Monday, March 30, 2009
WSJ says that Obama is leaning toward bankruptcy for automakers; GM could be sold off in parts
The Wall Street Journal reports from sources inside the Obama administration that the president now is leaning toward GM and Chrysler filing for bankruptcy and coming out reorganized into smaller companies or their parts sold off.
While I find that contention difficult to believe, perhaps President Obama now realizes it will cost too much to bail out the automakers. Their reorganization plans submitted to his auto industry committee were obviously disappointing, from his comments today.
Still, he seemed committed to some sort of U.S.-based auto industry operating in this country. Perhaps Ford will be the sole survivor and can operate some of GM's plants. Ford has not asked for government money.
Letting a federal court take care of GM bond-holding creditors and UAW members on retirement first, then seeing how much money is left to operate a company, makes better sense. I sure hope the president has reached that conclusion.
What this strategy means for the Spring Hill, TN., plant is anyone's guess.
The WSJ reports:
WASHINGTON— The Obama's administration's leading plan to fix General Motors Corp. and Chrysler LLC would use bankruptcy filings to purge the ailing companies of their biggest problems, including bondholder debt and retiree health-care costs, according to people familiar with the matter.
The move would in essence split both companies into their "good" and "bad" components. The government would like to see the "good" GM to be a standalone company, according to an administration official. The "good" Chrysler would be sold to Fiat SpA, assuming that deal is completed, this person said.
GM and Chrysler have had bankruptcy attorneys devising plans for such a move in recent months.
President Barack Obama's task force has told both companies that the administration prefers this route as a way to reorganize the two auto makers, rather than the prolonged out-of-court process that has thus far frustrated administration officials.
GM looks increasingly like it will be forced into filing for bankruptcy protection, sometime in mid-to-late May, in a plan where the automaker breaks into two companies, the surviving entity a "new GM" that maintains key brands such as Chevy and Cadillac and some international units, say several people familiar with the situation.
Stakes in this new GM could be given to creditors and UAW members. It is also possible the new company could be sold whole or in parts to investors.
The auto makers could avoid bankruptcy in the next two months. And there is some brinksmanship still going on in GM's high-level talks with bondholders, union members and creditors.