Executives at GM and Chrysler have each held private discussions on a possible pre-arranged bankruptcy for their companies. The two automakers are said to be considering the option as a measure of last resort to secure badly needed funding from the US government. The automakers would much rather get the bailout without having to resort to bankruptcy, fearing a bankruptcy will completely drive away their customers. But lawmakers in the US Congress, and the current Bush administration, have shown themselves very skeptical of a bailout for the US auto industry and have demanded to see detailed restructuring plans from each automaker as a condition for aid.

GM is very quickly running out of cash. CEO Rick Wagoner told the Congress in testimony today that his company needs 4 billion dollars before the end of the month and another 4 billion in January just to stay afloat. Chrysler is also in dire need of cash. Ford is fairing the best of the three. It has asked for a 9 billion US dollar line of credit as its part of the bailout package but says it may not need to tap it, depending on market conditions in 2009. But Ford CEO Alan Mulally says the industry desperately needs the bailout and that if GM collapses, it may take down his company too.

"The collapse of one or both of our domestic competitors would threaten Ford because we have 80 percent overlap in supplier networks and nearly 25 percent of Ford's top dealers also own GM and Chrysler franchises," Mulally said in Congressional testimony today, as reported by Bloomberg. But many Republican lawmakers remain opposed to a bailout. Alabama Senator Richard Shelby said the automakers' plans were not serious and had "few concrete details." "If you made this presentation to get a bank loan I suspect that any sensible banker would summarily reject your request," Shelby said, as quoted in the Bloomberg story.

In other testimony, chief economist of Economy.com, a Moody's Corp. website, Mark Zandi, said that automakers would need a lot more than the 34 billion on the table right now. "They would ultimately need 75 billion (US) to $125 billion to avoid this fate [of collapse]," Zandi told the Congressional panel.

 

This to me is the most telling part of this article. If megabillion $$$ companies that are so interwoven to each other and our economic survival can't even get basic business principles down, where does that leave us.

 

good. I hope they fail. I'd rather they fail now, and pay the economic consequences today, than bail them out, and try to build our economy on a house of cards.

 

Don't forget though that Shelby is in AL a state that has 3 or 4 foreign auto plants.

The senators and reps are doing an awful lot of grandstanding on this issue. Apparently unaware of how some of their idiotic regulations helped put the US automakers in this situation.

Not absolving the Big Three....but living here in SE Michigan, I do not want to see these 3 companies fail. We can give AIG and CITI Billions without any sort of hearings, but when it comes to the automakers, we have to dress them down.

The hypocrisy of the government is laughable....

 

Something’s got to give...
All three cannot come out of this, one will have to fall and most likely it will be Chrysler.
Benz could not turn it around and was very lucky to get it off its books for 7 odd Billion, and I don’t think any privet equity firm will succeed

 

I think Chapter 11 is the best, and quite frankly, the only answer. Restructuring under Chapter 11 gives them complete latitude to work around the UAW and pension liability issues, if I'm not mistaking. Giving them ANY money in their current condition makes no sense. I believe they are burning $7.5MM/day. There doesn't seem to be any possible way they can survive without drastic and immediate restructuring.

 

I don't understand the hate for GM yet support for a bailout of Citi 20x the size is somehow ok.