Tuesday, April 7, 2009

GM Speeding to Bankruptcy, Taxpayers to Own HUMMER

That’s what people are telling Bloomberg News:

General Motors (GM) is speeding up preparations for a possible bankruptcy filing even as directors seek deeper savings this week to avoid that outcome, people familiar with the plans said.

The bankruptcy readiness focuses on forming a new company from GM’s best assets if necessary, said the people, who asked not to be named because the matter is private. The cost-cut discussions center on how to go beyond GM’s proposal to slash debt by 46 percent and shed 47,000 jobs in 2009, and will include talks with Treasury officials, the people said.

The moves are a response to President Barack Obama’s March 30 rejection of GM’s bid to keep $13.4 billion in federal loans. With bondholders and the United Auto Workers balking at concessions, a push for more savings makes bankruptcy more “probable,” Chief Executive Officer Fritz Henderson has said.

This is probably a good thing. The sooner GM gets into the bankruptcy process, the sooner they can restructure and get on the road to recovery. Rick Wagoner is already gone, a positive first step, but the company desperately needs to reduce its debt load, both on balance sheet and off.

But one thing I don’t like is the idea of forming a new company with GM’s best assets. Call me crazy, but that sounds like GM keeps the good stuff, while the taxpayers end up with parts of the company like Oldsmobile and HUMMER, and probably billions in pension and health benefit obligations.

Obama and Geithner are only playing tough with the automakers because people are ticked that the problems have been so obvious for so long, and yet no one’s done anything about them.

At the end of the day, the government will give General Motors (GM), Ford (F), and Chrysler the money they need to squeak by. It’s only fair when you think about the trillions handed over to the banks. Michigan is a battleground State, and neither party will want to piss off the citizens there by officially breaking Humpty Dumpty.