Bush Considers "Orderly'' Auto Bankruptcy

But President Has Yet To Decide On Solution; GM Denies Chrysler Merger Talks

(CBS/ AP)  The Bush administration is looking at "orderly" bankruptcy as a possible way to deal with the desperately ailing U.S. auto industry, the White House said Thursday as carmakers readied more plant closings and a half million Americans filed new jobless claims.

With General Motors, Chrysler and the rest of Detroit anxiously holding its breath and waiting for a federal rescue, White House press secretary Dana Perino said, "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 bailout, said he hadn't decided what he would do but didn't want to leave a mess for Barack Obama who takes office a month from Saturday.

Bush, like Perino, spoke of the idea of bankruptcies orchestrated by the federal government as a possible way to go — without committing to it.

"Under normal circumstances, no question bankruptcy court is the best way to work through credit and debt and restructuring," he said during a speech and question-and-answer session at the American Enterprise Institute, a conservative Washington think tank. "These aren't normal circumstances. That's the problem."

Perino said the White House was "very close" to a decision — though she wouldn't give a timetable. She emphasized there were still several possible approaches to assisting the automakers, including short-term loans from the Treasury Department's $700 billion Wall Street bailout program.

The Big Three automakers said anew that bankruptcy wasn't the answer, as did an official of the United Auto Workers who called the idea unworkable and even dangerous. General Motors shot down reports of a possible merger with Chrysler as they insist their focus is on their own turnaround plan, reports CBS News correspondent Jeff Gilbert

"Adding Chrysler's problems to General Motor's own problems adds a level of complexity that would make things a bit riskier for GM and I think they understand that," IHS Global Insight analyst Aaron Bragman told CBS News.

House Speaker Nancy Pelosi said on Capitol Hill that grim new unemployment data heightened the urgency for the administration "to prevent the imminent insolvency of the domestic auto industry."

The California Democrat said Bush has the legal authority to act now, and should attach the accountability standards that were included in a $14 billion House-passed and Bush-supported carmaker bailout that died in the Senate last week. That plan would have given the government, through a Bush-appointed "car czar," veto power over major business decisions at any auto company that received federal loans.

Pelosi spoke after the government announced that initial claims for unemployment benefits totaled a seasonally adjusted 554,000 last week.

The comments in Washington came a day after Chrysler LLC announced it was closing all its North American manufacturing plants for at least a month as it, GM and Ford Motor Co. await word on government action. General Motors also has been closing plants, and it and Chrysler have said they might not have enough money to pay their bills in a matter of weeks.

Prices of GM and Ford stocks were down sharply Thursday after the remarks out of the White House. Ford, unlike General Motors and Chrysler, is not seeking billions in federal bailout loans, but a collapse of the other two could hurt Ford as well.

Alan Reuther, the United Auto Workers' legislative director, said the union urged the administration during a meeting this week to follow the provisions included in the House-passed auto aid bill.

Congressional aides in both parties who have been closely following the discussions suggested the talk of bankruptcy could be a tactic to extract more hefty concessions from the companies and union in exchange for granting short-term loans from Treasury's financial industry rescue fund.

Perino said one factor preventing an announcement of action by the administration is that discussions continue with the various sides that would have to sign on to a managed bankruptcy — entities such as labor and equity holders in addition to the companies themselves.

A senior administration official said the talks between Bush officials and the Big Three and their stakeholders amount to information-gathering, not negotiating.

The White House has repeatedly emphasized its opposition to "disorderly bankruptcy" — presumably a Chapter 7 filing that would effectively shut down a company and require liquidation of assets. That has left on the table the possibility of forcing one or more automakers into a Chapter 11 bankruptcy, which allows a firm to keep operating while under a court's purview.

Harlan Platt, who teaches corporate turnarounds at Northeastern University in Boston, said the government may be waiting for an offer of an ownership stake in the companies, much as it received in return for capital plowed into banks. "You really have to ask the question: If this is good enough for Wall Street, why isn't it good enough for Detroit?" he said.

On Thursday, spokesmen for Chrysler, GM and Ford generally referred to their previous comments that bankruptcy was not a workable solution. The car companies argue that no one would buy a vehicle from a bankrupt company for fear that the company might not be around to honor warranties.

