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Ear to the Ground

Uncle Sam Forces GM to Stop and Ask for Directions to Bankruptcy

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Posted on Apr 13, 2009
Flickr / dogonthesidewalk

GM has until June 1 to cut a deal with its workers and bondholders, but the Treasury Department is requiring the automaker to prepare for bankruptcy just in case, according to The New York Times. Newly installed GM chief Fritz Henderson is more receptive to the possibility than his predecessor, but warns, “If we need to resort to bankruptcy, we have to do it quickly.”

New York Times:

The Treasury Department is directing General Motors to lay the groundwork for a bankruptcy filing by a June 1 deadline, despite G.M.’s public contention that it could still reorganize outside court, people with knowledge of the plans said during the weekend.

Members of President Obama’s automotive task force spent last week in meetings and on conference calls with G.M. officials and its advisers in Detroit and Washington. Those talks are expected to continue this week.

The goal is to prepare for a fast “surgical” bankruptcy, the people who had been briefed on the plans said. G.M., which has been granted $13.4 billion in federal aid, insists that a quick restructuring is necessary so its image and sales are not damaged permanently.

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By Zero, April 13, 2009 at 10:55 pm Link to this comment
(Unregistered commenter)

I have driven most all of them and a US made car is the best car out there. How did this myth get started that our cars are inferior?

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By jackpine savage, April 13, 2009 at 3:58 pm Link to this comment

ff11,

All the money that has gone to GM and Chrysler has been in the form of loans.  How does the government deem fit to take control of companies and make management decisions because it gave a loan…and a relatively small loan at that?

Current UAW pay rates are sustainable (unless you think that new hires should make less than $14/hr…less than non-union transplant workers).  the legacy costs were supposed to have been pre-funded.  GM didn’t and so now adds the costs to the hourly figures for current employees.  But a contract was already signed that each company would contribute seed money in 2010 to start a trust that would be administered by the UAW.  The legacy costs are coming off the books next year anyhow.

With the government in charge, the only people who are going to see any value are the bankers.

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By Shift, April 13, 2009 at 12:10 pm Link to this comment

Do I care about GM?  No!  Do I care about the UAW?  No!

GM builds high priced sub standard cars with engineered obsolescence guaranteed to part the GM driver with his money.

UAW funds supported efforts to overthrow a Democratically elected President of Venezuela, Hugo Chavez. 

It seems to me that GM is anti-American and the United Auto Workers are anti-Democracy.

Good riddance to both of them.  I got rid of my GM car five years ago and have not replaced it.

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Eric L. Prentis's avatar

By Eric L. Prentis, April 13, 2009 at 11:53 am Link to this comment

Advisers to President Obama, Geithner/Summers/Bernanke and investment banker Steven Rattner, head of the government’s Auto Task Force, which represent the corrupt Republican-like neocon financial cabal, are playing out a suitable bankruptcy strategy for the insolvent Wall Street banks and inappropriately applying that same strategy to GM/Chrysler in the manufacturing industry.

I believe the financial elite want to make an example of GM/Chrysler and how bad their bankruptcy will be so they can argue that no bank should be put through that same process because the economy is now too weak. This is a win-win for the effete financial elite who want to get rid of auto labor unions and in addition they can save all their mollycoddled banks/AIG using many trillions of taxpayer dollars.

If GM/Chrysler go into a complicated bankruptcy they will, without a doubt, BE LIQUIDATED, because, cars are sold to the public whose decisions are personal, i.e., people don’t by losers, cars are extremely costly and people won’t take a risk on a bankrupt company’s product and cars are incredibly complicated machines requiring full faith that parts and service will be available over the long term. Consequently, a bankrupt GM/Chrysler will have no customers, in addition, no auto company has EVER emerged from bankruptcy, end of story! America gets screwed just to save the bankers, and Obama goes along? President Obama, please wake up before it’s too late, time for a new financial team.

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By Bud, April 13, 2009 at 5:54 am Link to this comment
(Unregistered commenter)

Corporate greed is the overiding factor in this country.Exporting good paying jobs was the wave of the future a few years ago.That wave has now become a tsunami that is washing away the dreams of many americans.Maybe what should have occured when the first piece of production machinery was unbolted,and shipped abroad was a general strike.Now I fear it is too late for everyone!!

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By ff11, April 13, 2009 at 5:12 am Link to this comment
(Unregistered commenter)

The government did not sign the long term contracts that you speak of.  The blame could with the auto companies that promised to pay what they could not afford, and the unions that demanded more than could be paid in a sustainable way.  It could be the auto companies with poor designs, or workers with poor workmanship.

Whatever the cause, it is the auto companies and their work force that got us into this mess.  Blame them, not government which has come in to salvage something ... anything from the mess that the two sides have produced.  And don’t forget, the government is only there to prevent a total collapse which would leave Zero jobs, Zero pensions, and Zero value.

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By jackpine savage, April 13, 2009 at 4:51 am Link to this comment

It will be both ok and good to slash retiree benefits that had been promised years ago, cut jobs, and force pay cuts for those left with a job.  It will be ok and good because it will be done at the behest of Democrat who will make a nice speech about how the government will take care of people…and within a week those people will be forgotten about.

I haven’t read anything about how to make better cars in the government restructuring plan…the one being overseen by an investment banker.

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