Administration may require bankruptcy for TARP funds.

[network engineer]

From SmartMoney

It looks like there may be some serious conditions attached to any TARP money that could be forthcoming.

With Detroit's car makers facing bleak short-term prospects due to a collapse in consumer demand for vehicles, the Bush administration was rushing to determine the extent of the companies' financial problems. Late last week, some officials thought the government might be able provide as little as $8 billion to tide the companies over until early next year. On Sunday, a person familiar with the situation said the companies' collective needs could range from $10 billion to more than $30 billion. The administration spent the weekend poring over the automakers' books to assess their financial needs.

After reviewing the books over the weekend, this was leaked to the media.

Two people familiar with the situation said the government is also considering of requiring any auto makers seeking aid to file for bankruptcy. Under such a scenario, the money would be used as so-called debtor-in-possession financing. Outside experts said such financing could require $50 billion or more for General Motors and Chrysler combined.

A prepackaged bankruptcy technically requires approval by all constituents that are making concessions in the bankruptcy, making that a less likely option. A more likely outcome, if the White House decides it will only lend the money on condition of a bankruptcy, is what bankruptcy experts call a pre-arranged bankruptcy filing.

Under that scenario, the filing company negotiates with its stakeholders beforehand and may get one or two groups to sign off on their concessions before filing. The company then hashes out the remaining concessions in bankruptcy.

One advantage of the continuing public debate and congressional talks, people familiar with the matter said, is that Chrysler and General Motors appear to be preparing for the possibility of a filing, with both recently bringing in bankruptcy advisers.

I personally believe that this may be the only way for GM to get itself back on track. While they may lose major market share, they can become profitable. GM could see their market share at 10% after a restructuring, but it's better to be smaller and profitable than to have 20% share right before you go out of business forever.

I'd rather have a smaller, focused, profitable GM than no GM at all..

[gmcbob]

From SmartMoney

It looks like there may be some serious conditions attached to any TARP money that could be forthcoming.

After reviewing the books over the weekend, this was leaked to the media.

I personally believe that this may be the only way for GM to get itself back on track. While they may lose major market share, they can become profitable. GM could see their market share at 10% after a restructuring, but it's better to be smaller and profitable than to have 20% share right before you go out of business forever.

I'd rather have a smaller, focused, profitable GM than no GM at all..

I'm right there with you on that. It would (or maybe will) be very interesting to see what a lean, mean, post "pre-arranged" bankruptcy GM would look like from a product standpoint.

[FUTURE_OF_GM]

The problem I see with bankruptcy is preserving the size of the company. (Divisions, overseas operations, etc.)

I, for one, will not be a GM customer if all they have to offer is Chevrolet or Cadillac. GM needs to maintain it's divisions for future growth and it's size for global competitiveness and economies of scale.

[network engineer]

The problem I see with bankruptcy is preserving the size of the company. (Divisions, overseas operations, etc.)

I, for one, will not be a GM customer if all they have to offer is Chevrolet or Cadillac. GM needs to maintain it's divisions for future growth and it's size for global competitiveness and economies of scale.

They could certainly do that by only offering the G8 for Pontiac and the.... well I can't think of anything for Buick to keep, but then they could just drop the badge jobs and build the Invicta. That way they get to cut the wasted development money creating competitors for their own cars but leave the divisions alive. You want to bring out a Velite later? No problem Buick is still there. How about a new RWD G6? Ok, it fits with Pontiac's image and it's still around. In the meantime they drop the badge jobs like the G6, G5, G3, Torrent, Vibe, Enclave, Lacrosse and Lucerne. And Saturn can just hit the bricks. If they want to sell opens here then just launch Open in the US and be done with it. Leave em right hand drive and everything for the really niche feel.

And Rick should be replaced with this guy GlenGaryGlenRoss. He'd definitely take no crap, and be fun to watch.

Edited December 17, 2008 by network engineer

[ellives]

The key word here is "profitable." I would like to see the administration go right back to the plan Corker outlined. I like his approach as it was lucid and practical. The bondholders ended up with 30% of their investment back which is better than nothing. Given the UAW was up to their tired old games, I would make one of the stipulations of the money the elimination of union representation at GM and Chrysler. While bankrupcy isn't a thrilling prospect, it would be a nice way to dispense with dealers who would be impacted and want compensation if their brand was killed. Of course at their current rate of closure, this may be a moot point.

