General Motors bankruptcy: Execs may finally be accepting the inevitable

General Motors Corporation (GM) has been in a downward spiral for some time, but only now, it seems, management has accepted it.

GM lost $9.6 billion in the last quarter, and with sales in February plunging 53 percent compared to last year, it doesn't look like the troubled automaker's top line is about to get better any time soon. While GM may be on track with its cost-cutting and restructuring measures, these may not be enough to keep it viable. GM's troubles have sent it to the government for federal loans.

Then, on Thursday, GM disclosed its auditor has "substantial concern" about its ability to remain a viable business, while Moody's recently said there's a 70 percent chance GM will file for bankruptcy. So finally -- finally -- GM's management has acknowledged what we've all been seeing for months. The Wall Street Journal reports that "a person familiar with the matter" said that top GM execs "are more open to a speedy bankruptcy reorganization financed by the government."

GM may have realized its assumptions regarding the auto market were far too optimistic and decided to change its view regarding bankruptcy, letting go of concerns that such a move would scare away too many customers for the company to survive.

Of course, this could be, as some suggested, a scare tactic to get bondholders to make concessions, but as the new administration considers more loans, such a tactic may be detrimental to that cause. Not only that, but the Wall Street Journal's source said that there have been months of research and analysis by top bankruptcy advisers. Unions, suppliers and bondholders will have to agree to concessions under the prepackaged bankruptcy.

Some experts have already said suppliers would be better off under a GM bankruptcy, as restructuring under such conditions could allow GM to emerge in a better position long term as its entire debt load could be reworked. The company could also circumvent some state laws protecting dealers, among other benefits. No doubt, many would be affected, from employees to rental fleets and others -- the question is whether this is the least bad option.

GM provided three bankruptcy scenarios last month when it submitted its viability plan to Washington, but its spokesperson insists this is not something GM wants to contemplate. Maybe GM doesn't want to, but President Obama's task force might as GM isn't the only troubled car maker in need of assistance, and government aid for automakers could balloon to amounts not accepted by many taxpayers. Washington will have to ask if the car makers can return those loans, and in this environment, the answer is that it's highly improbable.

In any event, the broader and long-term implications of such a move need considering, but many say bankruptcy would be the better option, and the cheaper one, since it is likely inevitable.
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