April 15, 2009 at 1:07 pm

GM chairman speaks out

Bankruptcy looms over auto talks

GM Interim Chairman Kent Kresa said he is in the process of overhauling the firm's board of directors, as mandated by the government. (Jean-Marc Bouju / Associated Press)

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

"I can't really say I'm optimistic" a deal can get done in time, Kresa told The Detroit News on Tuesday. "Can we do it? I do not know. Are we trying? Yes. I'm hopeful we can get there. 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 GM debt for new equity in the company, in a move to help boost GM's balance sheet.

In a wide-ranging interview Tuesday, Kresa said he is in the process of overhauling GM's board of directors, as mandated by the government, and has assembled a list of prospective candidates, but the list does not include any members of President Barack Obama's administration or the UAW.

Though the $13.4 billion loan agreement with the U.S. Treasury Department institutes a measure of control over GM -- investments of more than $100 million must be pre-approved -- Kresa said CEO Fritz Henderson and the board are responsible for day-to-day operations.

"No question, this is an independent company with an independent board. We're running the company," he said. "The government is a major owner and participant in the restructuring."

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.

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

"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. Kresa 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 have been supportive of Rick. I think he did a terrific job. 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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