* GM may be pushed into bankruptcy by June 1
* Bondholders not presented with any new terms--source
* GM shares down more than a third so far this month
* White House says has not prejudged bankruptcy for GM
* S&P says Ford may need to revisit gov't loan request
(Adds White House comment)
By Soyoung Kim
DETROIT, April 13 General Motors Corp (GM.N)
shares plunged 16 percent on Monday as traders shed positions
out of fear the U.S. government will push the automaker into a
bankruptcy that could wipe out existing equity.
GM, which is operating with $13.4 billion in emergency
federal loans, has until June 1 to win sweeping concessions
from bondholders and the United Auto Workers union.
The New York Times reported late on Sunday that the U.S.
Treasury Department was directing GM to lay the groundwork for
a bankruptcy filing should it fail to reach give-back deals
with stakeholders by the deadline set by the Obama
administration two weeks ago. [ID:nN12356870]
President Barack Obama has said bankruptcy might be
necessary, but his chief spokesman stressed on Monday that the
"president and the (administration's) autos task force haven't
The administration, according to spokesman Robert Gibbs,
believes government's role in determining what steps GM will
take has its limits.
"The eventuality of that bankruptcy or not, in some ways,
will be determined by many of those stakeholders," Gibbs said
at the White House.
Sources familiar with the situation told Reuters last week
GM was in "intense" and "earnest" preparations for a possible
"I think the amount of uncertainty has increased," Shelly
Lombard, senior high yield analyst at independent research firm
Gimme Credit, told Reuters Financial Television.
"At this point, I think a filing is more imminent, but by
the same token I think what will happen to bondholders and
their potential recovery is probably more uncertain than ever,"
GM is under pressure to cut $28 billion of unsecured debt
by two-thirds, make half of its remaining payments to a union
healthcare trust in equity rather than cash and reduce hourly
wages and benefits to match those paid by foreign automakers.
Chrysler, about 80 percent controlled by Cerberus Capital
Management LP [CBS.UL], also faces possible bankruptcy unless
it cements an alliance with Italian automaker Fiat SpA FIA.MI
by April 30 and wins concessions from bank lenders and the
A GM or Chrysler bankruptcy also could pressure rival Ford
Motor Co (F.N), which has not sought emergency U.S. government
loans, but faces severe pressure from the drop in U.S. auto
industry sales to the lowest levels in 27 years.
"We believe Ford may have to revisit its informal request
for $9 billion of loans from the U.S. government, unless
industry sales begin to recover later this year," Standard &
Poor's said on Monday. [ID:nWNA1595]
GM LESS OPPOSED TO BANKRUPTCY?
GM Chief Executive Fritz Henderson, who took charge of the
struggling automaker when the Obama administration ousted his
predecessor, Rick Wagoner, has said GM would prefer to
restructure out of court, but was prepared to file for
bankruptcy if necessary.
Under Wagoner, GM had said repeatedly that a bankruptcy
filing would be more costly than an expanded government bailout
and could be devastating for its business.
GM declined further comment on Monday.
"We think GM's new CEO, Fritz Henderson, is simply not as
opposed to a filing as his predecessor," JPMorgan analyst
Himanshu Patel said in a note to clients on Monday. "Henderson
has always had a more sobering assessment of the sustainability
of GM's liabilities."
"The government's task force, as it drives deeper into GM's
finances, may have come to a sobering realization itself that
... very few GM balance sheet restructuring scenarios can
really make GM's leverage viable," Patel said.
The White House task force charged with retooling the U.S.
auto industry is meeting with GM officials in Detroit this week
to accelerate the restructuring process for the automaker, once
the embodiment of U.S. industrial might.
Standard & Poor's analyst Efraim Levy said that even if GM
avoids bankruptcy through a sweeping debt restructuring, any
turnaround would dilute existing equity significantly.
Patel said the deep balance sheet restructuring demanded by
the U.S. Treasury would be a tough pill to swallow for GM
bondholders and the UAW, making bankruptcy more likely.
In negotiations with bondholders, GM last month offered 8
cents cash on the dollar, 16 cents on the dollar in new
unsecured debt, and a 90 percent stake in the automaker,
according to a person with knowledge of the term sheet.
Bondholders have not been presented with new terms, a
source familiar with GM's talks with bondholders said on
Shares of GM were down 33 cents, or 16 percent, at $1.71 on
the New York Stock Exchange.
The stock has lost more than a third of its value since
March 30, when President Barack Obama rejected GM's turnaround
plans and warned it could be put through bankruptcy to slash
(Reporting by Soyoung Kim, Walden Siew and David Bailey;
Editing by Steve Orlofsky and Andre Grenon)