Bush Leaning Towards "Orderly Bankruptcy"

[FordBuyer]

Bush considering "orderly" auto bankruptcy

White House considering "orderly" bankruptcy to deal with ailing automakers

Thursday December 18, 2008, 11:23 am EST WASHINGTON (AP) -- The Bush administration is seriously considering "orderly" bankruptcy as a way of dealing with the desperately ailing U.S. auto industry.

 

 

White House Press Secretary Dana Perino responds to a reporters question, Thursday, Dec. 18, 2008, during her daily briefing at the White House in Washington. (AP Photo/Ron Edmonds)

White House press secretary Dana Perino said Thursday, "There's an orderly way to do bankruptcies that provides for more of a soft landing. I think that's what we would be talking about."

 

President George W. Bush, asked about an auto rescue plan during an appearance before a private group, said he hadn't decided what he would do.

 

But he, like Perino, spoke of the idea of bankruptcies organized by the federal government as a possible way to go.

 

"Under normal circumstances, no question bankruptcy court is the best way to work through credit and debt and restructuring," he said. "These aren't normal circumstances. That's the problem."

 

At the White House, Perino said, "The president is not going to allow a disorderly collapse of the companies. A disorderly collapse would be something very chaotic that is a shock to the system."

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I think you have to assume Bush at best is only going to offer prepackaged bankruptcy. GM's best bet IMO is to try to hang in and wait for hopefully better deal from Obama. Chrysler may be better off with prepackaged bankruptcy, but I hope they can hang in too. Bush is not listening to auto industry or its defenders as expected.

[Michael Reynolds]

 

All the hand wringing that the American public has done over the auto bailout, and not word one on how the money spent to bail out AIG and Goldman Sachs is being utilized. I read something the other day that these companies are handing out bonuses!!!! Meanwhile the auto companies continue to suffer with no help at all whatsoever, and the attitude is too bad you dug yourself in.

 

I just don't get it, and Bush with all of his appologizing for the mess that we are in has yet to do something right.

[ironhorse]

As a life-long Republican,I'm the most disillusioned,disappointed and angry in my life with the party.

[grbeck]

I think you have to assume Bush at best is only going to offer prepackaged bankruptcy. GM's best bet IMO is to try to hang in and wait for hopefully better deal from Obama. Chrysler may be better off with prepackaged bankruptcy, but I hope they can hang in too. Bush is not listening to auto industry or its defenders as expected.

 

Obama isn't going to offer a better deal. If anything, I'll bet that he hopes that this deal goes through. It does the dirty, but necessary, work - a thorough restructuring that involves pruning divisions, dealers and workers - without getting his administration's hands dirty. He can tell the UAW, "Don't blame me - this was the Bush plan!" It's one less problem facing his administration.

 

Allowing them to reorganize under a government-approved, prepackaged bankruptcy is the only true solution. Any "loan" will never be repaid, because these companies are already bankrupt, it just isn't official. The "loans" that they had been seeking weren't nearly enough to make them viable companies. It would be flushing good money down the toilet. Obama knows this, and so do the Congressional Democrats.

Edited December 18, 2008 by grbeck

[grbeck]

 

All the hand wringing that the American public has done over the auto bailout, and not word one on how the money spent to bail out AIG and Goldman Sachs is being utilized. I read something the other day that these companies are handing out bonuses!!!! Meanwhile the auto companies continue to suffer with no help at all whatsoever, and the attitude is too bad you dug yourself in.

 

I just don't get it, and Bush with all of his appologizing for the mess that we are in has yet to do something right.

 

Maybe that's because we've learned our lesson...

 

And the collapse of the banking/financial sector would make the collapse of GM and Chrysler look like child's play.

Edited December 18, 2008 by grbeck

[Ralph Greene]

It is being reported on CNBC that the workers in the Chrysler plants being shut down will still be payed. Can someone confirm or deny that.

 

If true....that's one reason why they have to go into bankruptcy. They can't even control their labor costs. Bush....and I bet Obama also....will not rescue a company that pays workers when they don't work. So the Union contract will have to be broken....if story on CNBC is true.

[grbeck]

It is being reported on CNBC that the workers in the Chrysler plants being shut down will still be payed. Can someone confirm or deny that.

 

If true....that's one reason why they have to go into bankruptcy. They can't even control their labor costs. Bush....and I bet Obama also....will not rescue a company that pays workers when they don't work. So the Union contract will have to be broken....if story on CNBC is true.

