Of all the news that could come out of the White House regarding aid to the Big Three automakers, this is perhaps the most encouraging:
WASHINGTON â€” The White House said on Thursday that an â€œorderlyâ€ bankruptcy was one option being considered to try to rescue General Motors and Chrysler, which are seeking billions of dollars to avoid a shutdown.
President Bushâ€™s spokeswoman, Dana Perino, confirmed growing speculation within legal circles that the president and Treasury Secretary Henry M. Paulson Jr. were considering the step as part of an overall rescue package for the automobile industry.
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.
Unusual ? Perhaps to the extent that the government would be involved, but this sounds to me like the kind of pre-packaged bankruptcy that was being discussed last month:
The prospect of a managed bankruptcy for one or more of the companies has been explored for several weeks, dating back to an original request by the car makers to the Treasury Department for money from the Troubled Assets Relief Program. Mr. Paulson rejected that request, prompting the auto companies to appeal to Congress.
G.M. has retained Harvey R. Miller, a long-time bankruptcy lawyer, as its adviser. It is also being advised by William Repko, a long-time expert in restructuring with Evercore Partners who has worked with companies like United Airlines. And, G.M. is working with Arthur B. Newman of the Blackstone Group, another experienced restructuring adviser.
Chrysler has retained the law firm of Jones, Day to provide restructuring expertise, while several law firms in Washington and across the country also have been retained by companies that might be involved in a bankruptcy proceeding.
However, any filing by either of the automakers would not be imminent. It could take three months or more to reach the type of agreements the government might require before the companies seek bankruptcy protection. That time could give consumers used to the idea of dealing with a car company operating under court protection.
Some analysts have warned that Americans might be leery of buying cars from any company that was operating in bankruptcy. But other studies have shown that consumers would be assured if the companies received federal assistance, even if they end up in bankruptcy protection.
This isn’t perfect, but if it happens, and if the Obama Administration follows through on it, it is probably the best alternative out of a whole series of really bad options, and much better than the idea of giving taxpayer dollars to these companies on the promise that they will reform themselves.
As for the timing of all this, President Bush said today that he would act before leaving office, so I’m guessing we’ll see something by the start of the new year.