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US 'committed' to General Motors

2009-05-22 09:28

Washington - The Obama administration has no plans to push General Motors into bankruptcy next week and the outcome of the carmaker's restructuring efforts may not be known until a June 1 deadline, a source familiar with the situation said early on Friday.

Earlier, the Washington Post, citing sources familiar with the discussions, reported that the Treasury Department would steer GM into bankruptcy next week under a plan that would provide the company just short of $30bn in new federal loans,

A US Treasury spokeswoman declined to comment.

The Treasury is continuing to work with GM on its restructuring, and while the situation could change, there were no plans for a GM bankruptcy filing next week, the source, who was not authorized to speak publicly about the matter, told Reuters.

The government task force overseeing GM and Chrysler restructuring has given GM until June 1 to restructure its operations and prove it can be viable without government aid or face probable bankruptcy.

On Thursday an Obama administration official said the task force was continuing to work with GM and all of the stakeholders involved.

"I think that in terms of the outlook, I'm not going to speculate on the bankruptcy question, but I will say that the administration is committed ... to standing behind GM and is confident that the company will be able to restructure over a short period of time," the official said.

"GM faces a number of hurdles and it may well be that a court process is necessary to effectuate the restructuring, but the administration is committed to standing by the restructuring process whether or not that occurs," the official said.

GM officials could not be immediately reached for comment. While the company has indicated a bankruptcy is probable, there has been no indication from the carmaker, its advisors or the government that a filing would occur as early as next week.

GM must still address a number of concerns before any filing, including payments to suppliers, receiving ratification of proposed labour concessions and sorting out a complex proposal with its bondholders to further reduce debt.

If General Motors files for bankruptcy, as widely expected, its healthy assets will be quickly sold to a new company owned by the US government, a source familiar with the situation told Reuters on Tuesday.

The source, who was not cleared to speak with the media and asked not to be identified, said the US government would pay for the assets by assuming the carmaker's $6bn of secured debt and forgiving the bulk of the $15.4bn of emergency loans that the US Treasury has provided to GM.

The company on Thursday reached a sweeping deal on concessions with the United Auto Workers and has given its bondholders until next Tuesday to agree to a plan that would reduce the company's debt.


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