GM says still prefers out-of-court restructuring

General Motors Corp said on Friday that it still prefers to restructure the business out of court rather than file for bankruptcy reorganization.

GM shares fell as much as 32 percent on Friday on the New York Stock Exchange after sliding 15 percent on Thursday when the automaker's auditors raised doubts about the company's ability to survive outside bankruptcy.

The shares were down 21.51 percent at $1.46 in afternoon trading on the NYSE.

The No. 1 U.S. automaker, which is seeking up to $30 billion in U.S. government aid, reiterated that it has analyzed various bankruptcy scenarios.

The company firmly believes an in-court restructuring would carry with it tremendous costs and risks, the most significant being a dramatic deterioration of revenue due to lost sales, GM said.

GM has previously said that a bankruptcy filing could force a liquidation because of the financing its reorganization would require and consumer reluctance to buy vehicles from a bankrupt automaker.

The automaker, which lost nearly $31 billion in 2008, faces an end-of-March deadline to complete concession talks with the United Auto Workers and bondholders to reduce its debt load as part of a bid to convince the autos task force assembled by U.S. President Barack Obama that it can be made viable with a new round of government help.

Representatives of GM's bondholders met on Thursday with the U.S. autos task force. Under GM's bailout, its debt holders have been asked to take a payout of one-third of the $27 billion GM owes through a debt-for-equity swap.

Gimmecredit analyst Shelly Lombard said the task force is unlikely to extend the deadline.

If the auto task force got the sense that GM and its bondholders can't come up with a deal like Ford's, we expect the task force to push GM into bankruptcy rather than push back the deadline, Lombard said in a research note. We'd expect the government to provide a DIP loan backstop rather than allowing a free-fall bankruptcy that could lead to GM and supplier liquidations.

Ford Motor Co announced on Wednesday a plan to cut its $25.8 billion in automotive debt by about 40 percent by offering creditors cash and new shares.

(Reporting by Poornima Gupta, editing by Matthew Lewis)