GM Bankruptcy Probable as Obama Shields UAW Benefits

General Motors Corp. may be more likely to end up in bankruptcy based on the Obama administration’s willingness to place Chrysler LLC into court protection to safeguard union health-care benefits.

With GM and its biggest bondholders at odds over resolving $27 billion in unsecured claims by a June 1 deadline, the Chrysler model indicates that President Barack Obama may resort to bankruptcy to end any impasse over that debt, said Martin Fridson, chief executive officer of New York-based credit investment firm Fridson Investment Advisors.

Chrysler filed for protection April 30 after the U.S. was unable to persuade secured lenders to swap $6.9 billion in claims for $2.25 billion in cash. A union retiree health-care trust was offered a 55 percent stake in Chrysler.

“This confirms the fear, which right along has been that the Obama administration is more sensitive or beholden to the unions than the bondholders,” ... “It makes it clear that GM bondholders aren’t likely to be able to work out anything outside of bankruptcy.”

[Which is exactly what it's for and should have been used from the get-go.]

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