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post #1 of 74 (permalink) Old 12-18-2008, 01:50 PM Thread Starter
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Bush considering 'orderly' auto bankruptcy

Bush considering 'orderly' auto bankruptcy
By JENNIFER LOVEN, AP White House Correspondent Jennifer Loven, Ap White House Correspondent 1 hr 2 mins ago

WASHINGTON – The Bush administration is looking at "orderly" bankruptcy as a possible way to deal with the desperately ailing U.S. auto industry, the White House said Thursday as carmakers readied more plant closings and a half million Americans filed new jobless claims.

With General Motors, Chrysler and the rest of Detroit anxiously holding its breath and waiting for a federal rescue, White House press secretary Dana Perino said, "There's an orderly way to do bankruptcies that provides for more of a soft landing. I think that's what we would be talking about."

President George W. Bush, asked about an auto bailout, said he hadn't decided what he would do but didn't want to leave a mess for Barack Obama who takes office a month from Saturday.

Bush, like Perino, spoke of the idea of bankruptcies orchestrated by the federal government as a possible way to go — without committing to it.

"Under normal circumstances, no question bankruptcy court is the best way to work through credit and debt and restructuring," he said during a speech and question-and-answer session at the American Enterprise Institute, a conservative Washington think tank. "These aren't normal circumstances. That's the problem."

Perino said the White House was "very close" to a decision — though she wouldn't give a timetable. She emphasized there were still several possible approaches to assisting the automakers, including short-term loans from the Treasury Department's $700 billion Wall Street bailout program.

The Big Three automakers said anew that bankruptcy wasn't the answer, as did an official of the United Auto Workers who called the idea unworkable and even dangerous. GM said a report that it and Chrysler had restarted talks to combine was untrue.

House Speaker Nancy Pelosi said on Capitol Hill that grim new unemployment data heightened the urgency for the administration "to prevent the imminent insolvency of the domestic auto industry."

The California Democrat said Bush has the legal authority to act now, and should attach the accountability standards that were included in a $14 billion House-passed and Bush-supported carmaker bailout that died in the Senate last week. That plan would have given the government, through a Bush-appointed "car czar," veto power over major business decisions at any auto company that received federal loans.

Pelosi spoke after the government announced that initial claims for unemployment benefits totaled a seasonally adjusted 554,000 last week.

The comments in Washington came a day after Chrysler LLC announced it was closing all its North American manufacturing plants for at least a month as it, General Motors Corp. and Ford Motor Co. await word on government action. General Motors also has been closing plants, and it and Chrysler have said they might not have enough money to pay their bills in a matter of weeks.

Prices of GM and Ford stocks were down sharply Thursday after the remarks out of the White House. Ford, unlike General Motors and Chrysler, is not seeking billions in federal bailout loans, but a collapse of the other two could hurt Ford as well.

Alan Reuther, the United Auto Workers' legislative director, said the union urged the administration during a meeting this week to follow the provisions included in the House-passed auto aid bill.

Congressional aides in both parties who have been closely following the discussions suggested the talk of bankruptcy could be a tactic to extract more hefty concessions from the companies and union in exchange for granting short-term loans from Treasury's financial industry rescue fund.

Perino said one factor preventing an announcement of action by the administration is that discussions continue with the various sides that would have to sign on to a managed bankruptcy — entities such as labor and equity holders in addition to the companies themselves.

A senior administration official said the talks between Bush officials and the Big Three and their stakeholders amount to information-gathering, not negotiating.

The White House has repeatedly emphasized its opposition to "disorderly bankruptcy" — presumably a Chapter 7 filing that would effectively shut down a company and require liquidation of assets. That has left on the table the possibility of forcing one or more automakers into a Chapter 11 bankruptcy, which allows a firm to keep operating while under a court's purview.

Harlan Platt, who teaches corporate turnarounds at Northeastern University in Boston, said the government may be waiting for an offer of an ownership stake in the companies, much as it received in return for capital plowed into banks. "You really have to ask the question: If this is good enough for Wall Street, why isn't it good enough for Detroit?" he said.

On Thursday, spokesmen for Chrysler, GM and Ford generally referred to their previous comments that bankruptcy was not a workable solution. The car companies argue that no one would buy a vehicle from a bankrupt company for fear that the company might not be around to honor warranties.

"We continue to work with the administration to find a solution to this liquidity crisis," said GM spokesman Tony Cervone.

Chrysler spokeswoman Shawn Morgan noted previous statements against bankruptcy by CEO Robert Nardelli. Financing for even a prepackaged bankruptcy would be difficult to get in the current tight credit market, Chrysler has said.

The National Automobile Dealers Association also spoke out against bankruptcy for car companies "in any way shape or form, orderly or disorderly, prepackaged or unpackaged, managed or unmanaged," said spokesman Bailey Wood.

Bush said the auto industry is "obviously very fragile" and he is worried about what an out-and-out collapse without Washington involvement "would do to the psychology" of the markets.

"There still is a lot of uncertainty," he said.

At the same time, the president said anew that he is worried about "putting good money after bad," meaning taxpayer dollars shouldn't be used to prop up companies that can't survive the long term.

He revealed one other consideration — that Obama will become president in just over a month.

"I thought about what it would be like for me to become president during this period. I believe that good policy is not to dump him a major catastrophe on his first day in office," Bush said.

