GM Talks Not To Go Beyond June 1: White House

General Motors restructuring efforts are likely to go right up to the June 1 deadline set by the Obama administration, but not beyond, a White House economic adviser said Friday.

"I think the government is going to let it play out but not in a passive sense," Austan Goolsbee, a member of the White House Council of Economic Advisers and a member of the autos task force, said in an interview on Reuters Television.

"There's no question that if everybody came to agreement early, they could do something earlier than the deadline but I think the deadline is the last date," he said in an interview on the White House lawn.

"I doubt seriously they're going to let it go past the stated deadline." GM and the United Auto Workers union Thursday reached a tentative agreement to cut hourly labor costs and restructure the funding for $20 billion owed to a union-aligned trust for retiree healthcare.

Analysts have said that puts the focus now on GM bondholders who are being asked to forgive debt in exchange for a 10 percent stake in a reorganized company.

Representatives of the bondholders have rejected that offer as insufficient. The U.S. Treasury would hold a majority stake in a reorganized company under GM's proposal.

The UAW would hold 39 percent and current shareholders would get 1 percent.

Goolsbee said GM bondholders were wrong if they assumed that the government support for the automaker would fund a bailout for creditors.

"You know the bondholders are going to have to take some haircut. What we've seen over past months is the bondholders in some cases holding out thinking that the government will step in and bail out the car companies and we'll get paid off," Goolsbee said.

"I think what the president outlined in his remarks pretty clearly was that that's not going to happen and everybody has got to put some skin in the game," he said.

GM's smaller rival Chrysler filed for bankruptcy on April 30 after failing to get an agreement from all of its secured creditors on debt restructuring terms.

"Usually these things, and as you saw with Chrysler, go right up to the deadline," Goolsbee said.

"They've got to work through every possible scenario and figure out how much money would be needed to make the restructuring go, what formats it would take, what steps they have to take legally, and I think this is just part of that process," he said.

Goolsbee's comments come amid reports that a bankruptcy filing is not certain in the General Motors restructuring case and reports that the Obama administration will steer the automaker into bankruptcy as early as next week are premature, a source familiar with the situation said Friday.

Earlier, the Washington Post, citing sources familiar with the discussions, reported that the Treasury Department would steer GM into bankruptcy next week under a plan that would provide the company just short of $30 billion in new federal loans, A U.S. Treasury spokeswoman declined to comment.

The Treasury is continuing to work with GM on its restructuring, and while the situation could change, there were no plans for a GM bankruptcy filing next week, the source, who was not authorized to speak publicly about the matter, told Reuters.

The government task force overseeing GM and Chrysler restructuring has given GM until June 1 to restructure its operations and prove it can be viable without government aid or face probable bankruptcy.

On Thursday an Obama administration official said the task force was continuing to work with GM and all of the stakeholders involved.

"I think that in terms of the outlook, I'm not going to speculate on the bankruptcy question, but I will say that the administration is committed ... to standing behind GM and is confident that the company will be able to restructure over a short period of time," the official said.

"GM faces a number of hurdles and it may well be that a court process is necessary to effectuate the restructuring, but the administration is committed to standing by the restructuring process whether or not that occurs," the official said.

GM officials could not be immediately reached for comment.

While the company has indicated a bankruptcy is probable, there has been no indication from the automaker, its advisors or the government that a filing would occur as early as next week.

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GM must still address a number of concerns before any filing, including payments to suppliers, receiving ratification of proposed labor concessions and sorting out a complex proposal with its bondholders to further reduce debt.

If General Motors files for bankruptcy, its healthy assets will be quickly sold to a new company owned by the U.S. government, a source familiar with the situation told Reuters on Tuesday.

The source, who was not cleared to speak with the media and asked not to be identified, said the U.S. government would pay for the assets by assuming the automaker's $6 billion of secured debt and forgiving the bulk of the $15.4 billion of emergency loans that the U.S. Treasury has provided to GM.

The company on Thursday reached a sweeping deal on concessions with the United Auto Workers and has given its bondholders until next Tuesday to agree to a plan that would reduce the company's debt.

Meanwhile, four U.S. Republican lawmakers have complained to Treasury Secretary Timothy Geithner that the restructuring of GM subverts the rights of bondholders, according to a letter from the lawmakers obtained by Reuters Friday.

The restructuring favors the claims of the United Auto Workers "over the rights and claims of the company's diverse group of bondholders, who collectively hold $7 billion more in General Motors debt than the UAW's health trust and are equal members of the creditor class," the lawmakers said.

"Bondholders must have a seat at the table during negotiations in how the company would be restructured," said the letter to Geithner from Representatives Jeb Hensarling, Eric Cantor, Mike Pence and Pete Sessions.

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