General Motors, Chrysler mull bankruptcy to get US bailout

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: General Motors Corp 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.

“It’s essential for Congress to do due diligence on bankruptcy as an option so it gets a clear sense from independent people what the risks and possibilities are,” said Alan Gover of White & Case, who has been lead lawyer in $60 billion of corporate-debt restructurings. Many solutions to the automakers’ financial problems are on the table in discussions in Washington and around the country among company officials, lenders, union officials and other interested parties, the person briefed on internal talks said. Negotiations are splintered among small groups, making it unlikely a proposed solution such as bankruptcy would emerge until next week at the earliest, the person said.

Publicly GM Chief Executive Officer Rick Wagoner has said bankruptcy would mean liquidation because customers would refuse to buy cars from a company that might not be able to back warranties or supply parts. Bankruptcy is “way down the list of options,” GM board member George Fisher said yesterday in an interview. GM spokesman Tony Cervone had no additional comment. Chrysler spokeswoman Shawn Morgan didn’t have an immediate comment.