "help the industry survive and restructure outside bankruptcy," the congressman said.
The lawmakers also discussed their concerns for auto suppliers, who are seeking billions in loans and government aid and face an intense cash crunch this month. Auto suppliers met later in the day with members of the task force.
"Our entire area is hanging on by their fingertips," said Rep. Candice Miller, R-Mich.
Critics of GM and Chrysler, which have received $17.4 billion in government loans to stay alive and have requested a total of $39 billion, say the government should let them go into a short, prepackaged bankruptcy that would let them restructure debt and void costly labor contracts.
But at the breakfast sponsored by The Christian Science Monitor, Wagoner said a 30- or 60-day prepackaged bankruptcy might not work.
"If it doesn't, you'd need in the end a long period of bankruptcy which I believe would result in liquidation of the company," he said, adding that GM research continues to show that customers would shy away from buying vehicles from companies in bankruptcy.
Wagoner also said Ford Motor Co.'s deal with the United Auto Workers to change the funding of a retiree health care trust fund will not work for GM. Ford and the union agreed that the company will make half of its payments to the fund in stock instead of cash.
"The Ford program does not meet our needs at all," Wagoner said on an audio recording of the event obtained by The Associated Press. "It's basically a par deal. It probably works for Ford. It doesn't work for us."
Wagoner said GM needs to do "something different" and is working with the UAW to make that happen.
He also said he hopes auto parts suppliers get government aid soon because their situation is "getting more precarious."
Parts-making companies, especially those tied to the Detroit Three, have suffered as automakers have cut production to match weaker sales, and many are on the brink of bankruptcy.
GM has proposed that the government create a credit insurance program that would guarantee payments from automakers to parts makers, making it easier for suppliers to borrow against the expected payments.
Suppliers, Wagoner said, have held up better than expected for the past 30 days, but he predicted their situation will worsen.
"I think the pressure is there and continues to grow," he said. "The longer the industry runs at low production levels, I think the greater the risk grows."
Chrysler and GM each face a March 31 deadline to finish plans to show the government how they can become viable again and repay the government loans.
GM has received $13.4 billion in federal loans and is seeking an additional $16.6 billion. Chrysler has received $4 billion and is seeking an additional $5 billion.
GM announced Tuesday that it will hold its annual meeting in Detroit instead of Wilmington, Del., this year to save money and increase shareholder participation. The company also will delay the meeting until Aug. 4 _ about two months later than usual _ as it grapples with its restructuring plan. GM's directors believe it will be able to give shareholders a better perspective on the company's operations by waiting, company spokeswoman Julie Gibson said.
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Associated Press Writer Ken Thomas in Washington contributed to this report.
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TOM KRISHER 03/17/09 07:19 PM ET Associated Press