GM Bankruptcy Looms; Chrysler Awaits Fate

GM Board Meets As Bondholder Deadline Passes; Approval Of Chrysler-Fiat Deal Expected Monday

(CBS/AP)  General Motors Corp.'s board of directors met for a second day Saturday to make the final decision on whether the automaker would complete its restructuring by filing for bankruptcy protection Monday.

The outcome of the meeting could not immediately be determined. GM and the Treasury Department, which has been guiding the Detroit automaker toward a rescue plan that will give taxpayers nearly a three-fourths stake in the company, went into secrecy mode.

GM's bondholders had a 5 p.m. Saturday deadline to accept an offer to swap their $27 billion in debt for at least a 10 percent stake in a new GM. If the Treasury doesn't get the amount of support it wants, bondholders could wind up with far less in bankruptcy court.

The Treasury Department had no immediate comment on the deadline passing, and GM spokesman Tom Wilkinson said the automaker did not plan to make any statements Saturday.

GM took a huge restructuring step Friday when the United Auto Workers union agreed to a cost-cutting deal, and early Saturday, Germany's finance minister said a plan was approved for Canadian auto parts maker Magna International Inc. to move ahead with a rescue of GM's Opel unit.

But there was still much to do to beat the government's Monday deadline to qualify for more aid. The company already has received about $20 billion in government loans and could get $30 billion more to make it through what is expected to be a 60- to 90-day reorganization in bankruptcy court.

GM has yet to confirm it will seek bankruptcy protection, but it has scheduled a news conference Monday morning in New York.

Just 18 months ago, GM's market value was $20 billion. By friday, with shares trading at 75 cents, the company was worth $457 million, reports CBS News correspondent Randall Pinkston.

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CBS Early Show: Winners And Losers In GM Bankruptcy

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The Treasury on Thursday offered bondholders 10 percent of a newly formed GM's stock, plus warrants to buy 15 percent more to erase the debt. Last week, GM withdrew an offer of 10 percent equity after only 15 percent of the thousands of bondholders signed up.

It was unclear how many bondholders took the latest offer, although a group representing large creditors who hold 20 percent of debt agreed to it. If the 15 percent who took the first offer are added in, that would make 35 percent.

The government takeover will split the company in two, saving its best brands - Chevrolet, Buick, GMC trucks and Cadillac - while jettisoning the rest, reports Pinkston.

Elliott Management Corp., a $13 billion hedge fund and major GM bondholder, also said it had decided to accept the new deal. But Spokesman Scott Tagliarino wouldn't say how much GM bond debt Elliott represents.

Getting as many bondholders as possible to sign on to the offer in advance of a bankruptcy filing could help the automaker get through the court process more quickly, said Robert Gordon, head of the corporate restructuring and bankruptcy group at Clark Hill PLC in Detroit.

"The more consensus you have, the more likely it is you'll be able to move through the bankruptcy process in an expeditious fashion with less resistance," Gordon said.

In a typical bankruptcy protection case, the company files a plan of reorganization that must be voted on by creditors. In each class of creditors, the plan would have to be approved by holders of two-thirds of the claims and a majority of the number of individual creditors who vote.

But the GM case is anything but ordinary, and it appears the company will sell some or all of its assets to a new entity that would become the new GM, rather than submit a plan to reorganize the old company.

Under a so-called Section 363 sale, the prospective buyer and seller present a fully negotiated asset purchase agreement for approval by the court.

Creditors still can lodge objections, but GM could avoid the drawn-out fights between competing creditors, such as bondholders and workers, that often occur.

Chrysler LLC, which filed for bankruptcy protection April 30, chose a similar path. A judge heard three days of testimony and arguments last week over the sale of most of Chrysler's assets to Italian carmaker Fiat SpA.

U.S. Judge Arthur Gonzalez is expected to approve the sale Monday, pushing Chrysler closer to its goal of a speedy exit from bankruptcy protection. But an appeal is likely from three Indiana state pension and construction funds, which invested in Chrysler debt and say the deal isn't fair. That may force Chrysler to further postpone the deal's closing.

Chrysler claims that any substantial delay could push Fiat to back out if the deal, since the Italian automaker has set a deadline of June 15 to wrap up a transaction.

GM's stock tumbled to the lowest price in the company's 100-year history on Friday, closing at just 75 cents after trading as low as 74 cents. In a bankruptcy reorganization, the shares would become virtually worthless.

[andylance1]

Opel should be run by an American company or shut down. Give it to Fiat/Chrysler or shut it down. Why let the Germans make all the decisions? The Germans are picking the Russian company Magna - which also has a few Canadian investors. They know the Russians can shut down their gas pipelines so they have to kiss Russian butt. It figures ...no courage or principles, do business with anyone.

