A GM bankruptcy will lead to big disputes, analysts say

General Motors appears ready to resort to bankruptcy to save the company, but industry analysts say it won’t be easy.

GM would face big fights both inside and outside of court, analysts say. A judge would need to be persuaded to approve a reorganization plan quickly, and consumers would need to be persuaded to buy brands that have been tainted by bankruptcy.

Stephanie Brinley, analyst with AutoPacific in Southfield, Mich., said a courtroom battle would be tough as a large number of bondholders, dealers and suppliers vie for the judge’s attention. They all may have beefs with how GM plans to slim down to a smaller, but profitable, automaker.

Even if it prevails in court, however, GM still needs to make a profit and that means selling vehicles that don’t have large discounts attached, said Erich Merkle, an auto analyst in Grand Rapids, Mich.

“They can be pushed out of bankruptcy, but it’s going to be incredibly difficult to survive for the next 12 to 18 months,” he said.

The potential bankruptcy of GM is coming to a head because the federal automotive task force gave the automaker until June 1 to present an acceptable reorganization plan. GM has been surviving on loans from the federal government.

GM’s plan must include deals with bondholders, who hold much of GM’s debt, and the United Auto Workers, who are owed $20 billion to fund retirees’ health care.

Read more in Wednesday’s Vindicator and Vindy.com