Stephanopoulos: Adminstration officials say GM bankruptcy LEADING OPTION

[nonconformist]

http://blogs.abcnews.com/george/2009/03/white-house-ban.html

White House: Bankruptcy May Be Leading Option for GM

March 30, 2009 8:17 PM

The DOW plunged over 250 points today with General Motors and Chrysler facing the possibility of bankruptcy.

As I discussed tonight on World News with Charles Gibson, bankruptcy is very much on the table right now, and Obama administration officials tell me it's likely the leading option.

---------------------------------------------------

In other words: Fuck off, Detroit.

:mad:

[lamp_shade]

1. I read someplace that the new CEO said as much.

[depakid]

2. More like fuck off bondholders...

[SemiCharmedQuark]

6. Exactly. They can't threaten the bondholders if they say "Bankruptcy!....but not really."

[pampango]

16. Agreed. I have the feeling that President Obama is playing "hardball" with the bondholders.

He's proven himself to be a pretty smart guy who probably knows as well as any of us the effects of letting GM fail, but he is good at "making the other guy blink first".

Many here seem to think that he is willing to let GM fail. I think he just has to pretend to be willing to do that in order to get the concessions he feels are necessary to make GM viable in the long run, not just a short term bailout that will come back again and again.

"And with no edge to his voice, he left hanging the threat that he might yet force G.M. into a quick, managed bankruptcy, if it was the fastest way to remake the company. That message was directed at G.M.’s reluctant bondholders, an unsubtle warning that they must negotiate to get 16 or 20 cents on the dollar — or risk getting far less."

http://www.nytimes.com/2009/03/31/business/31assess.html?_r=1

[amandabeech]

26. Why doesn't he play "fuck off" with the bond holders of the financial institutions?

Oh, that's right, finance is "in," and those dirty manufacturing plants with their scummy unions are "out."

[Fumesucker]

3. Fuck off UAW is what this is all about..

Bankruptcy is what will allow union contracts to be unilaterally abrogated.

[nonconformist]

10. Exactly. nt

[acmavm]

4. Foolish foolish foolish.

[ColesCountyDem]

5. It depends on what *chapter* of the bankruptcy code is used.

Ch. 7 and Ch. 11 are vastly different, e.g. .

[nonconformist]

9. Many don't think GM can do an 11

http://www.democraticunderground.com/discuss/duboard.php?az=view_all&address=389x5359070

Either chapter is a disaster, though.

[ColesCountyDem]

11. It largely depends on whether or not they get a cash infuson, *with restrictions*.

See my posted thoughts here: http://www.democraticunderground.com/discuss/duboard.php?az=show_mesg&forum=389&topic_id=5354535&mesg_id=5361063
\
The difference, essentially, is that the only options left are bad and worse.

:hi:

[nonconformist]

12. It's my understanding they would need Debtor In Possesion (DIP) loans to operate in an 11

And those have gone to the wayside in the bad economy. So unless the government infuses them, the suppliers will go to the wayside as well. Then all hell will break loose.

I have a really bad feeling about this. Really bad.

[ColesCountyDem]

22. They would need those, most likely.

The one thing everyone needs to understand-- and I'm not saying that you don't, mind you-- is that there are NO good options left. It's either going to require large cash infusions (loans) and then debt restructuring, or liquidating a huge, vital segment of our economy with tyhe attendant 'ripples' (read: 3 million-plus unemployed, pensions downgraded or eliminated altogether, etc, etc. etc.) .

There are no roses to be picked in the garden, at this late date...

:shrug:

[Romulox]

17. The only point of a Chapter 11 would to be avoid contracts--UAW contracts and pension obligations

for example. This would be almost as devastating to the local economy as a complete collapse.

Bankruptcy isn't a magic wand. :hi:

[ColesCountyDem]

23. Not entirely.

While contracts and pension obligations do indeed account for a large percentage of the automakers' indebtedness, there is also a sizeable amount of other debt, some or most of which could be restructured, and restructured with far less disastrous consequences than liquidation would neccessarily produce.