"We continue to work with the administration to find a solution to this liquidity crisis," said GM spokesman Tony Cervone.

Chrysler spokeswoman Shawn Morgan noted previous statements against bankruptcy by CEO Robert Nardelli. Financing for even a prepackaged bankruptcy would be difficult to get in the current tight credit market, Chrysler has said.

The National Automobile Dealers Association also spoke out against bankruptcy for car companies "in any way shape or form, orderly or disorderly, prepackaged or unpackaged, managed or unmanaged," said spokesman Bailey Wood.

Bush said the auto industry is "obviously very fragile" and he is worried about what an out-and-out collapse without Washington involvement "would do to the psychology" of the markets.

"There still is a lot of uncertainty," he said.

At the same time, the president said anew that he is worried about "putting good money after bad," meaning taxpayer dollars shouldn't be used to prop up companies that can't survive the long term.

He revealed one other consideration — that Obama will become president in just over a month.

"I thought about what it would be like for me to become president during this period. I believe that good policy is not to dump him a major catastrophe on his first day in office," Bush said.

[holy-joe-722]

What?? and bankrupt what little is left of this nation??. I think not. After the GOP stole the country blind, put trillions into deficit and destroyed the credibility of this once great country. Posted by blitzder at 09:13 AM : Dec 19, 2008

Explain to me once again how we went from Trillions in debt because of Regan/Bush-41, and then misteriously, Clinton gave us a surplus in time for re-election, just to have it return with Bush-43.

Slick Willy was the king of lies. There never was a surplus. He was just playing the shell game with our money and in the end, just like in all shell games, we lost.

[holy-joe-722]

Until the Automakers AND the UAW realize that they are rapidly approaching the point of no return, neither side will probably not make the necessary changes and concessions to make any bailout, bridge loan, or restructuring work in the long term. Both sides need to realize that we are not in the same world we were in back in the 50''s and 60''s when American cars were king of the hill and we didn''t have competition. They need to take lessons from the foreign makers and offer fewer selections and fewer option packages. It''s not time to go back to "You can have it in any color as long as it''s black" but we''re heading that direction.

[jsd330]

Did we forget the HUMMER became the most popular civilian vechical on BILL CLINTON''S WATCH ??
posted by txgrouch2008
Yeah and who was the first one to actually get the civilian model that made it popular? The Governator (Arnold Schawartzenhager) And you wonder why California is broke.

[perk235]

US Dollar went down 10% against the major world currencies in the last two weeks. Bernanke was not kidding when he said he would drive in a helicopter around the country dropping dollars on us in order to "save"our economy. Feds are determined to drive our currency into the ground.....
Posted by Hackerpc at 09:09 AM : Dec 19, 2008
---------

A low dollar cheapens our debt and we''re drowning in debt.

[blitzder]

By the next election, the public will be CLAMORING FOR THE GOP TO COME BACK and rescue the nation from the sleazy Democrats.---------Posted by txgrouch2008 at 09:06 AM : Dec 19, 2008.

What?? and bankrupt what little is left of this nation??. I think not. After the GOP stole the country blind, put trillions into deficit and destroyed the credibility of this once great country.

Wake up from your dreamy, corrupt thoughts. ITS GOODBYE FOR THE NEXT 25 YEARS. Stay on the sidelines and dream. LOSER.

[perk235]

In the case of Chrysler, Chrysler is owned by Cerberus Capital Management, NYC. Cerberus is a multi billion dollar company with assets worldwide. They are betting that the taxpayer will come to the aid of Chrysler so they will not have to risk more of their money. This aspect has not been discussed enough in the media and the Congress.
Posted by ramos937 at 03:58 AM : Dec 19, 2008
--------------
Yes, and Dan Quayle is a Chairman of Global Investments at Cerberus. He''d be happy to shift the UAW work overseas.

[iowa0319]

President George W. Bush, asked about an auto bailout, said he hadn''t decided what he would do but didn''t want to leave a mess for Barack Obama who takes office a month from Saturday.

IS HE KIDDING OR WHAT? DOESN''T HE KNOW ABOUT THE MESS HE''S ALREADY CREATED?

[jtdev1]

Once again it''s passing the cost of a failed buisness down to the little guy.

