GM admits bankruptcy odds increasing

Fritz Henderson, the new CEO of General Motors, told Automotive News that bankruptcy is growing more likely, though he still thinks they may be able to avoid that through difficult negotiations over the next few weeks:

Henderson also said bankruptcy is “more probable” now given “the objectives that we set for ourselves.” But he would not quantify the likelihood of bankruptcy saying there is “still a chance we can do it outside of bankruptcy.”

GM, staying afloat on $15.4 billion in U.S. loans so far, is grappling with a government-imposed June 1 deadline to reach agreements to restructure operations and cut more than $40 billion in total debt.

Over the last several days, GM executives increasingly have signaled the possibility of a bankruptcy filing as the automaker has made little progress in negotiating with its bondholders. GM wants bondholders to take 10 percent of stock in the reorganized company in exchange for about $27 billion in their debt.

Making this deal with GM bondholders is going to be much more difficult than it was for Chrysler’s creditors. I’m having a hard time imagining a scenario whereby GM avoids bankruptcy.