Bush Considers “Orderly” Bankruptcy for Chrysler, GM
On the same day that Chrysler announced that it would close down all U.S. factory production for at least 30 days, the White House announced that President George W. Bush and Treasury Secretary Henry Paulson were considering an “orderly” bankruptcy for Chrysler and General Motors. Both companies are seeking billions of dollars in bailout money to avoid having to shut down production longer than the normal two-week holiday break that is scheduled for most years.
Bankruptcy would be one part of an larger rescue package for the companies, part of the “Big Three” American automakers. Ford has announced that they are no longer seeking bailout money or participation in other rescue package.
In order to file for bankruptcy, The New York Times reports that the deal would require concessions from the United Auto Workers union, suppliers, banks, the federal pension board and others.
If the companies filed for Chapter 11 bankruptcy protection, the government would provide enough money for the two companies to operate for several months. Major banks would provide debtor-in-possession financing so that the companies could continue to fuction while under bankruptcy. The cash from the federal government would only be used as a backup, for security.
”I will tell you this: the president is not going to allow a disorderly collapse of the companies,” said Dana Perino, President Bush’s spokeswoman. “Disorderly collapse would be something very chaotic that is a shock to a system. 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. That would be one of the options.”
Perino also stressed that no deal has been struck and there was no indication as to the timeline of such a deal.