Saturday, November 22, 2008

GM Not About to Rule Out Bankruptcy

The Wall Street Journal Online has reported that GM's board has come to the conclusion that seeking government funding is the company's top priority but is not dismissing the possibility of a bankruptcy filing.

WSJ Online on Friday reported that the company said its board had discussed bankruptcy but didn't see that as a "viable solution to the company's liquidity problems." A GM spokesman, Tony Cervone, told the newspaper that management is considering doing everything in its power to avoid a filing. Wagoner declined to be interviewed and several board members could not be reached for comment on Friday.

On Friday, General Motors shares closed at $3.06, up 18 cents, or 6.25%. Last year at this time, the stock was trading around $42.

House Speaker Nancy Pelosi, D-Calif., and Senate Majority Leader Harry Reid, D-Nev., sent a note to the 3 chief executives of the Detroit automakers that details what the lawmakers mean by "viability" for their firms and accountability to taxpayers.

The letter said the companies must lay-out their current operating cash positions, provide estimates of the terms of the loan requested, bar the payment of dividends and excessive executive compensation and demonstrate the companies' abilities to achieve strengthened fuel efficiency requirements.

Pelosi also denied Chapter 11 bankruptcy as an alternative for the Big 3. "I just think that would be digging a hole far too deep," she said, adding that such a scenario would prove devastating for workers, the economy and the U.S. manufacturing base.

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