Changes coming Monday for auto bailout

Not much time to post as I’m preparing for my first dissertation defense as a professor. Should be interesting.

But there is some big news coming on the auto bailout. GM will get 60 days to get their act in gear or fall into government funded bankruptcy. Chrysler gets 30 days to team up with Fiat or face the same.

A few industry news links to follow if you care: GM Inside News, Autoblog. Nothing yet from the UAW.  The Detroit Free Press already has posted the summary reports of the Auto Industry Task Force.  Apparently, the government will also partially fund a warrantee program for GM and Chrysler to reassure potential buyers.

Very good chance both companies are headed into a pre-packaged bankruptcy program.  Consider this from the summary:

While Chrysler and GM are different companies with different paths forward, both have unsustainable liabilities and both need a fresh start. Their best chance at success may well require utilizing the bankruptcy code in a quick and surgical way. Unlike a liquidation, where a company is broken up and sold off, or a conventional bankruptcy, where a company can get mired in litigation for several years, a structured bankruptcy process – if needed here – would be a tool to make it easier for General Motors and Chrysler to clear away old liabilities so they can get on a path to success while they keep making cars and providing jobs in our economy.

Bankruptcy would wipe out stockholders (not much value there anyway), but would also impact union contracts and bondholders.  Various reports suggest the government and the UAW would have the upper hand in bankruptcy, which is interesting.  Either way, the report sees Chrysler as not viable as a stand alone company, so bankruptcy would just be a process of making it more attractive to global partners.

The tone of the reports is interesting.  Might be refreshing to see something like this in the bailout of the financial industry.

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