 

It is my understanding that they first must apply for unemployment compensation, and the Jobs Bank money kicks in to supplement that benefit when it expires. If I recall correctly, unemployment compensation lasts for six months. Perhaps someone more familiar with how this works can better explain it.

 

But the Jobs Bank hasn't gone away, as the contract is still in effect, so, yes, Chrysler is still on the hook for their wages, depending on how long this shutdown lasts.

[FordBuyer]

Obama isn't going to offer a better deal. If anything, I'll bet that he hopes that this deal goes through. It does the dirty, but necessary, work - a thorough restructuring that involves pruning divisions, dealers and workers - without getting his administration's hands dirty. He can tell the UAW, "Don't blame me - this was the Bush plan!" It's one less problem facing his administration.

 

Allowing them to reorganize under a government-approved, prepackaged bankruptcy is the only true solution. Any "loan" will never be repaid, because these companies are already bankrupt, it just isn't official. The "loans" that they had been seeking weren't nearly enough to make them viable companies. It would be flushing good money down the toilet. Obama knows this, and so do the Congressional Democrats.

 

 

Seems easy for you to say. How come GM can't restructure without bankruptcy as union obviously is going to give up either way with very condtiional loans with tons of strings attached. That will be no picnic. Under bankruptcy, it makes it even more difficult to sell cars as the big B hangs over your head, and common shareholders lose everything. Even good chance that retirees could lose a lot also. No way GM takes this deal. Unacceptable. And no, Obama will not go along with this or Congressional Democrats. Only ones saying bankruptcy is fine are comservatives/laissez faire capitalisits. And of course Repugs from Southern right to work states. Obama knows who elected him and will not side with that group.

 

I would surmise both GM and Chrysler are shutting down because they got feeling that Bush was using delaying tactics to slowly move to prepackaged bankruptcy. Customers are scared to buy GM or Chrysler now with just thought of bankruptcy. The auto industry needs loans and incentives for Americans to buy cars again.

[probeGT]

As a life-long Republican,I'm the most disillusioned,disappointed and angry in my life with the party.

 

 

Hmmmm. . . .what's changed about them?

[one2gamble]

Maybe that's because we've learned our lesson...

 

And the collapse of the banking/financial sector would make the collapse of GM and Chrysler look like child's play.

 

*cough* a full on collapse would have never happened *cough*

[Gnostic]

Seems easy for you to say. How come GM can't restructure without bankruptcy as union obviously is going to give up either way with very condtiional loans with tons of strings attached. That will be no picnic. Under bankruptcy, it makes it even more difficult to sell cars as the big B hangs over your head, and common shareholders lose everything. Even good chance that retirees could lose a lot also. No way GM takes this deal. Unacceptable. And no, Obama will not go along with this or Congressional Democrats. Only ones saying bankruptcy is fine are comservatives/laissez faire capitalisits. And of course Repugs from Southern right to work states. Obama knows who elected him and will not side with that group.

 

I would surmise both GM and Chrysler are shutting down because they got feeling that Bush was using delaying tactics to slowly move to prepackaged bankruptcy. Customers are scared to buy GM or Chrysler now with just thought of bankruptcy. The auto industry needs loans and incentives for Americans to buy cars again.

 

 

Wait a minute your saying they should not take the deal. So you suggest they run just out of money and then go bankrupt. good plan.

[FordBuyer]

Wait a minute your saying they should not take the deal. So you suggest they run just out of money and then go bankrupt. good plan.

 

I would bet that the UAW would be willing to give up their pay for a month in order to get to January 20 and new Congress meets a week before that voting on new stimulus plan. Shut the fricking place down and wait for Obama. Bush is a lost cause. The final image of Bush is shoe coming at his head. That is summary of his time in White House. I'm tired of his bullshit.

[Michael Reynolds]

Maybe that's because we've learned our lesson...

 

And the collapse of the banking/financial sector would make the collapse of GM and Chrysler look like child's play.

 

That quickly, that's giving way too much credit when it isn't due. It has less to do about that and more to do about catering to your 'buddies'.

[Michael Reynolds]

Seriously though should I feel sorry for the financial sector and those that created this mess because everyone wanted to live the American dream, with mortgages that they couldn't afford and the usage of their homes as a piggy bank?

 

Seriously that is what annoys me to no end. I love how everyone gets on TV, blogs, writes, or whatever about how the auto companies dug themselves into this hole. As if they are innocent and did not contribute to the crisis at hand.

[Versa-Tech]

As a life-long Republican,I'm the most disillusioned,disappointed and angry in my life with the party.

That's your fault for subscribing to partisan politics. You, like most Americans, gave them the power to piss you off. Deal with it. The mistake is yours as much as it is theirs.

