NEW YORK, May 31 (Reuters) -Corp will file for Chapter 11 bankruptcy protection on Monday at the U.S. Bankruptcy Court in the Southern District of New York before markets open, according to U.S. government sources with direct knowledge of the preparations. [ID:nN31395352]
The bankruptcy has become the most carefully orchestrated Chapter 11 filings in the history of American business.
The following are comments about the company's bankruptcy made before the government sources comments:
UNIVERSITY OF MARYLAND ECONOMIST PETER MORICI
Said GM has long had two problems that bankruptcy reorganization is supposed to address, but probably will not resolve despite months of restructuring -- a bad capital structure and expensive labor costs, even after an agreement with the United Auto Workers union on concessions.
"It will come out of Chapter 11 with the same and a politically inspired board."
SENATE REPUBLICAN LEADER MITCH MCCONNELL OF KENTUCKY
McConnell criticized decision-making on GM and, which included $36 billion in bailout money and unsuccessful efforts to restructure out of court.
"We want them to survive. Obviously, they have to slim down and get competitive to do that, but it took an awful lot of government money and delay to get to the point we could have gotten to months ago."
JACK WILLIAMS, PROFESSOR AT GEORGIA STATE UNIVERSITY COLLEGE OF LAW
"As you know the market cap of GM has eroded at an accelerated rate. It's goodwill value is evaporating as we speak so it doesn't benefit anyone really to slow the process down.
"It has to move fairly expeditiously to conserve what going-concern value is left in the company. At the same time you have to balance due process rights. And that's going to be the tension in this case.
"Think ofas a trial balloon -- you will have a significant component of the equity of GM going to the unions or the trust who otherwise would hold an unsecured claim.
"This is unprecedented in business bankruptcy -- not the size -- but ... the role government will play and has played particularly in the reorganized, so new GM.
"Those who are long in the tooth will say (a quick emergence from bankruptcy is) a pipe dream, but you've got the government involved ... (and) you've got media involved. Not just business (media) but political media, which puts a whole different spin on the entire process."
SCOTT PELTZ, MANAGING DIRECTOR AT FINANCIAL ACCOUNTING AND CONSULTING FIRM RSM MCGLADREY IN CHICAGO
"The government has to pick a way that they are going to own GM, and one of the things they could do is put the stock into a trust and have some trustees that are business heads. Have the trust administered and the ownership handled by businessmen rather than politicians.
"The problem with government ownership is that at times it could be inconsistent.
"The best scenario is having it run by a group of business people for the benefit of the government." (Reporting by John Crawley and Caroline Humer)