- auto industry - bankruptcy - GM - USA
REUTERS - General Motors Corp appeared to clear a major hurdle on its way to filing the kind of bankruptcy it favors on Thursday by persuading major bondholders to accept a sweetened deal -- even as talks over the carmaker's Opel unit stalled.
But the troubles of the U.S. car industry took a potentially ominous new turn when two suppliers, including former Ford Motor Co unit Visteon Corp, filed for Chapter 11 bankruptcy protection -- a move that some analysts worried could affect Ford's liquidity.
GM said it had reached a deal with some major bondholders that would give them a bigger stake in a reorganized automaker and could pave the way for a fast-track bankruptcy backed by the U.S. Treasury.
The announcement was the clearest indication yet that GM, the No. 1 U.S. automaker, is close to filing for bankruptcy under the direction of the Obama administration. It would be the biggest-ever bankruptcy for a U.S. industrial company.
Under the proposed deal, bondholders representing $27 billion in debt would be offered 10 percent of a reorganized GM -- the same stake they had been offered previously.
But as an incentive, bondholders would also receive warrants to acquire another 15 percent of the equity in the new company, provided they support a quick Treasury-backed sale process similar to one now being used for rival Chrysler.
Bondholders would have until 5 p.m. EDT (2100 GMT) on Saturday to indicate they would not oppose the sale process as planned, GM said. If bondholders do not provide those indications, common equity and warrants "would be substantially reduced or eliminated."
A committee representing the major bondholders said they supported the revised offer as the "the best alternative ... in the current difficult and dire situation."
A senior Obama administration official, who spoke on the condition of anonymity because he was not authorized to speak publicly, said the government expects at least 35 percent of bondholders to accept the new offer.
The official, who estimated that any GM bankruptcy would take at least 60 to 90 days and perhaps longer, said that potential new aid to GM could total $40 billion, including $9 billion from Canada. But he predicted GM would emerge from bankruptcy a "highly, highly profitable" company.
In a court in New York, meanwhile, Chrysler, which filed for bankruptcy last month, was pushing for approval to sell most of its operations to a group that includes Italy's Fiat, labor unions and the U.S. and Canadian governments, in exchange for $2 billion paid to lenders.
Approval would be a victory for the White House, which many bankruptcy specialists had criticized as unrealistic when it set a 30-to-60-day schedule for bringing the automaker's operations through Chapter 11.
In Europe, Germany's goal of shielding Opel from GM's imminent bankruptcy hit a road block, raising the risk of insolvency for the German carmaker.
German Foreign Minister Frank-Walter Steinmeier said he would talk to U.S. Secretary of State Hillary Clinton later in the day, after German ministers emerged from 12 hours of talks having failed to strike a deal to provide Opel with temporary financing in the event of a GM bankruptcy.
The battle for Opel has effectively narrowed to a race between carmaker Fiat and auto parts supplier Magna, but it remains unclear whether Opel will be drawn into GM's bankruptcy.
German ministers put the blame for the failed deal talks on GM and the U.S. Treasury.
The fate of Opel and its workforce is a hot political topic in Germany, where unemployment rose for the seventh month in a row, according to data released on Thursday, and where the government is facing elections in September.
GM Europe head Carl-Peter Forster told a German magazine last week that Opel and GM Europe's Vauxhall operations in Britain had enough liquidity to last into the third quarter.
EU industry ministers will meet on Friday to discuss the Opel sale, a spokesman for the EU executive said. The EU is concerned that government aid to Opel could be tied to job guarantees in the aid-giving country, at the expense of Opel jobs elsewhere in the bloc.
Opel traces its roots in Germany back to the 19th century and employs about 25,000 staff in four plants there. UK-based Vauxhall Motors, which employs 5,000 people, is being spun off from GM Europe along with Opel.