The Wall Street Journal story on GM engaging a team of bankruptcy advisors stresses that this move is in part political, to underscore that the top US automaker really is at the end of its rope.
Most observers assume that if Congress failed to authorize a rescue bill, that the Treasury would uses it TARP funds to provide a lifeline. But the longer it takes for a plan to come into being, the more GM’s condition deteriorates.
From the Wall Street Journal:
General Motors Corp. has hired lawyers and bankers to consider whether to file for bankruptcy protection, said several people familiar with the matter….
The hirings have both a practical and political bent. Such a large case typically takes lawyers and bankers months to prepare. It also highlights the auto maker’s growing desperation as it petitions the U.S. Congress for a $14 billion bailout package.
GM Chief Executive Rick Wagoner has been reluctant to publicly embrace bankruptcy, fearing that it would scare off potential buyers. In addition, the cost of financing a Chapter 11 filing would be enormously expensive and difficult given tight credit markets.
Mr. Wagoner “still believes the company can’t and shouldn’t file,” but decided in the last few weeks to hire the outside advisers said a person familiar with the matter.
GM and its dealers are meeting late this week to discuss launching a new advertising campaign to spark sales amid concerns about GM’s health. GM will also discuss plans for its Saturn division, which it may shutter. One option includes putting the division into bankruptcy protection, as it is technically a separate entity.
One mounting fear is that even with a bailout, GM may be forced to file for protection from creditors. GM executives are worrying that suppliers could tighten credit terms, and the government could swiftly recall its loans.