[reality42]

If GM does open 14 plants in Brazil and China and close 14 here then the bail out money the American people have to pay back for GM to give jobs away. WOW
I thought the Americans were the smartes and would have been better to fold up gm with no bailout because they are way out of touch with the Auto industrys of the world. Market share would have went to the Japanese dealers and they would have keep jobs in the USA with depressed wags but hell Americans are going to see deflation all around as wages drop. At leat the jobs would have been at home.
But instead your goverment gives millions of dollars to the car companys to set up shop in other countrys.

You know the party is over in America --- time to live to learn like the East which has been held down by USA America long enough

[oiaf17]

America deserve to be East China. American deserve to go down.

[oiaf17]

I don't hate America!!!! I hate lazy workers
Posted by golfered2 at 3:33 PM : May 31, 2009

Ha Ha Ha Ha you cheer for America go down in flame and smoke because you hate lazy.

This is why now America go down. American hate American. You never care your country. Now you go down. Bye-bye America.

[golfered2]

14 plants to be open in Brazil and China!!!! GOOD
Posted by golfered2 at 3:23 PM : May 31, 2009

Ha Ha Ha Ha you hate America like me too! Obama is a failure. Down with America.
Posted by oiaf17 at 3:26 PM

I don't hate America!!!! I hate lazy workers who could care less about the product they make and the customer who buys the product!!!! Sorry UAW

[oiaf17]

14 plants to be open in Brazil and China!!!! GOOD
Posted by golfered2 at 3:23 PM : May 31, 2009

Ha Ha Ha Ha you hate America like me too! Obama is a failure. Down with America.

[golfered2]

14 plants to be open in Brazil and China!!!! GOOD Those 14 plants will employ workers who want to work and make a good product. UAW has no idea how to make a good product. You buy a UAW product and all you get are recalls!!!!!. The UAW lack of work ethics got them to this quality problem!!!!!

[oiaf17]

Family axes wedding plans, Egyptian cuts off *****
Posted by cmixxx at 3:15 PM : May 31, 2009

You very happy of that story?

[oiaf17]

14 GM plants to close-to be announced Monday during news conference
Posted by dsnj1-2009 at 2:44 PM : May 31, 2009

14 plants to open in China and Brazil. They use money Pelosi take from you and give to them.

[dsnj1-2009]

14 GM plants to close-to be announced Monday during news conference

[dsnj1-2009]

@eiaf17-go smoke some more crack

[oiaf17]

I just read on CNN that the result of this bankruptcy (which will be announced tomorrow)will be approximately 320,000 people in US losing their jobs (20k from GM and 300k from dealerships and suppliers)-has anyone else heard this? This cannot be good for the economy
Posted by dsnj1-2009 at 2:20 PM : May 31, 2009

Whenever a factory close in America, a new factory open in China or Brazil.

Obama and Pelosi move your job to China and Brazil. But they steal billions of your dollars first. But you still hate Bush.

[dsnj1-2009]

I just read on CNN that the result of this bankruptcy (which will be announced tomorrow)will be approximately 320,000 people in US losing their jobs (20k from GM and 300k from dealerships and suppliers)-has anyone else heard this? This cannot be good for the economy

[oiaf17]

Obama is president. Not Bush. Obama is same as Bush. But you never criticize Obama, but you still criticize Bush. Obama is a failure. You still say Bush Bush Bush Bush.

You say both sides to blame, but you still love Obama and hate Bush.

Now America go down. Bye-bye America.

[oiaf17]

Do you think a Republican president will do things differently? Look at the past 8 years.
Posted by incog-nito at 10:23 PM : May 30, 2009

Yes you do.

[incog-nito]

Posted by oiaf17 at 1:29 PM : May 31, 2009

Did I ever say Bush? I said both parties are responsible. Are you stupid or what?

[oiaf17]

That kind of logic is exactly why outsourcing will continue and will only stop when, yes, America becomes a third-world country.
Posted by incog-nito at 10:39 AM : May 31, 2009

That what Obama doing now. But you only say Bush Bush Bush Bush. Everybody agree free trade are bad. But nobody listen you. Obama no listen you. Obama laugh you. You say Bush Bush Bush Bush.

Bye-bye America.

[oiaf17]

Do you think a Republican president will do things differently? Look at the past 8 years.
Posted by incog-nito at 10:23 PM : May 30, 2009

It really true you always say Bush. Obama same but you say Bush Bush Bush Bush. Obama laugh you. You say Bush Bush Bush Bush.

[sjc_1]

If parts of the world make $1 per hour and we make $20 per hour, but have only 1/20th of the world's population, eventually all of us will make $1.50 per hour. The difference is their houses cost $10,000 and our houses cost $300,000.

[gratvialavas]

Meet the new GM. Same as the old GM.