General Motors CEO: Bankruptcy still an option (Roundup)

Mar 31, 2009, 18:11 GMT

Washington - General Motors Corp is keeping open the option of bankruptcy in order to restructure the flagging US carmaker, GM's new chief executive Fritz Henderson said Tuesday.

Henderson, who took over the top job from Rick Wagoner Monday as part of a White House-forced shake-up at the company, said he was confident that GM could make the necessary changes to survive either way.

'If we're not successful doing it out of court, we will do it in court,' Henderson told reporters in his first press conference from Detroit.

Henderson addressed reporters one day after US President Barack Obama issued an ultimatum to the US car industry: restructure or file for bankruptcy. Both GM and Chrysler LLC have received emergency loans totalling 17.5 billion dollars.

Obama said GM had not yet done enough to gain the government's long-term support and gave the carmaker 60 days to reach far-reaching deals with labour unions, creditors and others to cut costs.

Henderson said the government's requirements on reducing debt 'might very well drive us into' bankruptcy in order to make the drastic cuts needed. A bankruptcy process would be backed by government guarantees on warrantees and other aid to help speed up the process.

GM has lost some 80 billion dollars over the last four years. But the company has been brought to the brink only in the last few months as the US recession has driven US car sales to 25-year lows.

In an effort to revive sales in the struggling economy, GM said it would subsidize the monthly payments of buyers who lose their job in the first two years after buying a car. US rival Ford Motor Co, which has not sought a government bail-out, announced a similar plan Tuesday.

GM has already received 13.5 billion dollars in emergency loans from the US government and in February said it could need about 21 billion dollars more in the coming years.

Henderson said the White House had made clear that GM had to go 'faster and deeper' in its restructuring efforts if it hoped to keep the government's loans and get more support in the future.

'We got it, we understand it, now we need to accomplish it,' Henderson said.

Chrysler, which got 4 billion dollars in government loans, has been given only 30 days to clean up its own balance sheet and finalize a partnership with Italian carmaker Fiat Motor SA, or it too will be forced to declare bankruptcy.

The Wall Street Journal reported Tuesday that Fiat will take a 20- per-cent share in Chrysler as part of an arrangement worked out in conjunction with the US Treasury Department.

Germany's Daimler continues to hold 20 per cent of the company, while the majority is held by Cerberus, a private equity firm.