Bailout Watch 177: Big Mo Grows for GM C11

Today’s New York Times’ story on GM’s travails begins by highlighting the bailout bullet train– and then switches track. “Momentum is building in Washington for a rescue package for the auto industry to head off a possible bankruptcy filing by General Motors, which is rapidly running low on cash. But not everyone agrees that a Chapter 11 filing by G.M. would be the disaster that many fear. Some experts note that while bankruptcy would be painful, it may be preferable to a government bailout that may only delay, at considerable cost, the wrenching but necessary steps G.M. needs to take to become a stronger, leaner company.” Yes, it’s GM CEO Rick Wagoner’s worst nightmare: as TTAC predicted, momentum is growing for a GM C11. Obviously, any such suggestion depends on GM continuing to do business post-bankruptcy. And that’s a bridge [loan] too far for most MSM pundits.

“A study of 6,000 consumers last summer by CNW Marketing found that 80 percent of them said they would switch companies if G.M. or Ford filed for bankruptcy protection in the United States,” The Times dutifully reports. “Suggesting that only G.M. loyalists would stand by the automaker.” Anyone want to guess who sponsored that study? (“Clients include major automobile manufacturers, banks and lending institutions, Wall Street brokerage firms and consultants.”) Or what questions were asked? ‘Cause guesses is all we got.

Time has its own take on the Gray Lady’s C11 postulating piece. “Is General Motors Worth Saving?” the headline asks. Granted, reading the piece reveals that it’s a rhetorical question. Writer Eddie Guy is Motown’s kinda guy, arraying the usual suspects in defense of Detroit’s claim on the public purse. Still, his concluding ‘graph grabs you by goolies.

“If that’s ultimately where Detroit ends up, is it worth the price to get there? Put another way, does GM deserve to be bailed out or left at the mercy of the market and almost certain death? “The University of Chicago training in me says the market should prevail,” says Schrager. “But the Chrysler bailout was a success, and, gosh, I’d love to save it.” That sentiment is not shared by everyone, and it goes to the heart of the central economic debate facing the country — between hard-nosed capitalists, who believe the market should decide, and public-policy types who view the economy as something far more organic than a balance sheet.”

CNNMoney is firmly in the sway of the anti-C11 GM camp, as indicated by the headline of its polemic: “Why GM can’t survive bankruptcy.” In fact, Chris Isidore is ready to call it a day by paragraph three: “The bottom line: Unlike the experience of United, Delta and Northwest airlines, a GM bankruptcy could spell a quick end to the company’s operations.” GM, Isidore reckons, couldn’t get post C-11 debtor-in-possession (DIP) financing. So that’s that.

Most experts, even some of those who believe that GM would ultimately be able to find the financing it needs, agree that there is far less DIP financing available today because of the credit crisis. “A year ago we had 30 DIP lenders; you could count on about 20 of them showing up in any big case. It was a buyer’s market from a debtor’s perspective,” said Jack Williams, a bankruptcy law professor at Georgia State University and an ABI resident scholar. “Now we have three or four, maybe five, and they’re all very careful.”

I just got off the blower with Chris. The CNN scribe simply doesn’t believe GM could survive a C11– even if the U.S. government provided the required DIP (which he admits would be an elegant solution for Democrats: they screwed-it-up, we saved them). “The only people who will benefit from a GM C11 will be the lawyers and accountants,” Isidore says.

If Barney Frank’s bailout machinations don’t deliver Detroit’s desired result, we’re about to find out if he’s right. Meanwhile, the battle is joined.