Government Tells GM to Prepare for Bankruptcy

According a report by the New York Times, the federal government has instructed General Motors (NYSE:GM) to begin preparing for the possibility of filing for bankruptcy by June 1. Citing unidentified sources, the Times said that the Treasury Dept. has directed GM executives to lay the groundwork for a "surgical" bankruptcy that could be as short as a few weeks for portions of the company.
Those portions would be the "good" parts of the company. The "less desirable" parts of GM's business would remain in court for much longer, and could possibly be liquidated. These undesirably parts of the struggling US automaker could include "unwanted brands, factories, and health care obligations."

To date, GM has accepted in $13.4 billion in bailout loans from the government. They have asked for $16 billion more. President Barack Obama rejected the company's initial restructuring plan, and forced out CEO Rick Wagoner. The government has since set a May 31 deadline for GM to come up with an acceptable plan.

GM's newly crowned CEO, Fritz Henderson, has said that while GM was not ruling out bankruptcy, it wasn't inevitable. He believes that the company may be able to reorganization itself without bankruptcy.

Any bankruptcy would have huge implications for the state of Ohio, which is home to eight GM plants and other operations, including a parts center in Columbus and stamping plant in Mansfield. GM's biggest operation in Ohio is in Lordstown, which employs more than 2,500 workers. This 5 million square-foot assembly operation is where the Chevrolet Cobalt and Pontiac G5 are made.