CEO: Tasks are large to avoid bankruptcy

DETROIT (AP) — Bankruptcy protection for the nation’s biggest automaker is becoming more probable with a deadline just over two weeks away, the company’s top executive told reporters Monday.

General Motors Corp. CEO Fritz Henderson is still holding out hope that the company can restructure without court protection, but he says the tasks to complete before a June 1 government-imposed deadline are large.

The automaker, Henderson said, is looking at its operations country-by-country to determine where it might have file for bankruptcy, but he says a U.S. bankruptcy doesn’t necessarily mean that GM would file in other locations.

“Certainly the task that we have in front of us is large,” Henderson said during a conference call to update the company’s restructuring efforts. “There is still an opportunity and still a chance for it to be done outside of a court process.”

General Motors has received $15.4 billion in federal loans, and the government deadline to restructure or seek Chapter 11 protection is just over two weeks away. But the company must reach concessionary agreements with unions, persuade thousands of bondholders to exchange $27 billion in debt for 10 percent of GM’s stock, cut thousands of dealers, close plants and lay off more salaried workers.

Under Chapter 11 reorganization, a company can stay in operation under court protection while sheds debts and unprofitable assets to emerge in a stronger financial position.

Henderson would not comment about reports about Fiat Group SpA’s interest in getting 80 percent of GM’s European Opel operations, saying that any structure must address the needs of both partners.

Henderson said GM has an urgent need for funding from the German government, so any partner for its European operations would have to be suitable to the government.

Henderson cast doubt on reports that GM may sell its Latin American operations, saying they have consistently brought great returns to the company.

GM is still in the process of negotiating with the United Auto Workers about six factories that intends to close, Henderson said, and it is negotiating with both the UAW and Canadian Auto Workers about concessions.

The company also plans to notify dealers later this week about its plans to reduce their ranks by about 2,600 by 2010. The company has 6,246 dealerships, many of which are not profitable because of lower sales volumes.

Henderson said GM has said the number of parties interested in its Hummer brand has dropped to two from three, and he expects a decision by the end of May. For GM’s Swedish Saab unit, there are a number of interested parties, he said, adding that a resolution will take a month or two.

Negotiations are still under way to sell the Saturn distribution network, but GM would be open to selling factories to make the products if someone were interested, Henderson said.

GM cannot modify its stock exchange offer to bondholders because the company has been told by the Treasury Department that it cannot go above 10 percent of the company’s equity, Henderson said.

A committee representing the bondholders has counteroffered seeking a 58 percent ownership stake.