When the Big3 finally file bankruptcy, they no longer have to pay the bills they owe to the smaller companies, thus the smaller companies have to take the hit and layoff their employees and possibly go bankrupt themselves.

Orderly bankruptcy means each company will fail in order of largest to smallest all the way down to the individual employee...

Great Plan!

[debinok1]

This is the best option for everyone, if the companies cant be restructured then they will be liquidated, Ford has already said it can survive a restructure, whether or not GM and Chrysler can remains to be seen. Regardless it wont be falling on the backs of the taxpayers, If they survive a restructure and they choose to re-establish the unions in those plants that is their choice. However in my opinion it would make more financial sense not to.

[hitoyou11]

Can we bail out the Toy Stores that are going down? They need some help. Come on, all you who like giving tax payer maoney away. You don''t work, sorry, you don''t get paid by the toy companies, so you don''t care. Just like a UAW person.

[hitoyou11]

Did we forget that during his administration Bushy-Boy gave tax breaks to encourage buying SUV''''s? Detroit went bankrupt because the Republican values took them there!


--------------------------------------------------------------------------------

Posted by Puritan9


Talk about BS. This person must be the head of the UAW, and not want anyone to know it. Why don''t you blame it on GOD. The ones to blame are THE SCUM BAG UAW.

[hitoyou11]

Just close them down. That way we do away with the UAW. Which we need to do. All this BS about what they have done. Yes they have done a lot.
1 Make wage way to high.
2 Run job out of the U.S.
3 Run the Automakers out of the U.S.
4 DON''T WORK, JUST GET A CHECK.
6 The Tax Payer can pay me. Ask for a bailout, I don''t want to have to go to work to get paid.
5 Cry every time you don''t get your own way.
And on, oand on.
They have done a lot. To run U.S. Companies out of the U.S.

[fedupman]

The Big Three automakers are forced to pay 85 to 95 percent of union wages and benefits to members of the United Auto Workers union who aren%u2019t working %u2013 even if their plants have been closed.%u201D

that%u2019s the contract they negotiated way back when GM caved to avoid a strike.his one isn%u2019t purely the unions fault, the management
was idiotic to agree to a %u201Cjobs bank%u201D in the first place.

[fedupman]

The Big Three automakers are forced to pay 85 to 95 percent of union wages and benefits to members of the United Auto Workers union who aren%u2019t working %u2013 even if their plants have been closed.%u201D

that%u2019s the contract they negotiated way back when GM caved to avoid a strike.

[fedupman]

I have a friend who worked for GM in Arlington for years. During occasional "down times", she continued to receive about 85% of her salary AND was reimbursed for any schooling she sought during those lay offs. Instead of taking something worthwhile, she took doll making and once, cake decorating.

[woodjd42]

This is the first and propably only, thing that I would agree with bush on. One right decission in eight years, what a record.

[ramos937]

General Motors also has been closing plants, and it and Chrysler have said they might not have enough money to pay their bills in a matter of weeks.
----------------------------------
I am a small business owner. When I make a good decision, I benefit. When I make a wrong decision, I expect to deal with the consequences with no help from the government. This is an excellent system.

In the case of Chrysler, Chrysler is owned by Cerberus Capital Management, NYC. Cerberus is a multi billion dollar company with assets worldwide. They are betting that the taxpayer will come to the aid of Chrysler so they will not have to risk more of their money. This aspect has not been discussed enough in the media and the Congress.

[perk235]

"I thought about what it would be like for me to become president during this period. I believe that good policy is not to dump him a major catastrophe on his first day in office," Bush said.


Bush still doesn''t get it. We already have a major catastrophe even before the Auto companies file for bankruptcy protection. $60 TRILLION IN DEREGULATED DERIVATIVES.

This quote is Katrina all over again.

[puritan9]

Did we forget that during his administration Bushy-Boy gave tax breaks to encourage buying SUV''s? Detroit went bankrupt because the Republican values took them there!

[edward1975-2009]

This is exactly what Detroit feared, going through bankruptcy, they didn''t want someone appointed by the court, to come in and streamline their perk filled existence and to make the necessary cuts in salaries. With GM doing so poorly why does the top CEO pull in a 35 million a yr salary, 25 million for Ford, and the only reasonable one out of the bunch, Chrysler at 2 million. This is what should have been done from day one, not give them a handout from the taxpayers.