[156n3rd]

Forgive me for not giving a darn about anything GWB intends to do. It's too late to blame anyone now, though. It's gonna have to be fixed. the union has positioned itself very closely to what happened to Bethlehem Steel in Bethlehem, Pa. bck in '95. Both the company and the union allowed the Steel to die, and now it may happen again in the auto industry. I have voted for many candidates over the years from all parties. No one hass a clue right now. For as much as used to admire nancy Pelosi, I think she has had it too easy all her life, just like GW. These people are clueless to the needs of everyone out of their class. It is a bag full of shit and it all needs to be flushed.

[TStag]

Supposing that warranties were to be upheld during a chapter 11 filing through this "organised bailout". Then what is actually wrong with an "organised bailout"? Doesn't the UAW get shafted in such a scenario, the car makers reduced their costs and the future looks rosier? Can someone explain why an "organised ch11" is a bad thing?

 

If a bailout happened instead then how much would it cost to see the big 3 through the financial crisis? Are the big 3 as some suggest a bottomless pit because they carry so much debt? Or could they take on even bigger debts and still survive?

[F150 Man]

As a life-long Republican,I'm the most disillusioned,disappointed and angry in my life with the party.

 

I bet as a kid, GWB enjoyed pulling the wings off flies... Now he is simply using his signature "water-board" technique on GM & Chrysler to inflict a huge amount of pain and suffering. Its anybodies guess about the purpose of the end game. To suggest an orderly bankruptcy at this point, after the weeks of industry testimony and feedback from experts, reflects a lack of understanding and rational thinking.

 

His banking buddies all got a free pass when it came to bailouts, without any real investigation as to what really happened or why they were required. I hope every Republican reader makes a sound financial accounting of what this administration has cost them personally for the past eight years.

Edited December 18, 2008 by F150 Man

[Ralph Greene]

Supposing that warranties were to be upheld during a chapter 11 filing through this "organised bailout". Then what is actually wrong with an "organised bailout"? Doesn't the UAW get shafted in such a scenario, the car makers reduced their costs and the future looks rosier? Can someone explain why an "organised ch11" is a bad thing?

 

If a bailout happened instead then how much would it cost to see the big 3 through the financial crisis? Are the big 3 as some suggest a bottomless pit because they carry so much debt? Or could they take on even bigger debts and still survive?

 

In a sales invironment of about 2/3 of a couple years ago, the members of congress against an auto bailout believe Detroit can't be saved without bankruptcy. They believe the companies cannot compete with their current business model....especially GM and Chrysler. They believe the companies have too much expensive capacity, too many dealerships to be supported, to many competing car lines, and way too generous a wage contract with UAW....which includes a lot more than just hourly wage rate. In bankruptcy you could change much of that with stroke of a pen. Also....some recent polls suggest Americans would buy a vehicle from an auto company in a Government back bankruptcy.

[NickF1011]

Also....some recent polls suggest Americans would buy a vehicle from an auto company in a Government back bankruptcy.

 

I certainly wouldn't want to rely on those polls if I was GM or Chrysler. Their volumes would take a huge hit, regardless of what polls say.

[Michael Reynolds]

In a sales invironment of about 2/3 of a couple years ago, the members of congress against an auto bailout believe Detroit can't be saved without bankruptcy. They believe the companies cannot compete with their current business model....especially GM and Chrysler. They believe the companies have too much expensive capacity, too many dealerships to be supported, to many competing car lines, and way too generous a wage contract with UAW....which includes a lot more than just hourly wage rate. In bankruptcy you could change much of that with stroke of a pen. Also....some recent polls suggest Americans would buy a vehicle from an auto company in a Government back bankruptcy.

 

Suggests, but will that actually be the case?

[F150 Man]

Also....some recent polls suggest Americans would buy a vehicle from an auto company in a Government back bankruptcy.

 

Can you say, "Bullshit"? Make no mistake, we are ALL on thin ice, once we break through, there will be many who will not survive. Most of you 'chapter 11' supporters don't have any skin in the game. I have been in the business for 32 years and stand to lose a significant piece.

 

I can understand why those on the sidelines have no concern for those in the fight, but remember on thing: It was many previous generations that paved the way for you new comers. I will survive; however, you might be well advised to think ahead about your golden years and retirement.

 

You can pick up the pieces, but you can't put it back together.

[FordBuyer]

Can you say, "Bullshit"? Make no mistake, we are ALL on thin ice, once we break through, there will be many who will not survive. Most of you 'chapter 11' supporters don't have any skin in the game. I have been in the business for 32 years and stand to lose a significant piece.

