Bill Ackman Says GM (GM) Should Go Bankrupt

Hedge fund manager Bill Ackman said the biggest U.S. automaker, General Motors (NYSE: GM) should file for bankruptcy rather than taking money from the government.

"It has been hamstrung for years because it has too much debt and it has contracts that are uneconomic,'' Ackman, manager of the Pershing Square Capital Management LP, said on the Charlie Rose show yesterday. "The way to solve that problem is not to lend more money. They should do prepackaged bankruptcy.''

General Motors is currently petitioning the U.S. government for aid after saying last week that it may not have enough cash to operate this year. GM's CEO Rick Wagoner has said bankruptcy "is not an option."

Ackman told Rose that GM needs to reduce its debt to a more manageable level. Ackman said that the 'bankruptcy' word scares people, but it is simply a tool to help repair a debt-ridden balance sheet. A Chapter 11 bankruptcy filing enables a company to seek protection from creditors while still continuing to operate.

Ackman said the government should ensure GM uses funds to retrain workers and shouldn't put money into the company if it will only be used to service existing debt. "The welders at GM could help on the infrastructure of the country. That's a much better use of taxpayer money," said Ackman'.

Bill Ackman is the successful hedge fund manager who profited from going short MBIA (NYSE: MBI) and Ambac Financial Group (NYSE: ABK). Additionally, Ackman was also short Fannie Mae and Freddie Mac when they were seized by U.S. regulators.

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