REPORT: GM considering Chapter 11 filing that would create new company


El Presidente
May 23, 2007
Reaction score
Detroit's danse macabre on Capitol Hill continues this week, as General Motors and Chrysler prepare to unveil their so-called "viability plans" to the Treasury department in order to gain access to additional taxpayer funds. Without additional bailout money, neither company is in a position to continue existing on its own, making bankruptcy the logical next step.

The Wall Street Journal reported yesterday that General Motors, once very outspoken against the mere concept of the B-word, may now actually present it as an option – assuming the federal government would be willing to bankroll the debtor-in-possession financing that would need to accompany a Chapter 11 filing. According to the Journal, in this scenario, GM's "viable assets " (unspecified U.S. brands and its international ops) would then be reorganized into a new company. Everything else would get liquidated or sold off in bankruptcy court. While no names are mentioned, it doesn't take a Harvard MBA to know what's potentially on the chopping block. Of course, the other option is for the government to maintain the status quo and simply give GM more bailout money to let it continue operating.

Chrysler, for its part, is reportedly going to present two "viability" scenarios -- one in which it somehow manages to survive on its own and another in which it and FIAT stop flirting and consummate their relationship. Given that Auburn Hills has made an very high-profile production of its FIAT talks, it's seems pretty clear that the suits believe the road to salvation runs through Turin. Either that, or they need to sell eleventy-billion Rams in an awful hurry. Like GM, if Chrysler isn't the recipient of additional government largesse in the near term, it's essentially forced into bankruptcy.

Meanwhile, the UAW, unsurprisingly, is playing hardball with everybody. Automotive News reports that the union has walked away from the bargaining table with GM over the concessions the automaker wants regarding the $20 Billion it owes in payments to the retiree health care fund. GM wants the union to take half that sum in stock instead of cash. The UAW is unimpressed. Automotove News paints a similarly bleak picture regarding talks between the UAW and Chrysler. Of course, if either GM and/or Chrysler were to basically call the UAW's bluff and file for bankruptcy, the union's tactics backfire, as its current contracts would become meaningless pieces of paper and new deals would have to be negotiated.

In any event, the very public high-wire act better known as Detroit bailout continues apace. This week should be interesting, to say the least.

Create an account or login to comment

You must be a member in order to leave a comment

Create account

Create an account on our community. It's easy!

Log in

Already have an account? Log in here.

Top Bottom