Topic: White House mulling 'orderly' auto bankruptcy

[tpl]

From Reuters.   They certainly have no idea what to do, do they?     


The White House is considering a managed bankruptcy for U.S. automakers as one option to help save the troubled sector.

U.S. President George W. Bush will not allow a "disorderly collapse" of the struggling U.S. automakers and is nearing a conclusion on whether and how to provide them with financial aid, the White House said Thursday.

Options include tapping money from the $700-billion US rescue package that was designed for helping financial institutions, as well as helping the automakers navigate through a bankruptcy proceeding, White House spokeswoman Dana Perino said.
   
A day after Chrysler LLC said it would stop manufacturing for a month, Perino said that the administration was still gathering information from the automakers, digesting it and determining what kind of assistance could be provided.
   
"The president is not going to allow a disorderly collapse of the companies. That is not an option," Perino told reporters. "We're nearing a conclusion, we're narrowing
options, I just don't have anything for you today."
   
She said that the administration was taking into account Chrysler's decision.
   
Bush has said repeatedly that the administration would only help those automakers that would be able to survive over the long term and that he did not want to put good money after bad.
 


There is an "orderly way to do bankruptcies that provides for more of a soft landing," Perino said. "That would be one of the options. I'm not saying that is necessarily what would be announced."
   
Perino said the administration has committed to help the automakers in some capacity after Congress failed to pass legislation last week, it was just a question of how.
   
Because the economy was in a recession, "the overwhelming evidence is that the collapse of the American auto industry would have a terrible, negative consequence for our national economy, resulting in massive job losses, the failure of many businesses who are dependent on the auto industry," she said.
   
"The ripple effect would be quite strong," Perino said.




I'd let Chrysler disappear and put the money into saving GM  if it were my decision.  ( And I have never bought a GM vehicle, worked for GM, or even worked for a supplier to GM) Meanwhile getting the banks to wake up and get themselves back to normal even if it meant a few executions on the White House lawn

[locutusx]

So it looks like:

Chrysler - allowed to die, euthanasia ("orderly bankruptcy"?)
GM - given a shot of adrenalin (bail out?)
Ford - allowed to heal on its own, maybe with some bandages (lines of credit?)

[toolatecrew]

I'm very supportive of the concept ..I'm just sceptical as to if they can get their together enough to pull it off (both the Chrysler/Gm and the Govt)

Chapter 11 provides many avenues of flexibility to restructure that simply are not available at a reasonable cost any other way.
1. You can't get rid of dealers under State laws without great cost without Chapter 11
2. You can't start fresh with Union labour and contracts without chapter 11.

IF and I mean IF they could have all the ducks in a row for emerging from Chapter 11, all the financing etc from the Govt in place a real plan for what things would look like. Then go chapter 11 to facilitate the changes KNOWING how and when they will emerge that is by far the best case I can see.

The bogeyman of "people won't buy cars from a manufacturer in bankruptcy" should go away. People are no less likely to buy a car from a manufacturer that has a detailed plan for restructure and guaranteed government support to leave bankruptcy than they are to buy a car form a manufacturer who MIGHT go into disorderly bankruptcy and leave them stranded.

Orderly Bankruptcy is a less dirty word than just plain old bankruptcy.

[DockMan]

 

[Wolfe]

 They certainly have no idea what to do, do they?     

I guess that's what happens when they put a "decider" in charge of the government instead of a President.

[tpl]

I think that the baseline demand for cars, trucks, SUVs etc. in the USA will mean that GM will still sell 5MM+ vehicles a year even inside Chapter 11.   They would have to ensure that they have a credible scheme for warranty coverage and I don't think it would be difficult to persuade people of that.
Also of course offering a cast iron 60 month bumper to bumper warranty on ebverything would be a very strong incentive to ensure that their quality stays up would it not.  

[safristi]

yeah Wolfie..Like O'Mama knows Kars......he had a Chrysler 300C ...and when the PRESS got on his case he switched to a HYBRID.SUV (which his partee RAILS!! against..........like it will see any use(maybe some Reporter could check that out and see if it goes to Blogoiobitch!!!! .....
   an Orderly BAIL OUT is BEST       and U KNOW IT......................cut the CORD to the grandfathered UPPER MANAGEMENT & the UNION baffle gab..............too many "KONTRACTS" too many "BONUSES fer LAME MANAGERS"....................GET IT OV'r WITH fer 2009..................

[gta_driver]

I think orderly bankruptcy for Chrysler means:

A type of shotgun wedding to GM, where GM gets Chrysler's minivan line(don't be suprised that as part of the deal production is moved away from Windsor to a US factory), new factory in Mexico and possibly Jeep(or Jeep is sold in a pre-arranged deal to Nissan-Renault or Mahindra&Manhindra of India). The remaining Chrysler lines are folded, GM retains the rights to the Chrysler, Dodge names. Cereberus is on the hook for generous severance and job re-training programs to those workers who lose jobs.

