Bailout Watch 385: The Weaseling Begins

The Detroit News reports that GM and Chrysler are working furiously behind the scenes to extend the March 31 government deadline re: meeting the conditions of their $13.4b bridge loan to nowhere bailout buffet. Surprise! The American automakers’ inability to take responsibility for their actions may be true-to-form, but that doesn’t make it any less nauseating. Nor does the News’ coverage of the company’s weaseling, which put the “sick” in “sycophancy.” The only satisfaction to be had from this lede is the use of the word “scurrying.”

As General Motors Corp. and Chrysler LLC are scurrying to put the finishing touches on their restructuring plans due next Tuesday to the Treasury, finance and auto industry experts say submitting plans is one thing, but getting bondholders and all other parties involved in a massive restructuring to agree to those plans by the March 31 deadline seems unrealistic.

Pass the Alka Seltzer, here we go . . .

“I wouldn’t be surprised if the timetable got extended, because clearly the original plan was a temporary fix,” said Mark Oline, a Fitch Ratings analyst in Chicago. “It was going to be up to the new Congress and Administration to put in a longer-term solution.

Auto analysts and bankruptcy lawyers say the deadline set out in the federal bailout of the automakers is too ambitious to get bondholders on board in just a few more weeks. They say GM in particular needs an extension to avoid being forced into bankruptcy if it can’t show progress on its assignment to cut $27.5 billion of unsecured debt down to about $9.2 billion by the end of March.

So Detroit-friendly analysts are in the tank for Chrysler and GM. Surprise! Well here’s something worth considering: if there’s no “real” deadline, why should any of GM’s bondholders negotiate? They already crossed that bridge to nowhere during the GMAC debacle, when the feds ignored their own deadline and conditions for the then-lender’s (i.e., not bank) debt-for-equity swap, and dumped in $6b instead. Do you think GM and Chrysler bondholders didn’t learn that lesson? Cough. Pimco. Cough. And so GM CEO Rick Wagoner is down in DC doing what he does best [hint: it’s not building profitable vehicles].

GM’s Wagoner is working to smooth the reception of its plan with a series of meetings in Washington today, including one with the new chairman of the House Energy and Commerce Committee, Rep. Henry Waxman, D-Calif.

And the automaker is banking on the fact the loan agreements only require “commencement” of the exchange and not completion.

“So you have time. It’s not like everything is going to be done and buttoned up,” GM Chief Operating Officer Fritz Henderson said to reporters in January. “But we have to have preliminary plans by that time.”

Note to the DetN and our elected representatives: a plan to have a plan is not a plan. Not really. Not if you think about it.