Update on the Government Motors (GM) bailout.

The Treasury Department is directing General Motors to lay the groundwork for a bankruptcy filing by a June 1 deadline, despite GM’s public contention that it could still reorganize outside court, people with knowledge of the plans said during the weekend.

Not that we here at Hangar Dogs are opposed to the bankruptcy solution but…..

The preparations are aimed at assuring a GM bankruptcy filing is ready should the company be unable to reach agreement with bondholders to exchange roughly $28 billion in debt into equity in GM and with the United Automobile Workers union, which has balked at granting concessions without sacrifices from bondholders.

This part I don’t quite understand – why are the bond holders required to sacrifice? It looks like they are not to pleased with the plan.

One plan under consideration would create a new company that would buy the “good” assets of GM almost immediately after the carmaker files for bankruptcy.

So far so good…..

Less desirable assets, including unwanted brands, factories and health care obligations, would be left in the old company, which could be liquidated over several years.

I am pretty sure that’s what bankruptcy proceedings do.

Treasury officials are examining one potential outcome in which the “good GM” enters and exits bankruptcy protection in as little as two weeks, using $5 billion to $7 billion in federal financing, a person who had been briefed on the prospect said last week.

Again I am not sure why we (taxpayers) are financing this but…..

The rest of GM may require as much as $70 billion in government financing, and possibly more to resolve the health care obligations and the liquidation of the factories, according to legal experts and federal officials.

Wait…$70B – holy cow folks….dump $70B into a bankrupt company? Its not like you are going to get that back.