Canada says GM bankruptcy option is on the table

Mon May 11, 2009 4:56pm EDT
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TORONTO (Reuters) - General Motors Corp would have to provide adequate warning if it planned to file for bankruptcy protection or it would risk bringing further distress to the automotive industry, Canada's industry minister said on Monday.

GM's Chief Executive Fritz Henderson said earlier in the day that the automaker has already told bondholders that it would miss a $1 billion debt payment on June 1 and that bankruptcy protection was looking more probable.

"One of the options that is clearly on the table is a scheduled, surgical Chapter 11/CCAA process where they go in, some changes are made, and they go out again," Industry Minister Tony Clement told reporters.

CCAA, or the Companies' Creditors Arrangement Act, is Canada's counterpart to Chapter 11 bankruptcy protection in the United States.

"What we've always said is that if Chapter 11/CCAA is inevitable, what we don't want to see happening is that that process just happens all of a sudden without warning, because that's the biggest risk for our auto parts suppliers and dealers and so forth," Clement said.

To qualify for billions of dollars in government aid, GM has until the end of the month to secure major concessions from its stakeholders and come up with a business plan that Washington and Ottawa find acceptable.

With or without bankruptcy protection, GM will need to prove its viability in order to receive government loans, Clement said.

One of GM's fellow Detroit-based automakers, Chrysler, filed for bankruptcy protection in the United States on April 30, but it has not done so in Canada. The company expects to emerge from Chapter 11 in 30 to 60 days.

The Canadian Auto Workers union said recently after a meeting with the GM and the Canadian government that GM was likely to seek Chapter 11 bankruptcy protection, as well as CCAA bankruptcy protection.   Continued...

<p>Canada's Minister of Industry Tony Clement speaks during a news conference in the foyer of the House of Commons on Parliament Hill in Ottawa April 7, 2009. REUTERS/Blair Gable</p>