GM: Some Bondholders Want Bankruptcy

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Swap owners are not required to own the debt as well, so some may own swaps but not bonds. But if all of them hold GM debt and decide to get repaid in full through insurance policies in bankruptcy, it won't take too many more recalcitrant bondholders to get a deal done. "That's why you'll probably have to have a bankruptcy," says Richard Christopher Whelan, senior vice-president and managing director of Institutional Risk Analytics.

Discarding Pontiac?

While GM is preparing an offer for its bondholders, the company is also mulling the fate of its brands. GM has resisted suggestions to ditch its GMC truck brand, and two GM executives say the company has won the argument. News reports from Australia, where GM's Holden unit makes the Pontiac G8 sports car, suggest that GM may ditch Pontiac instead of keeping it around as a one- or two-car niche brand. Insiders say GM may dump it since the company has no new Pontiac models in the works.

At the same time, GM has several interested bidders in the Saturn retail network. One is a dealer group affiliated with private equity firm Black Oak Partners. Another is Renault-Nissan (NSANY). The French-Japanese auto alliance has been approached and gave it a look.

But any European carmaker may have trouble entering the U.S. even with Saturn's network, says James N. Hall, principal of 2953 Analytics, a Detroit-area auto consulting firm. European models are made with more expensive content because their buyers pay more for smaller cars due to expensive fuel. Plus, exchange rates hurt their profit potential, Hall says.

In any case, if GM enters bankruptcy, it could dispose of the unwanted brands more easily, says CSM's Robinet. Dealers could still sue under state franchise laws, but good luck getting any cash when the secured creditors, parts makers, government, UAW, and bondholders are already in line.

Click here to read BusinessWeek's complete coverage of the U.S. auto industry in our Special Report: Detroit in Crisis.

Welch is BusinessWeek's Detroit bureau chief.

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