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Originally Posted by tgagneguam
I admit I'm a bit uneducated about the precise nature of bankruptcy filings. Specifically, do the new bankruptcy rules going into effect this month make it more difficult to file for bankruptcy on both the personal and corporate levels or no? I ask because if it would be more difficult, then GM will need to get cracking if their intention is to file (I'm not convinced that that's GM's plan). I suspect that the new, allegedly tougher rules may explain the timing of Delphi's move.
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Just this morning I read a detailed summary of the changes in corporate bankruptcy law come 10/17. It's mainly a drop in executive compensation during bankruptcy, and a more limited amount of time a company has to bring a restructuring proposal to the courts (which must include a potential plan for liquidation).
I'm not sure GM could file now if it wanted to, because despite $200 billion of debt, they have about $30 billion in the bank. Furthermore, bankruptcy of a retail OEM would decimate its market share. GM would stand to drop from 27% to 20% almost instantly. People aren't eager to spend $30K on a car if they believe the company won't be around to honor warranties or offer service. Chapter 11 is not bankruptcy, it's a restructuring ... bankruptcy *protection*. But people hear the 'B' word, and that's all it takes.
I suspect the union will be a little more generous to GM in 2007 after this. I'm convinced that's why GM didn't bail out Delphi to prevent today's filing.