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President Barack Obama's thinking on the crisis facing General Motors has not changed since Monday, a senior administration official told Reuters on Tuesday.
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CNBC.com GM Bailout |
"Nothing has changed on this," the official said when asked about a Bloomberg report that the president has determined that a prepackaged bankruptcy is the best way for GM to restructure and become competitive. "This report is not accurate."
The White House wants the 60-day period for GM and a 30-day period for Chrysler to play out, as announced by the president on Monday, the official said, speaking on condition of anonymity.
U.S. stock futures slid Wednesday on the Bloomberg report, with S&P futures down 1.5 percent, while the dollar [JPY-TN
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] and the euro [$$EURJPY
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] fell against the yen, abruptly reversing earlier gains.
GM said the automaker was focused on restructuring more quickly and would use the next two months to seek cost-cutting deals with bondholders and the United Auto Workers union.
"Our focus is on accelerating the speed of our operational restructuring and reducing liabilities and debt on the balance sheet," said GM spokeswoman Renee Rashid-Merem. "During the next 60 days, we will work aggressively on restructuring our financial obligations."
A possible bankruptcy plan being discussed for GM includes quickly forming a new company of the automaker's most profitable parts, while a group of other units would remain under bankruptcy protection for a longer period, a source familiar with the plans told Reuters on Tuesday.
GM warned earlier on Tuesday that there is a rising chance it could file for bankruptcy by June, as the company has 60 days to reach deeper concessions with bondholders and unions after its previous restructuring plan was rejected by the U.S. government as insufficient.
Obama on Monday gave GM 60 days to come up with deeper cost and debt reductions than the biggest U.S. automaker had proposed in a viability plan submitted last month.
GM Chief Executive Fritz Henderson said in a news conference on Tuesday a judgment about whether the automaker will file for bankruptcy could come before June 1 when its 60-day window expires.
Potential GM Bankruptcy Plan Includes Company Split
While the automakers would still prefer to avoid bankruptcy, advisers to both GM and Chrysler LLC have been working to prepare for potential bankruptcy filings that would aim to preserve, or sell off, the best parts of the companies.
Under the plans being considered, GM would seek to quickly move its most profitable units into a new company separate from its other units in the early days of the bankruptcy filing, said the source who asked to remain anonymous because the person was not authorized to speak to the media.
The aim would be to show consumers, taxpayers, and the government that the new GM can survive and compete in the autos sector as a viable company, the source said.
Old components of the company not included in the new GM, such as Saturn and Hummer, would remain in bankruptcy over a longer period of time to be sold or wound down, said the source.
During a transition period, the new GM would have to coordinate with the old GM for some time and share certain operational activities, like accounting and insurance, the source said.
GM has recently made progress on its negotiations with the United Auto Workers, winning deep concessions on healthcare and entry-level wages, but negotiations are ongoing over the fate of its obligations to 775,000 retirees.
As part of the negotiations to reduce or eliminate certain retiree benefits, the union is likely to seek some compensation, which could include a stake in the new GM, cash from a sale of the new GM, or any other source of funds, the source said.
Bondholders, a key constituency in the GM [GM
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] restructuring have said they were braced for a reduced offer of "pennies on the dollar" for about $28 billion in GM debt.
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