White House officials are telling the media off the record that if bondholders and the UAW do not agree to the terms of concession demands and accept company stock instead of cash for some payments due, the government may force the automaker into a quick, managed bankruptcy. Automotive News reports:
 

Senior White House officials today said the federal government could help General Motors and Chrysler LLC through quick bankruptcies if the automakers are unable to restructure successfully outside of court…

The U.S. Bankruptcy Court could be used to change contracts and restructure debts so that the carmakers could emerge quickly as viable competitors, the sources said…

Bondholders with more than $27 billion of GM debt have not agreed to a federal loan requirement that they take GM equity for two-thirds of the face value of that debt. Likewise, the UAW has resisted accepting GM equity for half of the $20 billion that the company owes a retiree health care trust.

“Bondholders are going to have to step up here,” Sen. Carl Levin, D-Mich., said in a conference call with reporters today. “That’s just not taken place. The alternative is a quick in-and-out bankruptcy that will wipe out bondholders. They will hopefully see they have a pretty stark choice.”

If that happens, the government will almost certainly have to provide debtor-in-possession loans to keep the company going during bankruptcy restructuring because such loans would be unavailable in an already-limited credit market.