GM bankruptcy looks more likely

The bankruptcy of General Motors Corp. (GM) is almost as inevitable as the sun rising or the New York Mets collapsing in September.

GM is going beyond an earlier plan to slash debt by 46 percent and axe 47,000 jobs this year. The company has little choice but to consider more draconian measures after the Obama administration rejected its bid to keep $13.4 billion in loans. Both the United Auto Workers and bondholders are balking at further concessions.

Now Bloomberg News is reporting that the automaker is "speeding up preparations for a possible bankruptcy filing even as directors scout for deeper savings this week to avoid that outcome."

At this point, General Motors may have little choice. It has about $47 billion in debt and burned through $1 billion every three weeks in 2008. Analysts have dismissed the automaker's financial projections as being widly optimistic.

Late last year, some analysts argued that a GM bankruptcy would have cataclysmic consequences for both the auto industry and the wider economy. Automotive News estimated that a bankruptcy would affect about 14,000 dealers, almost half of those that specialize in domestic vehicles. And the GM that emerges from Chapter 11 will no doubt be much smaller, with far fewer employees.

About the only winner in GM's bankruptcy will be the lawyers. Weil Gotshal & Manges LLP could net an estimated $230 million, beating the firm's record take Bloomberg says it is likely to earn advising Lehman Brothers on the largest bankruptcy in U.S. history.

In November, CNN/Money quoted GM spokesman Dan Flores as saying, "Bankruptcy reorganization is not an option for GM because it would create more problems than it would solve."

Contrast that with newly appointed CEO Fritz Henderson saying on Meet the Press that while bankruptcy is not inevitable that the automaker would seek protection from creditors that it was preparing for all contingencies.

What a difference (not even) six months makes.
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