I think the reason why a bailout decision is taking so long is because there is a lot of opposition with helping a private company like Chrysler from both public and politcos, especially when the parent company of Chrysler Cerberus has billions in cash and assets and could easily inject some money to keep operations afloat but won't.

[safristi]

Chrysler BUH BYE BUY it privately.......IF ya Want ta BUY IT...with U're DOLLARS.......i ain't interested ....GM structure IT to be lean and MEAN GOOD..............FORD don't need any $$$ they say ...so take them at their word........................

[toolatecrew]

I think orderly bankruptcy for Chrysler means:

A type of shotgun wedding to GM, where GM gets Chrysler's minivan line(don't be suprised that as part of the deal production is moved away from Windsor to a US factory), new factory in Mexico and possibly Jeep(or Jeep is sold in a pre-arranged deal to Nissan-Renault or Mahindra&Manhindra of India). The remaining Chrysler lines are folded, GM retains the rights to the Chrysler, Dodge names. Cereberus is on the hook for generous severance and job re-training programs to those workers who lose jobs.

I think the reason why a bailout decision is taking so long is because there is a lot of opposition with helping a private company like Chrysler from both public and politcos, especially when the parent company of Chrysler Cerberus has billions in cash and assets and could easily inject some money to keep operations afloat but won't.

This is a very intersting point.

So if Chrysler goes Chapt 11 can debtors go after parent company Cerebrus assets  or are they protected by being at arms length somehow?

[DockMan]

So if Chrysler goes Chapt 11 can debtors go after parent company Cerebrus assets  or are they protected by being at arms length somehow?

The business is incorporated as a separate entity from any related company as a U.S. Limited Liability Corporation. As far as I know Cerebus could have a lending agreement (ie: Cerebus is the "Bank" that financed Chrysler LLC or simply a shareholder). This is a clasification differing from S or C Corps that we do not have a matching business class for here in Canada.

More Here:[url]http://en.wikipedia.org/wiki/Limited_liability_company/url]

[ovr50]

I think orderly bankruptcy for Chrysler means:

A type of shotgun wedding to GM, where GM gets Chrysler's minivan line(don't be suprised that as part of the deal production is moved away from Windsor to a US factory), new factory in Mexico and possibly Jeep(or Jeep is sold in a pre-arranged deal to Nissan-Renault or Mahindra&Manhindra of India). The remaining Chrysler lines are folded, GM retains the rights to the Chrysler, Dodge names. Cereberus is on the hook for generous severance and job re-training programs to those workers who lose jobs.

I think the reason why a bailout decision is taking so long is because there is a lot of opposition with helping a private company like Chrysler from both public and politcos, especially when the parent company of Chrysler Cerberus has billions in cash and assets and could easily inject some money to keep operations afloat but won't.

This is a very intersting point.

So if Chrysler goes Chapt 11 can debtors go after parent company Cerebrus assets  or are they protected by being at arms length somehow?

The guys at Cerberius at way too smart (hell, anyone is) to have set the purchase of Chrysler up so as to allow creditors of Chrysler to go after Cerberius in any way. This is normal business practice and totally acceptable.

I know developers who incorporate a new company for every project they do, so if a project gets into trouble, only the assets of that project are subject to attack (and not the other projects and the developers personal assets). Of course, the lender may insist on a personal covenant in order to have enough security to lend on.

[DockMan]

The guys at Cerberius at way too smart (hell, anyone is) to have set the purchase of Chrysler up so as to allow creditors of Chrysler to go after Cerberius in any way. This is normal business practice and totally acceptable.

I know developers who incorporate a new company for every project they do, so if a project gets into trouble, only the assets of that project are subject to attack (and not the other projects and the developers personal assets). Of course, the lender may insist on a personal covenant in order to have enough security to lend on.

I would wager that Cerebus has no liability in a Chrysler LLC default, but probably has security interest on all assets.

[airbalancer]

I know developers who incorporate a new company for every project they do, so if a project gets into trouble, only the assets of that project are subject to attack

I thought every developer would do that

GTA _ driver is the mode pretty low at GM's Canada head office?

[gta_driver]

GTA _ driver is the mode pretty low at GM's Canada head office?

Morale is low at CHQ.....it has been for awhile.

Most of us are putting in a 40 or more hour week but only getting paid for 32(this has been going on for awhile). I believe senior executives on the Canadian side are either forgoing pay or getting paid a nominal amount(this has been going on for awhile).

Entire floors/sections are closed and sealed off to lower electricity and heating costs.

A lot of us are taking unpaid time off.

Its been a rollercoaster ride.

[airbalancer]

Bummer