MotorAuthority

Report: GM and Chrysler considering bankruptcy

Posted Thu Dec 4 2008 4:10 AM by Ralph Hanson

GM and Chrysler may be forced to accept a structured bankruptcy to gain the federal bailout package

General Motors Chrysler executives are reportedly considering accepting a pre-arranged bankruptcy as a final measure to gain a bailout package from the federal government, although they insist such a move would most likely lead to a liquidation of the companies.

The latest information comes from people familiar with the internal discussions, who also revealed to Bloomberg that there are a number of options on the table, including bankruptcy with liquidation protection. Discussions are currently taking place between members of Congress, company executives, lenders, union officials and other interested parties.

GM CEO Rick Wagoner has previously stated that bankruptcy was not an option as it would turn away more customers from buying GM products. Chrysler has also previously stated that it does not intend to file for bankruptcy, however the current cash positions of both carmakers say otherwise.

Both will need about $11 billion from the federal government just to remain solvent until the end of the year. For this, they will most likely be asked to cut executive pay, reduce worker benefits, cut the number of brands and products, and launch more fuel-efficient vehicles.

story Tags:

• Chapter 11
• Chrysler
• Chrysler bankruptcy
• Detroit
• Detroit 3
• Detroit 3 bailout
• General Motors
• GM
• GM bankruptcy
• GM chapter 11
• Industry

Reader Comments

• Thu Dec 4 2008 8:47 AM

  JSH says

  I'm currently watching the congressional hearings and it appears from the questioning that a prearranged bankruptcy or government sponsored reorganization will be coming out of this. I don't see congress forking over $34 billion based on the companies current plans.
  
  While the representatives of congress seem to be concerned about the damage to the economy a bankruptcy would cause they also realize that in order for these companies to succeed everyone needs to come on board. That means the management, unions, suppliers, bond holders, dealers, etc. Right now none of these stakeholders are fully on board for a reorganization.

• Fri Dec 5 2008 7:01 AM

  Jim says

  After the guy from Moody's (Fitch?) testified that $34B is a down payment and $125B is more like the number, I'm not sure how bankruptcy can be avoided.
  
  Bold prediction. Ford gets a line of credit, the Gov agrees to be the guarantor of bankruptcy loans to GM and Chrysler is liquidated.