But a bankruptcy will mean big trouble for certain parties, especially bondholders who are expected to lose out substantially should the bankruptcy eventuate. At the moment, GM is only considering the option, according to anonymous sources, with nothing set in concrete yet, Reuters reports.
Currently, GM is surviving on government loans, but if it can't reorganize itself enough to impress the President's automotive task force, then the company will be weaned off its government-dependence and left to fend for itself - with the most likely outcome being a bankruptcy.
At the moment the task force wants GM to reduce its unsecured debt to just one-third of what it is now, as well as to reduce its wage rates and match overseas carmakers. Without these essential elements, it’s unlikely the task force will want to keep GM in the black.
The news means that many other sectors of the economy are getting ready for a possible GM bankruptcy, including auto parts suppliers who will be heavily hit if a bankruptcy occurs. Even foreign nations are preparing for the bankruptcy, with Canada's minister for industry claiming that the Canadian government has to be prepared to deal with a GM bankruptcy.