Moody’s Sees a 70 percent Chance of Bankruptcy for Detroit’s Automakers

Moody’s Investors Service said in a note dated Monday that it still sees a 70% chance of bankruptcy for Detroit’s automakers, given the difficulty of winning sweeping concessions from creditors out of court.

“Given the lack of progress achieved and the additional progress that will be required in the revised plans, this threat will need to be seen as credible in order to compel adequate movement on the part of stakeholders,” Moody’s said.

General Motors Corp. (GM) has until June 1 to complete a reorganization plan. Chrysler has until April 30 to complete an alliance with Italian automaker Fiat.

While the Obama administration would prefer that he Detroit automakers restructure outside of bankruptcy, it is clearly putting bankruptcy forward as an option, the ratings agency said.

In the event of a bankruptcy filing the government will act to prevent a free-fall or uncontrolled bankruptcy in order to contain the severe disruption to the supply base and the broader economy, Moody’s said. [via Reuters]

Separately:

..[A] source familiar with the GM’s plans told Reuters the company was in “intense” and “earnest” preparations for a possible bankruptcy filing.

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