___

Associated Press writers Julie Hirschfeld Davis and Ken Thomas in Washington and Tom Krisher in Detroit contributed to this stor
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post #2 of 74 (permalink) Old 12-18-2008, 02:55 PM
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Nothing good can come out of anything Bush "considers".
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post #3 of 74 (permalink) Old 12-18-2008, 03:04 PM
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^Didn't you come from a bush?
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post #4 of 74 (permalink) Old 12-18-2008, 03:04 PM
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Well, believe it or not, I agree with him on this one. The biggest problem is that these companies are saddled with onerous contracts. A bankruptcy voids them all, and allows renegotiation. People who retired at 45, people getting 95% pay while not working, that and the entire GM retirement system need to be scrapped, and the current UAW contracts all need to be renegotiated in order to save this business. Just giving these idiots money is a fool's errand. But it needs to be a well-managed bankruptcy, there are too many economic implications for them to just collapse. Good idea, but we need the new bunch to run the thing. Bush should do what is best for this country, which is to resign in a way that allows Obama to take office. We may be put into an even worse depression by this bozo hanging around for another month. Be gone, you fucking cockroach.

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post #5 of 74 (permalink) Old 12-18-2008, 03:24 PM
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Why not , he has already "orderly " bankrupted the whole country (except the oil companies, of course).
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post #6 of 74 (permalink) Old 12-18-2008, 03:34 PM
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While it may void current union contracts, I believe that pensions are federally protected from such actions, much for this very reason. And since the folks that want to blame the unions seem to believe that the 28% of the 10% of the cost of cars is what is causing this problem, this won't solve that.

What bankruptcy will do is destroy a bunch of small suppliers that rely on a steady cash flow to keep the doors open as the fallout propagates throughout the industry.

If the companies bankrupt, their pension accounts will be secured by the rules of teh Pension Protection Act of 2006 and the PBGC. Pension Benefit Guaranty Corporation (PBGC)




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On Thursday, Aug. 17 2006, President Bush signed into law the Pension Protection Act of 2006, which he called the "most sweeping reform" of US pension law since the enactment of the Employee Retirement Income Security Act (ERISA) in 1974. The compromise measure will have broad impact on the way future pension plans are structured and funded. It will affect pension outcomes, not only for tens of thousands of employees whose plans are currently hanging on the contents of the bill, but for millions of Americans who do not follow pension issues closely.

Affected groups everywhere are weighing in with commentary. With some 44 million Americans covered by private pension plans, bipartisan support for private sector reform was made possible by not stirring up a hornet’s nest of debate about stricter funding guidelines for public employee defined-benefit plans, which remain generous and are woefully underfunded. In any case, the bill may well signal the end of the era private defined-benefit pension plans. As recently as 25 years ago, more than 80 percent of large and medium-sized companies offered such plans. Today, fewer than a third do.

* * *

Late in the day on August 3, 2006, the Senate approved a compromise Pension Reform Bill and sent it on to the White House. It tightens rules for employers with defined-benefit pension plans – 21% of all workers-- and clamps down on companies that have fallen in arrears in meeting their funding obligations. Half the workers in private industry who have no pensions are not covered by the legislation, nor are government workers who have generous publicly funded pension plans.

With underfunding of DB plans now estimated at $450 billion, the bill requires companies to bring such plans to 100 percent funding within seven years, although certain major airlines are given a longer period. Plans that are seriously underfunded face restrictions, such as a ban on increasing benefits, and must make accelerated catch-up contributions. President Bush, who has taken a tough stance on forcing full funding of company promises, is expected to sign the legislation shortly.
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post #7 of 74 (permalink) Old 12-18-2008, 03:43 PM
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Nothing good can come out of anything Bush "considers".
The orderly bankruptcy is EXACTLY what they need.
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post #8 of 74 (permalink) Old 12-18-2008, 03:48 PM
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The orderly bankruptcy is EXACTLY what they need.
The only problem with a Chapter 11 is how they will treat suppliers and how they will refocus manufacturing facilities. Those will be the primary impacts to the US Economy. Whether the US Gov gives them money as part of a Bankruptcy deal or as a bridge loan, those two elements remain and are the critical two points of impact.

I would think that many of the Wall Street firms should be required to do the same thing, negating all those bonus contracts with their CEOs and their pay structures for their brokers. Seems we have a very odd double standard going on here.

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post #9 of 74 (permalink) Old 12-18-2008, 03:54 PM
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The only problem with a Chapter 11 is how they will treat suppliers and how they will refocus manufacturing facilities. Those will be the primary impacts to the US Economy. Whether the US Gov gives them money as part of a Bankruptcy deal or as a bridge loan, those two elements remain and are the critical two points of impact.

I would think that many of the Wall Street firms should be required to do the same thing, negating all those bonus contracts with their CEOs and their pay structures for their brokers. Seems we have a very odd double standard going on here.
The difference is removing the time uncertainties, lawsuits involved in a normal Ch11 so the auto companies can emerge with new ownership structures within a few weeks after filing it versus months/years in a drawn out fight in bankruptcy court.
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post #10 of 74 (permalink) Old 12-18-2008, 03:56 PM
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I'd agree with the double standard idea, but that doesn't mean this one is worth serious consideration.

Rather than just an orderly bankruptcy, and rather than just throwing money down a rathole (albeit a very large one populated by very hungry rats on both sides of the bargaining table) I'd prefer the orderly bankruptcy that encourages new lending by the use of federal guarantees triggered by significant waypoints throughout the Chapter 11 process. That way all the parties know up front if they want to dig in their heels and play hardball, the loans won't come through and everyone walks away a loser.

Yeah, that's a short synopsis, but that's the outline of something that could work and engender a realistic future for the big three instead of more of the same (and the moronic leanings by the dems to encourage them to build cars Americans won't buy anyway or force them to meet artificial CAFE regulations that Congress just pulls out of the...air).

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