Obama Admin Plans To Ease GM Into "Controlled" Bankruptcy

New York Times:

The government may seek to ease General Motors into what it calls a "controlled" bankruptcy, somewhere between a prepackaged bankruptcy and court chaos, by persuading at least some creditors to agree to a plan that would cleave the company into two pieces, according to people briefed on the matter.

Instead of signing on every creditor as is typically required in prepackaged deals, administration officials are using as leverage the promise of taxpayer financing. Many regard the government as the only lender willing to step up with money -- in bankruptcy or out.

Read the whole story: New York Times

Comments

[johncando]

Why wouldn't the Government either give the roadmap to recovery like a roadmap to peace or step back and allow GM to recover without the threat it is costing GM billions for lawyers to work out both senarios and not knowing if the Feds will drop the ball. This is like flying the shuttle from California on that 747 without bolts. The stupid Canadian Government was talking about the same thing it is like Canada is about to start a civil war here to show we are American too. The USA is a great partner but I as a Canadian on this North American Continant love our diferances Why would Toni Clement our minister ask how we fix our problem here in Canada when the wheels haven't fallen off, (yet) but given your Government can not give a plan, keeping the Company in limbo not knowing what way to go and working it out all ways to predict what is next , I would buy a Gun as CEO of GM and blow my brains out because the not knowing for this amount of time is tant amount to torture (that can't happen in the USA)

[econ1]

Sweden wisely told GM that it didn't want to take over SAAB (I own one...and like it) because "we aren't interested in being in the automobile business". Our government now thinks it can do anything and wants to run a few car companies. When all the political pay offs are included we will have spent billions of citizen's dollars to build some me-too cars. That money could have gone to our best companies to make them stronger or even left with the citizens. What a waste.

[KillTheMessenger]

Actually..­. the government did not say that it wants to take over anything. GM and Chrysler came begging and would have gone out of business months ago without the emergency loans they were given. That's not a takeover. It's merely being lender of last resort. If you happen to know bank lending to industry, you might know that banks will put all kinds of clauses into those contracts that give them control over assets. That's standard practice. In comparison to a typical bank what the government does here is rather hands off.

[senorlou]

Why doesn't the government buy up one of GMs divisions for nearly nothing and try its hand at making some cars. The problem with the US companies is that they don't have any decent cars that are affordable (under 20K). If the government took, say, Saturn - which used to make affordable cars with high gas mileage - and starts making them again, it might help turn the industry in the right direction. We can't count on the auto executives to make good decisions - since they haven't so far. It's just a thought, and it'll keep the workers in a job. Of course, the government would have to pay union wages.

[KillTheMessenger]

"Why doesn't the government buy up one of GMs divisions for nearly nothing and try its hand at making some cars."

1) The government does not know how to make cars.
2) A single division of GM can't make a whole car. They are all integrated into the operations of the whole company.
3) If successful, it would compete with GM and bankrupt the company even faster.

But trust me, it would never come to 3). Government made cars went under names like "Trabant":

http://en.wikipedia.org/wiki/Trabant

You don't want one of those. You really don't.

[rkimball]

first obama must get permission from the uaw. the uaw resisted obama's calls for pay concessions. the uaw is where the real buck stops at.

[senorlou]

So, you're saying that the decisions of the CEOs at GM to kill the electric car, dump all their money into building high-priced, low mileage SUVs, to offer virtually no affordable cars under $20K with high mileage, to instead offer $45K plus hybrids like the Chevy Tahoe (19 MPG combo), and the $45K plus Volt that nobody will be able to afford (hell, it might not even come out) weren't the cause of GM's collapse? It was the workers?

LMFAO!!!!

[EinChicago]

Actually, most of those were realtively sound at the time. The EV-1 was dead in the water in that form. Despite the hyperbiolic fiction that fringies cite, nobody was willing to pay the real price of that car (which cost $150,000 just to build). Yes, it was a darn good deal for those who got to lease one for the equivalent lease rate of a Hyundai Accent, but it could not be done on a mass market release. And where do you think the Volt and COnverj came from? Out of thin air? Hardly. The Volt was announced less than 5 years after the last EV-1 lease expired. Obviously the technology was evolved and adapted. Creating a new E-REV from scratch would take longer. Look at Toyota's complete lack of any next generation electric vehicle. They keep hanging a new set of fuzzy dice on the same old Prius and calling it "Next generation".

And every company aimed for the high-priced SUV market because it was a gold mine. Toyota did teh same thing. For every Hummer GM buillt, Toyota built an FJCruiser, and Nissan a an Armada. For every Dodge Ram,. Toyota was chaising their tail with a Tundra and Honda with a Ridgeline. The fact that the sheeple are dumb enough to fall for greenwashing PR doesn't make it a reality. It just means teh sheeple are even dumber than we thought.