I'm wondering if we'll see any sales uptick at all in December, given the plunging price of gas.

From SmartMoney

It looks like there may be some serious conditions attached to any TARP money that could be forthcoming.

After reviewing the books over the weekend, this was leaked to the media.

I personally believe that this may be the only way for GM to get itself back on track. While they may lose major market share, they can become profitable. GM could see their market share at 10% after a restructuring, but it's better to be smaller and profitable than to have 20% share right before you go out of business forever.

I'd rather have a smaller, focused, profitable GM than no GM at all..

Edited December 17, 2008 by ellives

[enzl]

The problem I see with bankruptcy is preserving the size of the company. (Divisions, overseas operations, etc.)

I, for one, will not be a GM customer if all they have to offer is Chevrolet or Cadillac. GM needs to maintain it's divisions for future growth and it's size for global competitiveness and economies of scale.

Unfortunately, the post-bailout GM cannot be the present size....a big part of GM's current problems is the fact they've had to maintain a certain footprint, due to legacy costs and franchise agreements. As an enthusiast, the loss of nameplates and divisions is certainly sad---but GM as we know it has been dead for years--$70Billion in losses during the largest US market in history has to tell even the most hardcore fan that something is terribly wrong at the Tubes.

There's no economy of scale when you cannot profitably sell what you make. It's obvious GM hasn't been making money on most of its production in years, probably decades.

I am sympathetic to all hurt in these cuts as a person (and I very well could be one of them), but anyone who foresees GM's survival must be a realist---there will be massive changes---many unpleasant.

[CARBIZ]

... and the point of getting funds from Washington would be? I thought the point of asking for funding is to AVOID bankruptcy. If GM is 'forced' into bankruptcy, why get the bridge loan? Am I missing something?

[zabolots]

... and the point of getting funds from Washington would be? I thought the point of asking for funding is to AVOID bankruptcy. If GM is 'forced' into bankruptcy, why get the bridge loan? Am I missing something?

Because only the gov't would be willing to provide debtor-in-possession financing. No bank would touch GM with a 10-ft pole during this economic crisis.

[Z-06]

The key word here is "profitable." I would like to see the administration go right back to the plan Corker outlined. I like his approach as it was lucid and practical. The bondholders ended up with 30% of their investment back which is better than nothing. Given the UAW was up to their tired old games, I would make one of the stipulations of the money the elimination of union representation at GM and Chrysler. While bankrupcy isn't a thrilling prospect, it would be a nice way to dispense with dealers who would be impacted and want compensation if their brand was killed. Of course at their current rate of closure, this may be a moot point.

I'm wondering if we'll see any sales uptick at all in December, given the plunging price of gas.

Corker's plan indeed was a simple and practical one. Unlike his other southern counterpart, he laid down some practical points. What GM, Ford and Chry must accept is in short terms they may have to sacrifice market share if they want to make long term viable. In order to go five steps ahead you sometime have to put a step back. Unfortunately, modern captains of industry do not see that as an effective strategy, as they believe going negative is doom and gloom.

It is always easy to battle to the top spot, and always difficult to maintain the top spot. Given current resource crisis, GM would be better off to stave off their dream for volume for time being before it makes itself profitable, and then gun for the top spot again.

[smk4565]

... and the point of getting funds from Washington would be? I thought the point of asking for funding is to AVOID bankruptcy. If GM is 'forced' into bankruptcy, why get the bridge loan? Am I missing something?

Also a chapter 11 bankruptcy will likely lead to a chapter 7 liquidation unless the government loans them money and keeps them afloat while they reorganize. GM doesn't have the cash to survive chapter 11, if they filed a year ago they might have been able to.

I think best case scenario is Chevy-Buick-Cadillac, and about 15% market share if they manage this well. Given Wagoner's track record, Chevy-Cadillac and 10-12% market share wouldn't surprise me.

[regfootball]

the reason this would would be done pre-bama is to kill the union. i don't think obama would provide a deal like this to bust the union.

so part of the agenda is 'bust the union'. second is to require bankruptcy to fix the legacy costs issue and provide DIP to keep consumer confidence in buying warranted gm stuff etc.