[Romulox]

35. The point is that SOMEBODY has to eat the loss. You make it sound like it will "poof" magically...

[ColesCountyDem]

40. No, I didn't make it sound that way at all. Read my post again, please.

The pertinent part reads, "... restructured with far less disastrous consequences than liquidation would neccessarily produce." (emphasis mine) .

[Hannah Bell]

7. GM's "owners" want bankruptcy, imo.

GM's not in that bad of shape.

set-up.

perception management, managed reality.

[Romulox]

18. Cute how they're playing "Bad Cop/Even Worse Cop" with President Obama then...

[Hannah Bell]

20. who's playing what with who?

[Romulox]

21. You say shareholders want bankruptcy. So does Obama.

Forget I mentioned it.

[Hannah Bell]

25. obama is giving the owners what they want. that's the function of government.

it wouldn't do to be overt about it, however.

since it enables the owners to break contracts...the ones so inviolable when made with banksters...


gm's not in such bad shape. the government wouldn't be "forcing" the #1/2 car manufacturer in the *world* into bankruptcy if its *real* owners didn't want to be forced.

spectacle, charade.

their "debt":

November 7, 2008

While GM, Ford and Chrysler put the squeeze on the taxpayer’s elected (and appointed) representatives, their shift of investment out of the U.S. and into other countries continues apace. This morning, for example, the Associated Press reports on the grand opening of General Motors newest $300mfactory… in St. Petersburg, Russia. “This plant is GM’s first in Russia, where demand for cheap, well-built cars has exploded amid a decade-long economic boom.” Similarly, last month GM opening it’s second factory in India and launched a new $250 million Shanghai, China R&D palace.

[Cessna Invesco Palin]

31. GM's not in bad shape? What are you smoking?

Have you looked at their financials? That place is a fucking mess. Their cash flow is totally fucked. Enormous fixed costs + huge debt load + drastically falling sales = recipe for disaster. Hell, it was a fucking mess *before* the economic crisis.

[Hannah Bell]

39. yes. i have. & i'd dispute your assessment.

[Dinger]

8. What The Hell?

How does President Obama think this will be a good thing? How?

[TexasObserver]

13. The bankruptcy makes the most sense.

Most people who are critical of the notion that bankruptcy is the best avenue have no idea what a major business bankruptcy is really like, or what it is really about. It is designed to give the company a fresh start. A line is drawn at the moment the bankruptcy is filed. A new entity known as the bankruptcy estate comes into being. This new entity is suddenly capable of getting loans and making contracts that have more meaning than they did the day before. THAT is what bankruptcy does for a big business.

It allows the company to renegotiate with all sorts of creditors, to make many of them take less. It gives structure and openness to that process.

For the US government, it assures that many liabilities can be negotiated down by the company, so the US government isn't simply signing blank checks.

Bankruptcy is the answer for GM, and it's been the answer all along.

[nonconformist]

14. No.

I know a fair amount about bankruptcy, and I also have done my research on this. GM is not just any company. There are far reaching ramifications if GM is in bankruptcy. For one, many experts think that it's not possible for GM to be able to do a Chapter 11, because the funds they would need to continue operating (DIP loans) aren't available. They can't operate if they can't pay their suppliers. Not to even mention the union contracts that will be shredded in the process, which will undoubtedly include healthcare for the retired (like my parents).

Most experts are saying that if GM goes under, it takes 3-5 million jobs with it.

[TexasObserver]

15. YES. I'm very familiar with the process.

I've worked in huge bankruptcies, the kind where there are 200 lawyers at every hearing.

I've represented the bankrupt entity, so I know that of which I speak.

They are free to accept those they wish to accept, and modify those they may want to keep upon condition. They will be bankable, and what's more, they'll get US government help they otherwise would not get.

As for that 3 million jobs going down number, that's absurd. It's a number someone invented. The whole point of the bankruptcy is to keep the company alive. If 20% of the employees lose their jobs, that's better than 100% losing theirs.

