Despite an apparent deal with the UAW to reduce labor costs, with the inability to win concessions from investors who hold $27 billion worth of company bonds the Treasury Department is preparing to move GM into bankruptcy. Under a draft plan, the move will include additional federal loans approaching $30 billion bring the government’s investment in GM to nearly $45 billion. Although bankruptcy is viewed by some as the best means of saving the company, many including members of Congress have expressed concerns that the benefit of an expedited bankruptcy has been at the expense of investors and dealers.
It is being reported that the reconstituted GM, like Chrysler will be partially controlled by the U.S. government, UAW and possibly the Canadian Auto Workers or the Canadian government which has already agreed to invest approximately $3.5 billion in Chrysler to protect production plants in Canada.
As GM prepares for bankruptcy, the U.S. Government appears to be keeping its promise to lift Chrysler from bankruptcy within 60 days over the objection of some investors who have filed challenges in federal district court which has authority over the bankruptcy court. Investors allege that Chrysler’s sale to Fiat violates their rights as secured lenders. A hearing on the challenge is scheduled for next week. Depending on the outcome, we could see the new Chrysler emerge from bankruptcy protection as early as June 1st.
Richard V. Stokan, Jr.