U.S. Threatens Bankruptcy for GM, Chrysler
Posted By thestatedtruth.com on April 4, 2009
This is a big deal………..and interestingly enough,  it looks like a new car purchase IRS tax deduction is being set up……..Plan Would Separate ‘Bad’ and ‘Good’ Assets of Two Companies; Historic Intervention Carries Big Political Risk for Obama………. President Obama, who announced the plans Monday with Treasury Secretary Geithner, said the U.S. would not let the auto industry “simply vanish.” The Obama administration, wading deeply into the U.S. auto industry, is weighing a fix for General Motors Corp. andChrysler LLC that would divide their “good” and “bad” assets and send the auto makers into bankruptcy to purge their biggest problems. The potential move would transform two companies that have helped define U.S. industrial power over the past century. The administration would like to see the “good” GM, comprising brands such as Chevrolet and Cadillac, remain an independent company, according to an administration official. Equity in the “good” Chrysler, meantime, would be sold to Fiat SpA, assuming that proposed deal goes forward, this person said. The auto plan came packaged with several new government initiatives whose price tags remain unclear. The government said it would guarantee the warranties for all new GM and Chrysler cars until the two companies return to health. It also plans to speed up government fleet purchases, and to support a congressional bid to offer large tax incentives for new-car purchases, with money for the program coming out of the $787 billion stimulus package. Mr. Obama also said that the Internal Revenue Service was creating a new tax benefit for car buyers.  GM looks increasingly like it will be forced into filing for bankruptcy protection, sometime in mid-to-late May, and that the surviving “new GM” will retain select brands and some international operations, said several people familiar with the situation.Stakes in this new GM could be given to creditors. It is also possible the new company could be sold whole or in parts to investors or its shares sold in an initial public offering. The UAW’s retiree health-care fund would likely get either some shares or proceeds from the sale of the stock. GM looks increasingly like it will be forced into filing for bankruptcy protection, sometime in mid-to-late May, and that the surviving “new GM” will retain select brands and some international operations, said several people familiar with the situation. Stakes in this new GM could be given to creditors. It is also possible the new company could be sold whole or in parts to investors or its shares sold in an initial public offering. The UAW’s retiree health-care fund would likely get either some shares or proceeds from the sale of the stock.   On the first day in bankruptcy, people familiar with the matter said, GM would transfer the valued assets to new GM. Then it would launch a marketing and advertising campaign, aiming to comfort consumers about warranties on new and existing vehicles, the resale value of their vehicles and the ability to buy replacement parts.  The “new GM” would have a less-burdened balance sheet than GM currently has. But one debt that would stay with new GM is the $20 billion or so the federal government has lent to it, say these people. At Chrysler, where Jones Day lawyers have been working on a plan, bankruptcy would be used to force new labor contracts and rework debt deals with secured creditors. People working on Chrysler’s behalf say the approach is risky, because the company is still unsure it could survive even a short-term bankruptcy. GM and Chrysler’s bankruptcy financing, called debtor-in-possession, would have to be funded by the government at a cost of tens of billions of dollars.Â
-John Schultz
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