Auto Maker Bankruptcies Creep Closer
The market indices are down already over 3.5% this morning as the auto makers are expected to submit their latest viability plans by 5:00 PM EST. The problem is that there have been no finalized concessions from either the debt holders or the UAW and the plan isn’t finished.
That begs but one question, bankruptcy inevitable? The Obama Administration has already told the auto makers to include bankruptcy protection under there plans so it is very plausible.
With Obama’s newly announced auto maker oversight team (the one car czar idea flopped in favor of a full team) the auto makers are under much more pressure to make concessions. But perhaps it is too little, too late.
From today’s WSJ:
Troubled U.S. auto makers and union representatives dug in late Monday for all-night cost-cutting negotiations as the government advanced its point person on auto restructuring, a former investment banker with a record for demanding harsh concessions from manufacturers, unions and investors alike.
General Motors Corp. (GM) and Chrysler LLC are required to submit recovery plans to the government on Tuesday as part of their agreement to receive billions of dollars in federal loans. As the government’s auto-industry task force began to take shape ahead of the deadline, President Barack Obama’s administration appeared to be turning up the pressure on GM and Chrysler to carry out tough restructuring measures, possibly through the use of the bankruptcy court.
The administration stepped back over the weekend from naming a “car czar,” as it had planned, to oversee the restructuring. But according to people familiar with the task force, it named former Lazard Freres & Co. investment banker Ron Bloom a key adviser. Mr. Bloom, who made a name advising U.S. steelworkers to accept major concessions in several bankruptcy cases, is expected to take the task force’s lead role, a senior U.S. Treasury official says.
People who know Mr. Bloom expect him to be tough on the auto makers, the United Auto Workers and other parties involved in their restructuring.
On Monday, GM’s bondholder committee delivered a “framework” for a new debt structure, one person close to the committee said. Late Monday afternoon, talks between the UAW and both GM and Chrysler were also making some progress as the parties hammered out cost-reduction details. But people familiar with the talks said significant differences remain between the sides.
For investors waiting to hear from GM they have scheduled a news conference for 6:00 PM EST to discuss their viability plan. Should be an interesting one.
Source:
Auto Maker Bankruptcy Looms
John Stoll and Monica Langley
WSJ, February 17th, 2009
