CAR giant General Motors (GM) was last night teetering on the brink of bankruptcy, as it failed to win enough support for a $27.2bn (£17bn) debt-for-equity deal with its bondholders.
Creditors had until midnight US time last night to accept a deal which would give them 10 per cent in a restructured GM, in return for clearing their debt.
But the largest US automaker has failed to secure anywhere near the 90 per cent of bondholder support needed to stave off bankruptcy.
Without bondholder support, GM’s attempts to restructure will fail, forcing it to file for chapter 11.
GM had been given until 1 June to cut its debts, which include $20bn owed to the United Auto Workers (UAW) union healthcare fund as well as the $27.2bn owed to bondholders.
But in spite of losing bondholder support, GM yesterday managed to secure a tentative deal with the UAW union’s bosses.
If GM is not forced into bankruptcy, it will give the UAW up to 20 per cent of common stock, $6.5bn of preferred shares and a $2.5bn guarantee, which would fund a trust to take over retiree health care costs starting next year.
Meanwhile in Germany, where the carmaker is selling off GM Europe, Canada’s Magna emerged as a favourite buyer for the brand, which consists of Vauxhall and Opel.
The car-parts maker is mulling shifting the production of Opel’s Astra from Belgium to Germany.
A final decision from GM on a buyer is due today. Germany, which is providing a €5bn (£4.39bn) loan guarantee to the programme, will also be involved. Magna is up against Italy’s Fiat, Brussels-listed RHJ International and a new bidder, Chinese carmaker Beijing Automotive Industry Holding (BAIC), in its bid for GM Europe.
Business secretary Peter Mandelson said the government had “not ruled out making a financial contribution” to help secure the future of carmaker Vauxhall amid fears Germany would seek to protect domestic jobs at the expense of the two UK car plants.