GM says delay in its bankruptcy exit would kill suppliers

ERJ staff report (AN)

Detroit, Michigan (Reuters) -- General Motors needs to exit from bankruptcy quickly in order to avoid a "fatal" blow to many of its suppliers and the loss of thousands of jobs, CEO Fritz Henderson said in a court filing on Thursday.

"Many of GM's suppliers are already in the midst of a severe liquidity crisis, which has only been exacerbated by the current shutdown of certain GM production facilities," Henderson said.

GM has shut 13 of its US assembly plants for up to 11 weeks in some cases as part of a bid to cut production and run down inventory as it reorganises.

Henderson said tentative plans to resume operations at some GM plants by July 13 could be endangered if the court does not approve GM's sale of its best assets out of bankruptcy in a deal brokered by the Obama administration's autos task force and funded by the US Treasury.

"If ... (the) new GM is not able promptly to commence operations, many of GM's suppliers will have further draconian reductions in revenue and no income," Henderson said.

That could force suppliers "to shut down their respective operations -- perhaps permanently -- and thereby (terminate) thousands of jobs."

At least 15 auto parts suppliers have filed for bankruptcy or had their assets seized by creditors in 2009, according to the Motor & Equipment Manufacturers Association, which represents the industry.

But the true number of suppliers filing for protection is not known because many smaller companies go into bankruptcy or go out of business without being counted publicly.

Lear next?

Moreover, seating and electronics supplier Lear Corp. faces a likely bankruptcy filing in coming days as it attempts to negotiate a "pre-packaged" bankruptcy reorganisation plan with its creditors, according to wire service Dow Jones.

If the prepackaged- bankruptcy deal collapses, Lear could file for a traditional-style bankruptcy next week, the report said.

GM, which filed for bankruptcy on June 1, is seeking bankruptcy court approval to sell its best assets to a reorganised company funded by the US Treasury .

Judge Robert Gerber of the federal bankruptcy court in Manhattan has scheduled a June 30 hearing on the proposed sale.

Some of GM's smaller unions, including the IUE-CWA and the United Steelworkers and a group of states, including Ohio and Connecticut have filed objections to the sale.

No competing bidders have emerged as an alternative to the US government's $50 billion financing for GM that would give the US Treasury a 60 percent ownership stake. Last week, the White House rejected a request for up to $10 billion in additional emergency funding from the auto parts industry.

From Automotive News (A Crain publication)