[cap]

27. this aint the airlines going down with a limited impact on people...

the auto industry tanking will have huge implications nationwide.... The auto industry has huge linkages into major parts of the economy: chemicals, paint, coatings, upholstery, machinery, iron, steel, glass, ceramics, plastic electronics, IT, call centers. Their dealer network and finance. This is an atom bomb with ground zero at Detroit that radiates over the midwest and then spreads NATIONWIDE! It's what will happen in your backyard. Anyone got a Rohm & Haas, Dupont, Pittsburg Paint and Glass, Corning, Delphi, US Steel, IBM, EDS, GMAC, US auto dealership, US Auto Parts supplier etc. in their backyards? Also, all these companies' suppliers to other industries... like upholstery for furniture. Chemicals for house paint. This means YOU!

The auto industry is one of the key drivers of the US economy. Not quite like it was in the 60s with our shift in emphasis towards the service sector. But don't kid yourself. Google "Auto Multiplier Effect" or "Auto Industry Linkages" and you will see what I am talking about.

There ain't no easy way out folks. We can't let Detroit continue the way it has; it is unsustainable. But we must renew the auto industry. Whether that means GM and Chrysler continue to exist is another story. Whether a bankruptcy will lead to a recovery is yet to be seen. Whether GM split up into smaller components will save jobs is yet to be seen. But it is not something to be taken lightly.

Not all bankruptcies are created equal. Some industries like the airlines go down with a limited impact nationwide. Others are like the holocaust. Autos and housing are the two main drivers of the economy. We all are having great fun with the housing industry tanking. We will surely add to the fun with autos.

As far as Obama is concerned, I think he does have something up his sleeve. The midwest and the unions are his base. He just would not cannibalize his base. The Democrats won by sweeping the Midwest. They would not give it up so easily. If GM and Chrysler go away, I sincerely believe Obama has something else to transition the folks to instead of autos being made the way they are.

[Cessna Invesco Palin]

28. Yeah, airlines have no linkages into other parts of the economy.

:eyes:

[nonconformist]

37. Is the airline industry required to make thousands of new planes to operate minimally? nt

[Romulox]

19. You speak of bankruptcy like its a magic word. The "fresh start" is on the backs of creditors

and in this case, the creditors are pensioners, workers, and mom and pop suppliers.

[TexasObserver]

24. Two alternatives: Creditor gets 0% of $ owed. Or, Creditor gets 80% of $ owed.

You fail to recognize that there is no alternative by which the creditors get 100% of their payables.

[Romulox]

29. Nonsense. AIG's "counter-parties" got 100%. nt

[TexasObserver]

32. Your analogy is ill conceived.

What AIG's counter parties got is immaterial to this discussion. GM is not going to get enough cash from the government to pay all its debts. If you think that will happen, you might as well stop thinking about this now.

Bankruptcy. It's going to happen, so get used to it.

[Romulox]

33. It's "ill conceived" only in that AIG, Citi, et al. have the ear of our President, and GM does not.

There is no other logical distinction, and you haven't even attempted to make one.

"Bankruptcy. It's going to happen, so get used to it."

Nonsense. It's politically unfeasible. :hi:

[Cessna Invesco Palin]

30. Umm...

If either company had submitted a restructuring plan with a snowball's chance in hell of succeeding, we wouldn't even be here talking about this. They've known for at least five months that restructuring would be a necessary part of any long-term bailout, and they are still dicking around. I suspect this, along with getting rid of Wagoner, amounts to putting the fear of God in them in order to get reasonable restructuring plans, since nothing else seems to have worked.

[Romulox]

34. How would you rate Citi restructuring plan (since you're an expert and all!)?

:hi:

:rofl:

[Cessna Invesco Palin]

36. The banks don't need restructuring.

The need nationalization followed by breakup and reselling of the sustainable divisions. It's not the same thing at all.

[leftstreet]

38. But that's not going to happen

So the question is relevant - what's the restructuring plan for the financial industry?

:shrug: