The US government’s ‘task force’ on the automobile industry has been in Detroit this week for talks with GM, Chrysler and the UAW as pressure mounts to let the troubled firms enter bankruptcy.
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The aim of the meetings this week is to try to chart the best way to restructure the two companies and reports say that a ‘prepackaged’ bankruptcy is one of the options under consideration.
Reuters reported that lead task force members Steven Rattner and Ron Bloom held a two-hour meeting with UAW president Ron Gettelfinger. UAW concessions are seen as a key ingredient to restructuring.
Bloom and Rattner also met with GM CEO Rick Wagoner, GM Chief Operating Officer Fritz Henderson and GM Chief Financial Officer Ray Young at GM’s technical centre in Warren.
“We believe today’s visit provided a constructive glimpse of GM people, their passion for their work, and the technology solutions that are behind the pages of our viability plan,” GM said in a statement.
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By GlobalDataRattner and Bloom also toured Chrysler’s plant in Warren, where Dodge pickup trucks are built, and met with Chief Executive Bob Nardelli, Vice Chairman Tom LaSorda, Vice Chairman Jim Press, and Chief Financial Officer Ron Kolka, Chrysler said.
Chrysler reviewed current and future product plans with the task force, including electric and hybrid vehicles, the automaker said in its statement.
“We are focused on doing everything possible to rebuild a great industry and keep manufacturing jobs in the United States,” UAW president Ron Gettelfinger said in a statement announcing the UAW ratification deal at Ford.
“As we have stated many times, in order to succeed, shared sacrifice will be required from all stakeholders, including executives, directors, shareholders, bondholders, dealers and suppliers.”
However, prominent Republican senators have said bankruptcy is GM’s best path to long-term recovery.
“I think the best thing that could probably happen to General Motors, in my view, is they go into Chapter 11,” John McCain told Fox News.
GM executives are now said to be more open to a speedy bankruptcy reorganisation financed by the US government, pushing aside earlier concerns that such a move would scare away so many customers that the company wouldn’t survive.
The increased threat of bankruptcy could also force bondholders into making concessions, analysts say.
Under a prepackaged bankruptcy stakeholders, including unions, suppliers and bondholders, would agree in advance to concessions. Prepackaged bankruptcies typically take just a few months to accomplish. Some say it would be far more effective than the type of restructuring GM is currently undergoing and government financial support would also provide reassurance.
GM is currently funding its operations with US$13.4bn in emergency loans from the US government and said last month it would need an additional US$22.6bn in government aid to survive. Last week its own auditors questioned its ability to survive as a going concern in a filing to the SEC.
