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GM chair fears deal can’t be reached

Tuesday, April 14, 2009

GM chair fears deal can’t be reached

Robert Snell / The Detroit News

Kent Kresa, interim chairman of General Motors Corp., is not optimistic money-saving concessions can be reached with bondholders and the United Auto Workers to avoid bankruptcy before a June 1 deadline.

"I’m hopeful we can get there," Kresa told The Detroit News today. "Everybody understands we would be in a much better situation if we can resolve this among all the players without going through bankruptcy."

GM is trying to restructure about $28 billion in unsecured debt held by GM’s bondholders and $20 billion in obligations to the United Auto Workers. The federal government also may agree to swap some of its $13.4 billion in General Motors Corp. debt for new equity in the company in a move to help boost GM’s balance sheet.

GM has been planning for weeks for a possible bankruptcy filing if it can’t meet the June 1 deadline set by the Obama administration’s auto task force, members of which are operating out of GM’s headquarters in the Renaissance Center.

In a wide-ranging interview this morning, Kresa said he is in the process of overhauling GM’s Board of Directors and has targeted certain candidates, but the list does not include any members of President Obama’s administration or the UAW.

"I’ve been talking with existing board members to get their understanding and interest and desire to stay, and I am starting to put together lists of individuals," he said.

Kresa did not say whether GM needs $2.6 billion in loans this month from the U.S. Treasury Department as they previously said. GM has asked for $16.6 billion more in federal aid, including $2 billion last month, which they did not need, and $2.6 billion in April.

Kresa was noncommittal about whether GM needs the $2.6 billion this month.

"We are in a continuous dialogue with the government in terms of what our cash situation is," Kresa said. "There will be some announcement in the next few weeks about that, but I don’t want to speak out of turn."

Kresa was named interim non-executive chairman last month after Chairman and CEO Rick Wagoner was forced out by the Obama administration. He also is chairman emeritus of Northrup Grumman Corp., which he helped build into one of the largest defense contractors in the United States.

An industry source said during Wagoner’s tenure, Kresa was one of three board members, including John Bryan and Philip Laskawy, who were more likely to question the CEO’s strategy.

"I can’t say there was a group of individuals who were particularly negative about anything that was going on. We obviously have been critical of things and asked for independent information," Kresa said. "I certainly have been vocal on any given issue and speak my mind, as do many of the board members.

"I’m not fully sure why they chose me. The government has said it was because I had a strong background of being involved and a chief executive officer of a large company previously," he said.

Kresa previously served as Northrup Grumman’s chairman and CEO from 1990 to 2003. He joined GM’s board in 2003 following a stint on Chrysler’s board in the 1990s.

GM plans to unveil a harsher offer to bondholders this week than it proposed last month. The new offer could be as little as 20 percent of GM’s equity, versus the previous offer of 8 cents on the dollar, 16 cents of new debt and up to 90 percent of GM’s equity.

Kresa would not put a specific timeline on when the new proposals would be submitted or whether they have been submitted.

"All I can say is we’re in discussions with all the players on a continuous basis," he said. "There are discussions back and forth and that’s about all I can say. We’re not just waiting."

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