Racing to restructure by a government-mandated June 1 deadline, General Motors Corp. said Friday that it was "more probable" that it would be forced to file for bankruptcy.
Although the troubled automaker said it still hoped to avoid taking that step, the statement, made by Chief Executive Fritz Henderson, was the latest -- and most affirmative -- indication that the company was preparing for a filing.
Henderson said that GM was exploring several options with an eye to making bankruptcy as painless as possible. Those include a so-called prepackaged bankruptcy that would have many of the relevant pieces prepared ahead of time, or what Henderson described as a "good GM, bad GM" scenario that could divide the company into two pieces.
"There are ways to accomplish our goals within a bankruptcy process quickly, and we're going to make sure we're ready to do that if it's required," Henderson said.
To date, GM has received $13.4 billion in federal aid and in February requested an additional $16.6 billion, only to be rebuffed by the Obama administration last month. Instead, GM was given until June 1 to show it was a viable business.
To that end, GM is being asked to significantly reduce $47 billion in obligations to bondholders and to the United Auto Workers union. The government also wants the company to cut labor costs and shrink its network of more than 6,100 U.S. auto dealers.
Henderson said the automaker probably would need an additional $4.6 billion in federal aid in the second quarter to remain solvent.
And, in a reversal of a decision announced last October, Henderson said GM had decided not to sell the AC Delco parts brand.
The automaker has been in unsuccessful negotiations with holders of roughly $27 billion in bonds for several months, and at the same time, it has been attempting to persuade the UAW to accept equity in lieu of as much as $10 billion in cash payments to a trust fund for retiree healthcare.
Because of the difficulties involved in resolving those discussions, there are increasing indications that the automaker and the administration see a Chapter 11 filing as the best option, since a bankruptcy judge could break relevant contracts and eliminate billions in debt.
A filing could also allow GM to use the bankruptcy code to sell off stronger assets such as the Chevrolet and Cadillac brands in a single package, while weaker parts of the company, like Saturn or the company's underfunded pension, would be kept together as the "bad GM."
Chrysler has received $4 billion in federal aid, and the auto task force rejected its bid for an additional $5 billion, instead giving it until May 1 to cement a merger plan with Italian automaker Fiat or face being cut off from further aid.
Like GM, Chrysler is working to reduce debt and rework its union contract. Henderson said that because the privately held automaker is working on a shorter timeline, the UAW had been negotiating more intensely with it than with GM.
Henderson denied rumors of a possible merger with Chrysler should the Fiat efforts fail, saying that although the two companies explored an alliance last fall, GM had since decided to concentrate on its own restructuring.
Ford Motor Co. has not requested any outside aid, despite sales declines on par with those at GM and Chrysler.
Despite having "several interested parties" discussing AC Delco, Henderson said that "we just concluded that we're not able to get the price we're looking for." He added that AC Delco was profitable.
GM said it was also talking with multiple bidders for the three brands it has pledged to either sell or shutter -- Hummer, Saturn and Saab -- and has offers from six parties to take stakes in its Opel division, which operates in Europe.
On Wednesday, a private investment firm in Oklahoma said it had contacted GM about purchasing Saturn, and Henderson said Friday that three bidders were expected to submit "final bids" for the Hummer brand next week.
He also said reports that GM would consider selling or closing its GMC and Pontiac brands were "speculation."
Through the first three months of the year, GM's U.S. sales were down 48% compared with last year, worse than the overall industry decline of 38%. GM shares fell 8 cents to $1.86 in trading Friday.