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Report: Feds Tell GM to Prepare for Bankruptcy

The U.S. Treasury Department is directing officials at General Motors (GM) to lay the groundwork for a June 1 bankruptcy filing, according to a report from The New York Times. The directive comes even as GM publicly says it could still reorganize outside court. The Times says that members of President Barack Obama's automotive task force have been in talks with the company since last week and are expected to continue those talks this week. The plan is to prepare for what is being called a "surgical" bankruptcy, which would be handled quickly in order to ensure the least amount of damage to GM's image and sales. The company is being told to make the bankruptcy preparations now to expedite the filing in the event that is unable to reach agreements with its bondholders to exchange roughly $28 billion of debt into equity in the company; the United Auto Workers union has said it will not agree to concessions with GM without bondholder sacrifices. Neither the Treasury Department nor GM are commenting on the Times report. Late last month, the government gave GM 60 days to create a new restructuring plan in order to be considered for additional bailout funds. The Times reports that GM's new CEO Fritz Henderson is sending signals that bankruptcy is now an option that the company is considering.

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