General Motors Prepared for ‘Surgical’ Bankruptcy

General Motors have been told to by the U.S. Treasury to prepare for bankruptcy.
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General Motors Prepared for ‘Surgical’ Bankruptcy
Cars and trucks are offered for sale at a Chevrolet dealership in Park Ridge, Illinois. General Motors Corp., may have to file for bankruptcy under the direction of the Obama administration. (Scott Olson/Getty Images)
4/13/2009
Updated:
10/1/2015
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Cars and trucks are offered for sale at a Chevrolet dealership in Park Ridge, Illinois. General Motors Corp., may have to file for bankruptcy under the direction of the Obama administration. (Scott Olson/Getty Images)

NEW YORK—Shares of General Motors Corp. fell by around 19 percent in early trading Monday, after reports that the ailing automaker is preparing for bankruptcy filings under direction from the Obama administration.

The U.S. Treasury has asked General Motors (GM) to start the filing process by June 1, in preparation for a speedy “surgical” bankruptcy, as reported by the New York Times.

The June 1 deadline is thought to be given to GM so they can try and win concessions from bondholders and its workers’ union association. Failing that, the automaker, which has already obtained close to $14 billion in federal loans, would be expected to file for bankruptcy.

The company has up to $28 billion in debt that it will need to convert into equity.

The bankruptcy move would wipe out existing equity. Marketwatch reported that an “ad hoc committee representing the automaker’s bondholders” are readying a challenge to the bankruptcy plan.

The Obama administration, which recently forced erstwhile GM CEO Richard Wagoner to step down, is reported to be in heated talks with the board at General Motors to restructure the organization.