[MetalCanuck]

Too bad he wouldn't do this to the banks...OH I forgot the banks own the government.

[-0013]

Wow what a great idea.

Maybe he should have done that in the first place instead of giving them $20 billion dollars just so they could end up in bankruptcy court anyway.

Nice job Mr. President.

[notAMoron]

That was the "other president" that gave them the first $20B. But he only did that because congress was gridlocked and he (and presumably Obama from his statements at the time) wanted to kick the can down the road and let BO deal with it.

[Pucky]

Obama should have forced the head of the union out. Then we would know he was serious.

Instead he is just going to kick this can down the road. (Sigh....)

[davidwayneosedach]

The sooner the better. No more bailout billions!

[jeanruss]

I read that Wagoner had to go because he had involved GM in the derivatives mess illegally.

[IbeHappy]

They might as well gut it now. Who's going to buy a car with a promise that even if the company disappears, the warranty will still be good. Sort of like your pensions. Why not just move the Suburban plant to Salt Lake City and sell it to the local oligarchy? They still got lots of money and their people love these things.

[notAMoron]

Jay Leno put it pretty well last night when he was making fun of the government's plan to back the warranty on new GM and Chryslers. He said something along the lines of "combining the reliability of an american car with the honesty of an auto mechanic and the efficiency of the federal government should give the car buying public a lot of faith in the product."

[KillTheMessenger]

Jay Leno has some seriously funny joke writers working for him.

:-)

[watchTVgetSTUPID]

DUDE WHERE IS MY CAR?


oh yea, Obama put Wall Street Insiders in charge of the auto rescue.

I would feel in safer hands if Obama put Brown (FEMA Katrina guy) in charge instead.

[slowhand0728]

LOL..."You­r Doing a Great Job Tiny Tim!"

[Cinderpath]

-This will be an absolute economic disaster, you wait, people that don't think GM affects much of the economy will be in for a shock of their lives. Combine this with a parallel Chrysler liquidation and there will be thousands of chain bankruptcies when suppliers don't get paid in the process. The death blow to the parts supplier chain and loss of jobs and parts makers will take Honda,Ford and Toyota down with them. Ob*m* is playing with some serious fire, they have yet to realize. Once you loose the supply base, all bets are off. As much as I am against bailouts, there is no such thing as a "Speedy, prepackaged bankruptcy" ,which is as rare as an economic "V-shaped Recovery".

[drymartini1]

There is a REASON why govt. wants bankruptcy court.

See with all the billions govt has paid GM, we are still NOT FIRST IN LINE when its time to get paid.

said otherwise, Govt.'s claim is subordinate to senior creditors (mostly banks but there are others). That means if GM goes busto, govt still doesnt get paid first.

but if GM goes to bk court, the govt. could become Debtor in possession financier and move first in line.

well thats my understanding. but what do i know !!

[Cinderpath]

This will be an absolute economic disaster, you wait, people that don't think GM affects much of the economy will be in for a shock of their lives. Combine this with a parallel Chrysler liquidation and there will be thousands of chain bankruptcies when suppliers don't get paid in the process. The death blow to the parts supplier chain and loss of jobs and parts makers will take Honda,Ford and Toyota down with them. Obama is playing with some serious fire, they have yet to realize. Once you loose the supply base, all bets are off. As much as I am against bailouts, there is no such thing as a "Speedy, prepackaged bankruptcy" ,which is as rare as an economic "V-shaped Recovery". If this happens, watch Obama's political future go down in flames with it.

[drymartini1]

If you are a GM bondholder, you probably should take your chance in bankruptcy court. The offer you are getting compared to UAW is ridiculous.

[Cinderpath]

-This will be an absolute economic disaster, you wait, people that don't think GM affects much of the economy will be in for a shock of their lives. Combine this with a parallel Chrysler liquidation and there will be thousands of chain bankruptcies when suppliers don't get paid in the process. The death blow to the parts supplier chain and loss of jobs and parts makers will take Honda,Ford and Toyota down with them. Obama is playing with some serious fire, they have yet to realize. Once you loose the supply base, all bets are off. As much as I am against bailouts, there is no such thing as a "Speedy, prepackaged bankruptcy" ,which is as rare as an economic "V-shaped Recovery".

[KillTheMessenger]

GM does not affect much of the economy beyond the local scale. Walmart alone has an order of magnitude more employees than GM. GM's remaining business won't just go away with the company. People will still need cars, so they can buy them from Ford and the others. Easy.

The part suppliers will be bailed out by the remaining car companies which need them. It would also make a heck of a lot more sense to spend the GM bailout money on the supply chain for the rest of the industry than on the rotting carcass of a dead company.

Nobody says this will be speedy or cute. It will be ugly and long drawn out. However, at this point you only get to chose between death and cutting off your leg above the knee. Which one should it be?