Report: GM, Chrysler considering bankruptcy

Automotive News
December 4, 2008 - 3:00 am ET


(Reuters) -- General Motors and Chrysler are considering accepting a pre-arranged bankruptcy as the last-resort price of getting a multi billion dollar government bailout, Bloomberg reported, citing a person familiar with internal discussions.

In response to automakers' bailout plea, staff for three members of Congress have asked restructuring experts if a pre-arranged bankruptcy -- negotiated with workers, creditors and lenders -- could be used to reorganize the sector without liquidation, Bloomberg said.

General Motors and Chrysler could not be immediately reached for comment by Reuters.

Industry executives and analysts say the immediate carnage from a bankruptcy of General Motors, Ford Motor or Chrysler would spread throughout an industry that is bleeding cash in a global slowdown.

All three automakers have urged Congress to authorize $34 billion in loans and credit lines, saying they will restructure, and cut models, jobs and executive pay to remain viable.

The White House did not dismiss the industry's $34 billion figure on Wednesday but said it was too early to say what it might support on an emergency basis.

Senate Majority leader Harry Reid wants to try to find a way to avert threatened bankruptcies in the U.S. auto industry with Detroit Three chief executives readying for a make-or-break hearing on Thursday on the bailout request.

Negotiations currently are splintered among small groups, making it unlikely that a proposed solution such as bankruptcy would emerge until next week at the earliest, the person briefed on internal talks told Bloomberg.

GM's failure alone would mean more than $200 billion in interest-bearing debt at the carmaker and its GMAC financing arm could be worthless for countless retirees and taxpayers, further upsetting consumption patterns.

 

It's a nuclear option.

It's a backup, final option to entice congress to grant loans in the event that they fail to convince congress on it's own merits.

 

FWIW, Wagoner said today bankruptcy isn’t in his plan.

 

bankruptcy is certaining a plan for these guys. It's just not the prefered. It's a last resort Plan B or C.

It also takes a step towards answering the big question why can't you just use bankruptcy like everyone else.

 

honestly it seemed to me that all 3 of them were about ready to bend over backwards and do whatever is asked of them even if it makes no sense to get the loan. not sure i think thats a good thing to do

 

Just like Dr. Zandy of Moody's said at today's hearings;

Saying no or doing nothing will be cataclysmic.