President Bush appears to be trying to cling to a shred of his former economic policy: He may kill off General Motors (GM) and Chrysler, after all:
The action would be unusual, and would require concessions by the United Automobile Workers union, suppliers, investment banks, the federal pension board, bondholders and other stakeholders in the two auto companies.
Ford Motor, which does not face an urgent need for capital, is not likely to be part of any rescue package.
Under one possibility that has been discussed, the government would give G.M. and Chrysler enough financing to operate for several months. Then a government-selected overseer would bring together company executives and other representatives to map out steps that would be taken once the two companies file for Chapter 11 protection.
“It’s not going to be easy, it’s not going to be pleasant, or palatable, but it’s the only solution that makes the least bit of sense,” said Hugh M. Ray, head of the bankruptcy practice at the Houston law firm Andrews & Kurth, who has participated in many major bankruptcy cases.
Major banks would provide debtor-in-possession financing for the companies to operate while under bankruptcy, with federal funds as security.
That’s not a bad plan…except for one thing. The instant Bush is shipped back to his ranch, GM and Chrysler will beg Obama to scrap the bankruptcy part of the plan so they can keep whatever equity value they’ve got left.