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This will be GM’s last chance to get it right


This will be GM’s last chance to get it right


D-Day for General Motors Corp. is June 1.

And this time, they mean it — "they" being GM management and the U.S. Treasury Department that controls the life-support loans keeping GM alive.

GM either reinvents itself by then as a smaller, trimmer company by forging voluntary deals with its labor unions and bondholders, or it collapses into bankruptcy by defaulting on a $1-billion debt payment.

"We’re not going to make that payment," Ray Young, GM’s chief financial officer, told reporters without equivocation Wednesday when quizzed at the Dearborn Ritz-Carlton hotel after speaking at a Chinese auto industry forum.

In other words, this is it.

No more deadline extensions to rewrite viability plans.

No more federal loans until GM meets Uncle Sam’s demands for debt reduction and a business plan to get profitable and off the government dole.

That business plan, however, will require bondholders to swap their debt for equity in a reconstituted GM whose future is highly uncertain. Bondholders aren’t too crazy about that. And GM’s labor union leaders aren’t wild about asking their members to ratify more wage and benefit givebacks.

"Deadlines are useful," Young said, referring to both GM’s June 1 date and Chrysler LLC’s even shorter timetable to conjure deals with unions, debt holders and Italian automaker Fiat SpA by next week.

There was an almost surreal aspect about listening to Young on Wednesday, as if he were talking about two parallel but different universes.

As he spoke to the Chinese auto forum, he talked glowingly about China’s auto market and GM’s future there, predicting that GM’s Wuling joint venture will someday be building passenger cars as well as low-cost vans and trucks.

Noting that car and truck sales in China may surpass those in the United States this year, Young proclaimed, "To win globally, we must win in China."

Back to the present

But after speaking of a faraway future in a faraway land, Young left the forum to face the pesky present in the hallway outside, where reporters fired questions at him about whether GM will be alive a few months from now as anything resembling the far-flung global giant we’ve come to know.

There’s an incredibly high-stakes game of chicken hurtling toward its conclusion here.

Most of the players say they would prefer to settle things outside of bankruptcy court. Whether inside or out, Young said, "Treasury wants us to be a viable entity when we emerge."

But unions, debt holders and other stakeholders must be careful as they bargain to the brink of D-Day.

Don’t assume that GM, or especially Chrysler, management has a lot of power or flexibility.

Misjudging where the power lies could easily land GM, Chrysler — and the future of the Detroit region — in a harrowing and completely unpredictable bankruptcy scenario.

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