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GM Bankruptcy Rumors Confirmed As Probability

Posted By admin || 23-Apr-2009

According to an article in the Dallas Morning News, General Motors Corp. Chief Executive Fritz Henderson confirmed rumors that a GM bankruptcy is probable; but he emphasized that bankruptcy is not preferred by the giant automaker.

The article said:

In a conference call with reporters, Henderson said GM is working on two parallel plans: one that involves bankruptcy and one that doesn't. "Contingency planning is under way," he said. "We are on several tracks... I felt several weeks ago that it would be more probable that we would need to go through a bankruptcy process," he told reporters. "I certainly feel that way. That continues today. But I wouldn't be able to hazard a guess as to what the probabilities would be."

If GM does in fact file bankruptcy, it will be a Chapter 11 bankruptcy which is used by businesses (and some individuals) to reorganize debt. Chapter 11 bankruptcy would allow GM to reduce or even discharge some of its debts so that it can become financially viable and emerge from bankruptcy a stronger company.

Unfortunately, many consumers will view a GM bankruptcy negatively and may shy away from its products. While investing in a company going through bankruptcy may be a bit risky, buying products from a company in bankruptcy is not risky at all for the consumer. Those that will suffer the most from a GM bankruptcy may be its unionized workers who could face reduced benefits and wages or even job losses .

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