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GM early payments: Another bankruptcy signal - May. 14, 2009GM early payments: Another bankruptcy signal
Automaker agrees to about $2 billion in early payments to suppliers, ahead of deadline for possible bankruptcy.
NEW YORK (CNNMoney.com) -- In another sign the company is preparing for a possible bankruptcy filing within the next two weeks, General Motors has agreed to speed up payments to 1,500 suppliers who provide it with the parts it needs to make cars in North America.
The company typically pays its suppliers during the first week of every month. The next payment was originally scheduled for June 2. But GM spokesman Dan Flores said the June payment has been moved up to May 28 to help its suppliers in the face of current "market uncertainty."
That uncertainty is due to the fact that under bankruptcy law, once a company has filed for bankruptcy court protection, it is not allowed to make payments to people or entities it owes money while a judge sorts out how much to pay each creditor.
Thus the five-day difference in payment could make a great deal of difference to the suppliers, since GM faces a June 1 deadline from the Treasury Department to win concessions from its bondholders and unions, and to make other structural changes.
If it can't win agreement from those groups, the company may file bankruptcy on June 1, an option that CEO Fritz Henderson said is "probable" given the difficulty in getting agreements from the various groups, particularly its bondholders.