The Wall Street Journal has posted an interesting story that speculates on what exactly would happen to GM if the company were to declare bankruptcy. Not surprisingly, contingency plans are already on the table and have been under discussion for a while in case the restructuring plans don’t satisfy the Obama Administration’s apparently hard-nosed committee.
According to the WSJ, the plan would go something like this. There would be two GMs, a “good” GM and a “bad” GM. Good GM would get the brands that are worth saving: Chevrolet, Buick, Cadillac and GMC. It would also get to dump the billions of dollars in retiree and health care benefits that are currently killing the automaker. Those obligations, underperforming plants, and other problematic elements would be transferred to bad GM, along with the lower-performing brands Hummer, Saturn and Pontiac. Good GM would potentially get out of bankruptcy faster since it would retain the parts of the company that are doing well. Bad GM would stay in bankruptcy longer, either being sold off piece by piece or simply shuttered altogether. Interestingly, one debt that would stay with the good GM is the $20 billion in government loans the company has thus far received. The biggest stumbling block would be getting the UAW to agree to an entirely new contract with significantly cut benefits.
Definitely an interesting read, as it also goes into how a Chrysler bankruptcy might work.
