GM Bankruptcy Prospects Still Loom

By contrast, a pre-packaged Chapter 11 bankruptcy would mean that "GM would be able to craft a new labor agreement in an expedited fashion, without a rank and file vote; create a new VEBA funding plan that reduces the cash demands on the company, potentially with backstop support from the U.S. government; commence a debt exchange that ensures 100% bondholder participation; forge a new legally-crafted agreement with its secured lenders, and cancel its existing equity," Penniman writes.

Moody's analyst Bruce Clark says the likelihood of a Chapter 11 filing by one or more U.S. automaker is around 70%. He notes that the government is a big investor, getting bigger: GM, which has already received $13.4 billion in loans, now wants at least $22.5 billion -- plus another $7.5 billion if its "worst case" scenario pans out, and even more if its pension plan funding is deemed insufficient. Chrysler, which has received $4 billion, wants $5 billion more.

"Given the significantly increased need for government support, Moody's expects that the U.S. Treasury is likely to be more insistent that each company's constituents, particularly creditors and the UAW, make substantive concessions as part of their restructuring programs," Clark wrote in a report. Because both parties are resistant, he says, the government "may in fact have to stand aside and allow one or more companies to make a Chapter 11 filing."

Meanwhile, S&P equity analyst Efraim Levy writes that regardless of whether stakeholders accept equity in place of debt, GM shares are doomed. If stakeholders accept shares, "we would expect the value of existing GM shares to be diluted," he writes. " If an equity exchange is not accepted, GM could file for bankruptcy protection." Levy cut is 12-month target price by $1 to 50 cents, the lowest target price available.

• GM's German-based Opel unit needs some 3.3 billion euros $4.2 billion) to weather the economic crisis, a union official who sits on the company's supervisory board said Friday.

• Saab, the Swedish-based unit of General Motors, filed for protection from its creditors Friday so it can be spun off or sold by its struggling U.S. parent, officials said.

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