Gm Faces Debt Default, Closures

April 23, 2009|By From Baltimore Sun staff and news services

DETROIT -General Motors Corp. might miss a $1 billion bond payment due June 1 if it doesn't complete a debt-for-equity exchange by then, the company said Wednesday.

The troubled auto giant plans to make the exchange offer soon to bondholders, perhaps next week. GM has $28 billion in unsecured bond debt.

GM said in a statement that it will not make the payment if the exchange is still in progress June 1, which is also its deadline to reduce debt, cut labor costs and complete other restructuring steps to the government's satisfaction. If it can't meet the deadline, GM will go into Chapter 11, which could also make the company miss the payment.

Also, GM is planning to temporarily close most of its U.S. factories for up to nine weeks this summer because of slumping sales and growing inventories of unsold vehicles, two people briefed on the plan said Wednesday.

The exact dates of the closures are not known, but both people said they will occur around the normal two-week shutdown in July to change from one model year to the next.

Neither person wanted to be identified because workers have not been told.

GM spokesman Chris Lee would not comment other than to say the company notifies employees before making any production cuts public.

"I have not seen anything that's come through that would affect the Baltimore plant at this point," said John Raut, a spokesman for GM's White Marsh transmission plant.

Typically, a plant scheduling committee meets weekly and plant officials and employees are notified on Fridays about any changes, he said.

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