The big hearings are set for later today, and word is that Chrysler and GM (GM) may be open to pre-arranged bankruptcy. So sayeth Bloomberg:
General Motors Corp (GM). and Chrysler LLC executives are considering accepting a pre-arranged bankruptcy as the last-resort price of getting a multibillion-dollar government bailout, said a person familiar with their internal discussions.
Auto executives have warned bankruptcy would lead to liquidation as customers abandoned the companies. Staff for three members of Congress have asked restructuring experts if a pre-arranged bankruptcy — negotiated with workers, creditors and lenders — could be used to reorganize the industry without liquidation, a person familiar with that matter said.
We know their first preference is for the check upfront, but they’d be stupid not to be considering this. There’s really no other alternative. We’d assign a probability approaching zero that the government just letting them declare bankruptcy and get thrown to the courts, which would probably lead to liquidation. If Congress can’t be persuaded to do a proper bailout, they’ll come up with some middle ground.
Also you have to figure that the unions would be big benefeciaries in a pre-packaged bankruptcy. While the UAW is bound to take some hits regarldess of the solution, any plan arranged by politicians — particularly Democratic politicians — will certainly protect the interest of a swath of workers in important Midwestern states.