Geithner to force GM into a 'surgical' bankruptcy

The Treasury Department is directing General Motors to lay the groundwork for a bankruptcy filing by a June 1 deadline, despite G.M.’s public contention that it could still reorganize outside court, people with knowledge of the plans said during the weekend.

Members of President Obama’s automotive task force spent last week in meetings and on conference calls with G.M. officials and its advisers in Detroit and Washington. Those talks are expected to continue this week.

The goal is to prepare for a fast “surgical” bankruptcy, the people who had been briefed on the plans said. G.M., which has been granted $13.4 billion in federal aid, insists that a quick restructuring is necessary so its image and sales are not damaged permanently.

The preparations are aimed at assuring a G.M. bankruptcy filing is ready should the company be unable to reach agreement with bondholders to exchange roughly $28 billion in debt into equity in G.M. and with the United Automobile Workers union, which has balked at granting concessions without sacrifices from bondholders.

Maybe Geithner is dictating this move because he knows the response of the UAW already to GM's pleas for concessions; "You can take you concessions and stick 'em where the sun don't shine."

The bondholders too are a little recalcitrant. And why not? Most of them are institutional investors who plan to lose a fortune. The only question is are they going to take the pennies on the dollar offered by government or the dimes on the dollar offered by GM. Either way, if they are waiting for Geithner to to offer them a deal - something that will never happen. And if GM goes to bankruptcy, the bondholders lose it all.

The UAW has nothing to worry about. They've got the US government behind them so they can stonewall anything that GM might offer. Must be a nice feeling, Uncle Sam having your back.

All of this will lead to a fairly messy bankruptcy followed by more taxpayer billions flushed down the black hole.

Cant wait to see what kind of car the government allows GM to build next year. Probably look like a cross between the VW Bug and the old East German Trabant - the worst of both worlds.