GM Willing To Change

The Wall Street Journal leads its front page, and the New York Times and the Washington Post lead their business sections, with General Motors' (GM) restructuring plan, which would see the U.S. government taking a majority stake in the troubled auto manufacturer. Also vying for prime space is a breaking report by the WSJ (and picked up by Reuters, Bloomberg, et al.) that Citigroup (C) and Bank of America (BAC) have been urged by regulators to boost their capital as a result of the government's stress tests. Executives at both banks are objecting to the preliminary findings, which are slated to be made public some time next week.

A plan put forth by GM Monday would give the government more than half of the restructured company's 60 billion shares and would drastically reduce its bloated infrastructure. In exchange, GM has asked for an additional $11.6 billion loan, making total borrowed monies top $27 billion. As part of the plan, GM has said it will lay off another 21,000 factory workers, shutter 13 plants, reduce its "vast" network of 6,500 dealers by half, and close its Pontiac division, the NYT writes. In the end, GM expects to have only 38,000 union workers and 34 factories left in the United States, a stark contrast from the 395,000 workers and 150 plants the company could boast in 1970, its veritable heyday.

Still to do is reach an agreement with the United Automobile Workers union, which has been urged by the government to accept company stock to finance half of GM's $20 billion obligation for retiree health care and to convince bondholders to swap their debt for equity, neither of which will prove too easy.

According to analysts interviewed by the WSJ, BofA may be facing a capital shortfall in the billions of dollars. The bank has a number of options to go about raising capital, such as an additional loan from the government, the sale of assets or shares, or a conversion of the government's preferred shares into common stock. The last would in essence nationalize the bank. It is also expected that a handful of other regional banks will receive the same prognosis, including Regions Financial Corp. (RF), Fifth Third Bancorp (FITB), and Wells Fargo & Co. (WFC). The government has said that banks ordered to raise capital shouldn't be viewed as insolvent. "Instead, the capital is intended to cushion the banks against potential future losses under dire economic conditions," the Journal says. Officials say they won't allow any of the top 19 banks to fail.

The WSJ leads its Money & Investing section with news that the Securities & Exchange Commission has charged Danny Pang, founder of Private Equity Management Group, with securities fraud and frozen his assets after an article in the WSJ revealed the portfolio manager's questionable professional history and business practices. Following the article, Pang stepped down as chairman and CEO of the firm, and hired a lawyer to conduct an independent investigation. "The SEC also accused Mr. Pang of lying about his past, saying PEMGroup falsely represented him as a former merger adviser at Morgan Stanley and said he held an M.B.A. degree from University of California, Irvine. Pang never worked at Morgan Stanley nor did he attend or obtain any degrees from UC Irvine, the SEC said," the WSJ writes. According to the SEC, Pang's career in fraud began at the latest in 2003 in Taiwan. The last that is known of Pang's whereabouts is that he went to China two weeks ago "for a religious pilgrimage."

Bloomberg reports that the spreading swine flu, which some worry could turn into a pandemic, has sent the peso tumbling 5.1 percent. As a result, analysts say the country will likely tap a $45 billion credit line from the International Monetary Fund, which was extended only 10 or so days ago as a "preventative loan" to protect against an ongoing "slump in tourism, migrant remittances and exports to the U.S. The sell-off began just as investor confidence in Mexico was starting to recover" because of the loan, according to Bloomberg. The peso had declined 32 percent in the past six months amid a gripping recession and rampant drug violence but had rallied 12 percent in the past six weeks before the fist case of swine flu was reported April 23. Barclays predicts the peso will rebound to 13.2 per dollar by year-end from 14.05 now.

In more car news, the Detroit Free Press sheds light on the end of a squabble between Daimler AG and Cerberus Capital Management over Chrysler. Daimler has agreed to give up its ownership stake in Chrysler and let the company off the hook for a $1.5 billion loan. Meanwhile, Cerberus Capital Management has dropped charges that Daimler "hid the depth of Chrysler's problems prior to the 2007 sale." In addition, Chrysler's UAW workers are voting on a proposed agreement that would eventually give the union a 55 percent stake in the restructured company, according to a summary of the agreement reviewed by the WSJ. Fiat SpA would get 35 percent, and the U.S. government and Chrysler's secured lenders together would end up with 10 percent.

Taking its own angle on Chrysler, the WP reports that the U.S. government is racing to sell Chrysler's loan arm, Chrysler Financial, to long-time rival GMAC. However to do so would mean loaning GMAC capital, a prospect that has some over at the FDIC balking "out of concern that its resources would be drained in support of an auto manufacturer."