DealZone

Riding on GM’s rehab

Lear is preparing to file for bankruptcy as soon as next week, The Wall Street Journal reported on Thursday, citing people familiar with the matter. The auto parts supplier’s lenders have agreed to waive defaults under its primary credit facility through June 30. The ventilator may still be working, but the decision on whether to pull the plug will soon be at hand.

Last week, the White House rejected a request from the auto parts industry for up to $10 billion in additional emergency funding. Yesterday, General Motors CEO Fritz Henderson made the case that a speedy exit from bankruptcy for the automaker was the way to avoid a “fatal” blow to suppliers.

Henderson said tentative plans to resume operations at some GM plants by July 13 could be endangered if the court does not approve the sale of the its best assets to a reorganized company funded by Uncle Sam.

Bankruptcy court is a busy place. Lear could be arriving just as the court hears arguments on GM’s asset sale, scheduled for next Tuesday, June 30. On the face of it, there isn’t a whole lot to discuss. There are no other bids out there to rival the government’s $60 billion financing for GM, though some of the automaker’s smaller unions have filed objections to the sale.

So far this year, at least 15 auto parts suppliers have filed for bankruptcy or had their assets seized by creditors, according to the Motor & Equipment Manufacturers Association. The casualty list includes Visteon, Metaldyne Corp and Noble International Ltd.

Live: GM bankruptcy court hearing

GM cleared several of the hurdles on its way out of bankruptcy Thursday at a court hearing in Manhattan. The federal bankruptcy judge gave GM the final ok to tap the rest of its $33.3 billion bankruptcy financing and a lawyer for asbestos claimants withdrew a request for official committee status. Other obstacles including the status of non-union retirees rights to healthcare benefit– are on the agenda for the afternoon. We’ll be filing updates from the hearing in the live headline box below and on our Twitter feed.

Faster than a speeding bankruptcy

After enjoying a bit of confusion from savior Fiat about the imperative of a June 15 deadline, and a quick, 24-hour trip to the Supreme Court, Chrysler creditors now know in no uncertain terms just how much political will there is behind getting the automaker’s government-orchestrated deal done.

The top U.S. court can certainly be counted on to ponderously deliberate matters of vital importance to the nation. But when the consequences of delay are dire (thousands of auto workers’ jobs, a U.S. presidency, etc.), a decision to not make a decision can come with lightning speed.

In a brief two-page order, the justices said opponents of the Fiat-Chrysler deal had not met the burden of showing the Supreme Court needed to intervene. The court’s action was not a decision on the merits of the challenge, they said. The Chrysler dispute marked the first time the Supreme Court had been confronted by legal issues involving the federal government’s power to deal with the economic crisis.

Hush hush Hummer sale

They can’t name the price or the buyer, but a day after heading into bankruptcy General Motors was finally able to say it was selling what is arguably its biggest albatross: Hummer.OK, “sell” might be too strong a word, since all they have is a memorandum of understanding. But they said the deal should close by the third quarter, save more than 3,000 U.S. jobs, and see the Hummer get a big investment infusion.In early April, three bidders were in the running for Hummer, and none were automakers. While private equity was said to be among the interested parties, it’s probably a safe bet that Cerberus – the owner of bankrupt Chrysler – is not among them.With the price of gas rising again, and the Hummer the poster-car for the age of excess, the buyer may want to stay anonymous for some time. Maybe as long as it takes to design an environmentally friendly engine for the off-road behemoth. One powered by hamsters would have the added benefit of a catchy new name.

GM: genetic modification?

So, it has come to pass. General Motors, ultimate symbol of the world’s greatest car-owing democracy, is to end up in state hands. Henry Ford might have said history is bunk but it is still humbling for all Americans to see Ford’s great rival rescued by the Government, wiping out most bondholders and shareholders. What happens next?

This deal, with its maze of myriad related smaller transactions, has been all about vested interests. The Government would be forced to support workers made redundant if the business was not saved. Banks would take a harder hit. And suppliers, such as Magna, GM’s biggest, rely on the business continuing to save their own significant workforces.

That leaves little left for investors. In theory chapter 11 should allow GM to focus on how to cut its cloth, free of such parties desiring a quick return on their investment. GM might then become a leaner machine, better able to cope with the tougher economic outlook. Can the Obama administration make the necessary cuts to achieve this?

