The government-imposed March 31st deadline for restructuring is now just five days away for General Motors, but several sources have indicated that the Michigan-based automaker may not make that deadline. If GM doesn’t meet the government’s requirements, it could be forced into bankruptcy.
According to several sources, GM is having trouble with the debt-for-equity swap required by the government. The UAW and GM bondholders are wary about accepting stocks instead of cash, which would essentially devalue their investments by two-thirds. The uncertainty of GM’s future is also hindering any real progress.
GM bondholders have already voiced their concerns to the automotive task force, but no changes have been made to the government requirement. If GM can’t get all parties to agree within the next five days, it could be forced to pay back its government loans – a move that would likely force GM into bankruptcy.
Although a GM bankruptcy would leave the company’s bondholders with nothing, the majority of GM’s bondholders are banking on the U.S. government keeping the auto giant from Chapter 11, even if all conditions are not met. However, with support waning for a Detroit bailout, the government may have no other choice than to let GM file for court protection.
