Mike Stevens | Apr 8, 2009

Reports worldwide indicate that General Motors has commenced preparations to file for bankruptcy.

Bloomberg News says that company directors have not given up hope of finding a solution to GM's financial troubles, and are still scouring GM operations for cost-cutting measures to relieve the pressure on the giant automaker's bottom line. Bankruptcy, daily, appears increasingly likely however.

According to Reuters, a company source has revealed discussions to file for Chapter 11 bankruptcy are well underway, and were described as “intense” and “earnest”.

GM Annual Report
GM CEO Frederick 'Fritz' Henderson

Under the proposed move, GM would divide the company in two, with its most profitable ventures forming a 'new' organisation – Chevrolet and Cadillac – while its remaining less successful brands would form an 'old' one.

Following the split, the new GM would then inherit some of the debt gathered from bankruptcy proceedings including secured debt (leaving bondholders with considerable losses on their investment).

Many industry analysts regard this plan is the most sensible scenario for the company if it is to come through the global financial crisis as a viable entity.

However, there is no consensus regarding what to do with GM, neither in the US Congress, nor among US tax-payers (who have been funding the company's bail-out), nor in the media.

GM-sign

Tom Petruno of the Los Angeles Times said: “It is, of course, in GM’s interest to keep talking about bankruptcy, if the game is to scare the United Auto Workers and GM bondholders into deep concessions to keep the company afloat.”

Meanwhile, shares in GM continued to fare poorly, falling almost 12 percent on the New York Stock Exchange to finish at $2.00 by close of trading.

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