No deal on Opel as GM needs more cash – again

opel1What’s surprising: Talks for General Motors Corp’s Opel failed to yield a deal.

What’s not-so-surprising: GM needs cash. Again.

Talks that ran all through Wednesday night to sell Opel to one of four final bidders narrowed the race to two but failed in sealing a deal. German ministers, emerging in the early hours of Thursday morning after more than 12 hours of talks, blamed GM and the U.S. Treasury for the failure.

Why? Because GM, the ministers say, shocked participants by announcing it needed 300 million euros ($415 million) more in short-term cash from the German government to  keep Opel operating.

Ball bounces in GM bondholders’ bankruptcy-bound court

Holders of $27 billion of General Motors‘ unsecured debt have until midnight tonight to decide whether to exchange it for equity, and the chance that the once mighty auto giant will get the 90 percent participation it says it needs to avoid bankruptcy protection is looking just as remote as it did a week ago.

Based on its assets at the end of the first quarter, GM’s filing would be among the biggest U.S. bankruptcies ever, and could be one of the trickiest to work through among the myriad interested parties.  Of key interest to markets is how much TARP money GM might need for DIP financing. GM cleared a key obstacle in its restructuring last Thursday when it reached a sweeping deal on concessions with the United Auto Workers. Canada’s union also says it is on board.

There are two big problems with leveling charges of obstructionism and intransigence at the thousands of GM bondholders. It’s a diverse group, so expecting a unified voice would be a stretch in any case. There are those who argue that all GM investors are being hurt and creditors shouldn’t expect to be spared. The problem is that the deal brokered with Obama’s task force attempts to save at least part of the company from an outright bankruptcy, preserving better assets for a new and improved company that bondholders would then own. Such a solution keeps bond holders from being able to sell them off for their pennies on the dollar. Instead it lumps them in with shareholders, but with none of the upside equity investors get for their risk.

Ford goes into overdrive

AUTOS-FORD/With GM‘s share price heading toward $1 and Chrysler close to consummating its shot-gun wedding with Fiat, Ford‘s raising $1.4 billion through the sale of 300 million shares puts some serious distance between it and the competition.

Having gone this far into the recession without government aid, Ford is making a big show of going green, consolidating its dealer networks and taking the kind of cost-cutting steps that GM is being chased into by the government and that Chrysler is hoping for from its merger with Italy’s Fiat.

If the restructuring moves weren’t enough, Ford chief Alan Mulally (smiling and clapping, left) made sure to hit the right PR notes when detailing how the fresh cash would be used: possibly funding a larger portion of Ford’s retiree obligations.

GM bondholders haggle

GM/RESTRUCTURINGUnder the bondholders’ deal, they would swap a 51-percent stake in a restructured company for $27 billion in debt, a person with knowledge of the plan tells Reuters Detroit Bureau Chief Kevin Krolicki. The deal would give the United Auto Workers union 41-percent in a new General Motors while the U.S. government would not receive an equity stake, according to the person who asked not to be named because the offer had not yet been submitted.

A committee representing GM bondholders will present the alternative plan to the White House task force overseeing the restructuring of GM and Chrysler later today, the person said. GM said this week it was moving ahead with a plan to offer existing bondholders a 10-percent ownership of the restructured automaker. Under the GM plan, the US government would own a combined 89-percent of the new company.

GM Chief Executive Fritz Henderson said on Monday the automaker would file for bankruptcy if bondholders did not swap out of 90-percent of the $27 billion they are owed.

Chrysler bankruptcy looms despite deal

USA/Chrysler’s biggest lenders and the U.S. government reached a breakthrough framework deal to cut the automaker’s debt by $6.9 billion, but officials say bankruptcy is still a strong possibility with the Obama administration’s Thursday deadline for a comprehensive rescue plan just hours away.

Fiat Chief Executive Sergio Marchionne was quoted by the president of the Canadian Auto Workers union as saying Chrysler would likely enter Chapter 11 bankruptcy for a period of time. But Michigan Senator Carl Levin said, “If they do go into bankruptcy, it would really be in and out.” A source with senior-level knowledge of the restructuring told us that a surgical bankruptcy could be a way, for instance, to address “recalcitrant” lenders.

With Germany’s Daimler AG dumping its 19.9 percent stake in Chrysler and Italy’s Fiat poised to “eventually” own more than a third of the company, European know-how and innovation have never been more important for the U.S. auto industry.