Bailout Watch 232: There Will Be Bankruptcies. Or Not.

Edward Niedermeyer
by Edward Niedermeyer

Bloomberg reports that Obama’s transition team is exploring the possibility of prepackaged bankruptcies as a solution to the dire situation the Detroit Three find themselves in. According to an anonymous source, Obama’s team has already contacted at least one bankruptcy- law firm to say that Daniel Tarullo, a professor at Georgetown University’s law school who heads Obama’s economic policy working group, would call to discuss the workings of a so-called prepack. And as the worm turns on the idea of a bridge loan, a prepackaged bankruptcy seems to be about where the middle ground shakes out to. So is Obama leading to the middle? Not openly, at least not yet. “That’s not true,” a spokesman for Obama’s transition team tells Automotive News [sub] of the Bloomberg report. So then is the story that Obama’s not exploring all the options? Or he is, but doesn’t want it publicized? From the sound of things at recent congressional beggary testimony, none of the D3 are willing to consider the possibility of bankruptcy of any kind. But if the their turnaround plans, due to Congress by December 2, aren’t convincing enough there will be bankruptcies. And not neat, pretty prepacks. Time to face the strange?

Edward Niedermeyer
Edward Niedermeyer

More by Edward Niedermeyer

Join the conversation
4 of 12 comments
  • Cdnsfan27 Cdnsfan27 on Nov 21, 2008

    I agree with John. People are not buying GM vehicles because of the uncertain future of the company and their inability to get financing. A C11 GM would be able to cut cost and prices, clear the decks, and reorganize. Get rid of the fear of the worst-case scenario and customers will slowly come back.

  • Autonut Autonut on Nov 21, 2008

    Oi, no lawyers, please. The first 25 billions goes there. Then we will be talking what to do with retards from Detroit. I am ready to compromise. We know that government will pay unions and their plebes. Lets give them salaries till end of their careers and then they can retire. Management already took care of themselves. This is the cheapest solution I can come up with. Even if we pay union members to end of their natural life, it will be much cheaper for us, then them manufacturing the crap they manufacture.

  • MikeInCanada MikeInCanada on Nov 21, 2008

    With all this talk about Bankruptcy as being a panacea, don't forget that the Big 2.8 could very well F' that up too. Success is not guaranteed. Let's not kid ourselves, there is a pretty good chance that they will not change their fundamental business model, just cut off the union and creditors at the knees. For a recent example United Airlines comes to mind. They did not shake out enough costs and stuck to the same old business models - and they're still struggling.

  • AG AG on Nov 21, 2008

    'Survival not guaranteed' Sounds like a ytmnd. This is why I took Bankruptcy Law class last semester...sadly Chapter 11 wasn't my strong suit.