 

I can understand why those on the sidelines have no concern for those in the fight, but remember on thing: It was many previous generations that paved the way for you new comers. I will survive; however, you might be well advised to think ahead about your golden years and retirement.

 

You can pick up the pieces, but you can't put it back together.

 

Well said. The Domestics didn't come to Washington and endure all that bulllshit grandstanding to end up in bankruptcy "managed" or not. A deal was struck that Bush would have supposedly gone along with. Basically, what Bush is saying right now is that he now does not support the original bill that he said he supported and now wants "managed" bankruptcy. So we are basically back to square ONE after all after two months of stress and worry. Back to nothing. The stock market caves in when bankruptcy is even mentioned like it is now with Ford and GM down over 10% soon as bankruptcy and no loan is even mentioned. Investors know what that means. The shareholders get screwed and retirees will probably have to get a law firm. This uncertainty AGAIN is killing the economy. All Bush has to say is loan is on its way for sure and we are just crossing the t's and dotting the i"s. But no, Bush would rather dink around and torture two iconic American companies that have done 1 million more good things for America than he has.

[grbeck]

Seems easy for you to say. How come GM can't restructure without bankruptcy as union obviously is going to give up either way with very condtiional loans with tons of strings attached. That will be no picnic. Under bankruptcy, it makes it even more difficult to sell cars as the big B hangs over your head, and common shareholders lose everything. Even good chance that retirees could lose a lot also. No way GM takes this deal. Unacceptable. And no, Obama will not go along with this or Congressional Democrats. Only ones saying bankruptcy is fine are comservatives/laissez faire capitalisits. And of course Repugs from Southern right to work states. Obama knows who elected him and will not side with that group.

 

I would surmise both GM and Chrysler are shutting down because they got feeling that Bush was using delaying tactics to slowly move to prepackaged bankruptcy. Customers are scared to buy GM or Chrysler now with just thought of bankruptcy. The auto industry needs loans and incentives for Americans to buy cars again.

 

It's easy for me to say because it's the truth. And the ones who are saying that a prepackaged bankruptcy is the best way to deal with this include people who actually understand business and the auto industry, which appears to exclude the UAW and present management.

 

The simple fact is that GM and Chrysler are not sustainable in their present form. Giving them government aid only prolongs the agony. They have failed as businesses; it's time to accept this and move on.

 

GM and Chrysler have been heading for bankruptcy for years. So was Ford, but William Clay Ford saw the handwriting on the wall. He changed what he could, brought in an outsider to bring a desperately needed new perspective and really clean house, and then went to Wall Street with a VIABLE restructuring and business plan and got the money needed to implement it.

 

GM, meanwhile thought it would be saved by a few new models and more cost-cutting. Well, that didn't work, now did it?

 

Customers were doing a pretty good job of avoiding GM and Chrysler dealerships BEFORE the credit bubble burst. GM and Chrysler were surviving on sales to customers who really shouldn't have bought new cars but received the loans anyway (which contributed to the current mess), and dumping excess production on rental car companies. That wasn't a viable strategy. They were losing money hand-over-fist before this year's sales plunge.

 

Of course, we could give GM more money and allow its management do more of the same. I can't wait to see the Chevrolet Aveo rebadged as the Buick Special. Or have Bob Lutz import some Australian or European model, hail it as the next big thing, and then watch it flop because GM couldn't afford to properly promote it, while exchange rates made each sale unprofitable anyway.

Edited December 18, 2008 by grbeck

[grbeck]

Can you say, "Bullshit"? Make no mistake, we are ALL on thin ice, once we break through, there will be many who will not survive. Most of you 'chapter 11' supporters don't have any skin in the game. I have been in the business for 32 years and stand to lose a significant piece.

 

I can understand why those on the sidelines have no concern for those in the fight, but remember on thing: It was many previous generations that paved the way for you new comers. I will survive; however, you might be well advised to think ahead about your golden years and retirement.

 

You can pick up the pieces, but you can't put it back together.

 

Most people I know drive cars, so they have "skin in the game." The problem is that many of them lost their shirts buying subpar domestic products, switched, and have no desire to go back. If they wanted to help out the domestics, they'd buy a new vehicle from them. They aren't, so there is your answer regarding the depth of their concern.

 

If anything, the feedback I've been getting from friends and family is "If this (bailout) goes through, I will definitely NEVER buy another domestic car again." This is what happens when a company regularly burns a large percentage of customers for 30 or so years...you wouldn't believe the reaction when I tell people we have a Ford.