DETROIT, April 7 Moody's Investors Service said
it still sees a 70 percent chance of bankruptcy for Detroit's
automakers, given the difficulty of winning sweeping
concessions from creditors out of court.
While the Obama administration would prefer that General
Motors Corp (GM.N) and Chrysler LLC restructure outside of
bankruptcy, it is clearly putting bankruptcy forward as an
option, the ratings agency said.
"Given the lack of progress achieved and the additional
progress that will be required in the revised plans, this
threat will need to be seen as credible in order to compel
adequate movement on the part of stakeholders," Moody's said in
a note dated Monday.
GM is under pressure to cut unsecured debt by two-thirds
and make half of its remaining payments into a union healthcare
trust in the form of equity rather than cash. It has until June
1 to complete a reorganization plan. The government has warned
the alternative would be bankruptcy.
Chrysler has until April 30 to complete an alliance with
Italian automaker Fiat FIA.MI.
Moody's said Chrysler faces a more difficult burden in
demonstrating its viability than does GM, and has the highest
risk of filing for bankruptcy. It said Ford Motor Co's (F.N)
bankruptcy risk is moderately below 70 percent.
In the event of a bankruptcy filing by any of the Detroit
automakers, there is a high likelihood that the government will
act to prevent a free-fall or uncontrolled bankruptcy in order
to contain the severe disruption to the supply base and the
broader economy, Moody's said.
(Reporting by Soyoung Kim; editing by John Wallace)