GENERAL MOTORS aims to choose a preferred partner for its European operations by the end of this month, the embattled Detroit carmaker’s chief executive Fritz Henderson said this week.
Providing an update on GM’s restructuring, Mr Henderson said that it was “more probable” that the company would file for Chapter 11 bankruptcy protection by a June 1st deadline set by the US government. GM is required by that date to conclude deals with bondholders, the United Auto Workers union and other stakeholders which are needed to lighten its debt load and streamline operations.
Holders of $27 billion (€19.85 billion) in unsecured bonds have so far baulked at a debt-exchange offer that would leave them with 10 per cent equity in the restructured firm.
By contrast, the union would end up with a 39 per cent stake for its $10 billion claim related to GM’s contribution to the new union-managed healthcare trust. The US government would emerge with a majority interest. GM’s existing shareholders would be virtually wiped out.
On the decision by Chrysler’s secured lenders last week to withdraw opposition to that car-maker’s debt-for-equity proposal, Mr Henderson said that “our facts are very different”.
He noted that Chrysler, which filed for court protection on April 30th, was dealing with 46 lenders, while GM has tens of thousands of bondholders.
The debt-exchange offer is set to expire on May 26th. “We don’t have any plan to make modifications at this point”, Mr Henderson said.
On moves to sell a stake in the European operations, centred on Germany’s Opel, Mr Henderson said GM was speaking to “multiple bidders” and that it aimed to sell “before the end of this month”. Bidders include Italy’s Fiat, Toronto-based Magna International partnering with Russian investors, and sovereign wealth funds from Abu Dhabi and Singapore.
Fiat is also interested in GM’s Latin American business, but Mr Henderson declined to comment on what role those operations might play in negotiations with the Italian carmaker. “This is a business we know and like very much,” he said.
GM has said it would be willing to retain only a minority stake in its European arm. “Any time you bring in another partner into a business, you’ve got to make sure you legitimately address the interests of both partners,” Mr Henderson said.
He noted that GM already participates in joint ventures, notably in China and South Korea. He did not rule out the possibility that some of its overseas operations might follow the parent in filing for bankruptcy.
While overseas bankruptcy filings were “not a foregone conclusion”, he said, “at this point the analysis is being done country by country”.
GM aims to finalise talks this month with two bidders for its Hummer brand. It plans to shut its Pontiac division by the end of 2010, and 13 North American plants.
– The Financial Times