Obama Transition Said to Consider a ‘Prepack’ Auto Bankruptcy

[WriteDown]

Source: Bloomberg

Nov. 21 (Bloomberg) -- President-Elect Barack Obama‘s transition team is exploring a swift, prepackaged bankruptcy for automakers as a possible solution to the industry’s financial crisis, according to a person familiar with the matter.

Obama’s team has already contacted at least one bankruptcy- law firm to say that Daniel Tarullo, a professor at Georgetown University’s law school who heads Obama’s economic policy working group, would call to discuss the workings of a so-called prepack, according to this person.

U.S. lawmakers yesterday postponed until December a vote on whether to give General Motors Corp., Ford Motor Co. and Chrysler LLC a $25 billion bailout as an alternative. Automakers such as GM could use court protection to reduce debt and reject unfavorable contracts.

“It creates the environment to deal with GM’s problems but limits government financial commitment,” said bankruptcy lawyer Mark Bane of Ropes & Gray in New York....

Read more: http://www.bloomberg.com/apps/news?pid=20601087&sid=aRf...

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If this is their attitude, then you can pretty much kiss union labor goodbye in the US.

edited for spelling

[notadmblnd]

1. Union busting, that's what this is all about.

And the corporate Democrats are going to take them by the hand and lead the way.

[bookman]

7. I agree..

..the workers are being blamed for "high wages and benefits".

Management takes little responsibility.

Southern politicians usually lead the way. I'm in Texas after working in the NE at a 'union' job.

People hate the fact that I get a pension, SSI, and health benefits.

[PSPS]

8. There has been a lot of right-wing code in the media about this

They even wheeled out Romney, saying it was necessary to "remove financial obligations" which means busting the union, looting the pension trust fund for CEO "bonuses," and eliminating retiree health benefits and any other union-related obligation.

Pretty sick, isn't it?

[liberal N proud]

10. That and nothing more

[Honeycombe8]

17. Yeah, the Repubs are using this to try & break the unions. BUT...concessions

must be made by all. The unions have already made some concessions that start in 2010, I heard. Maybe those need to be moved up to 2009, making the auto makers more competitive with the foreign ones that are here.

THEN concessions have to be made by management by getting a new board and management. Getting rid of the old CEOs, etc.

THEN put on the line to be made more innovative and green cars that consumers really want and more competitive with the foreign cars.

Every facet of the companies has to be looked at. Truth is, maybe more concessions don't need to be made by the unions. But one thing is for certain...the unions will lose far less with the Dems in power than if the Repubs still controlled Congress.

Isn't it better to keep your job and have your pension cut by 25% than to lose your job when you're 45 years old? These workers are unskilled and are almost certain not to be able to find another job soon, and when and if they ever do, will not find a full-time job that pays well.

The Dems are on to what the Republicans want to do insofar as union busting. They won't let it happen. But they have to look at ALL places where costs can be cut, in order to make the companies viable going forward. It's just common sense, IMO.

[Demeter]

2. It Sounds Perverse

I like the idea of buying up the stock of the Big 3, which is going for pennies, before
China does, throwing out all management above shop steward, leasing the electric car designs from the startups and manufacturing them on a commercial scale to price under the Prius.

[WriteDown]

3. You are assuming our mages in Congress can....

run it any better? They would probably call for the dissolution of the union the next day.

[Roland99]

4. CNBC reported earlier that the prepack option has already been shot down by Obama

[zipplewrath]

5. A missed opportunity

It would seem we are missing an opportunity here. If they start to go bankrupt, the government is going to get stuck with the healthcare and other pension costs of the retirees. So why doesn't the congress basically agree to "take over" healthcare for the retirees. They can charge the auto companies some "reasonable" and predicatable rate for the near future to do so. This will unburden the companies from these obligations on their balance sheets, and keep the overall costs predictable. It will give the government an opportunity to start to integrate portions of the population into a government managed healthcare system. And it prevents them from just being "dumped" into the governments lap anyway.

In the out years more companies could come clamoring for inclusion in this system, including small business and potentially nonprofits. Ultimately it could allow us to merge medicare/medicaid and the federal employees health insurance with the veterans hospital system and for that matter the active duty system. We could bring children and students in at the other end and fairly soon we'd have an integrated system. But it would be one that evolved instead of had to be formed out of whole cloth and potentially "dumped" on the nation in short order.

[customerserviceguy]

11. As I understand it, those retirees

have health benefits way beyond what is offered under any other government program (except, of course, the ones provided to government employees, which we would expect to have competitive health benefits for their services), and it would seem inequitable to give one group of unemployed Americans a "Cadillac" level of care, while the other groups get the "Chevette" model.

Perhaps the threat of large numbers of employed Americans facing the prospect of losing health care is what will provide the political impetus needed to finally just go to single payer, which is the end of band-aid treatment of the gaping wound.

[amandabeech]

14. Please read the 2007 UAW contracts with the Big 3.

Then post.

Please, it does not sound like you're totally up to speed here, as I have suggested to you in earlier threads, I don't think that you have been following the auto industry closely for the last 3 years or so.

There have been lots of changes.

[Profprileasn]

6. How will that work?

Wonder if it will work like for individuals and they will pay pennies on the debts owed, get it over with and move on. Must move in right direction however.

[FarCenter]

9. Chapter 11 is needed in order to eliminate 2/3 of the dealers

Who are otherwise protected by contracts and state franchise laws.

[amandabeech]

15. If they aren't profitabale, they will shake themselves out.

That's happening to the Ford dealers in the area of Pennsylvania where I recently bought a very well priced, gently used Taurus.

Three dealers had gone down to one in just a few months.

It will happen elsewhere.

I love my Taurus, by the way.

[Better Believe It]

12. So Obama's "Team" Is Going Along With The Destruction Of Domestic Auto Industry

and with it the destruction of the auto workers union.

Isn't that just wonderful. Change we can believe in.

[drm604]

13. From CNBC - Obama not eyeing prepackaged carmaker bankruptcies

http://www.cnbc.com/id/27839807/site/14081545/for/cnbc /

CHICAGO, Nov 21 (Reuters) - U.S. President-elect Barack Obama's transition team is not exploring a prepackaged bankruptcy plan for U.S. automakers, officials from Obama's team said on Friday. Bloomberg News reported that Obama's transition group was exploring the option. "That's not true," said Tommy Vietor, a spokesman for Obama's White House transition team. Bloomberg reported that Obama's team was considering a swift prepackaged bankruptcy for automakers as an answer to the financial woes of the sector, citing a person familiar with the matter. According to the report, Obama's team has already contacted at least one bankruptcy law firm to say that Daniel Tarullo, who heads Obama's economic policy working group, would call to discuss the workings of a so-called "prepack." Two officials within the Obama team said the report was false.

[amandabeech]

16. The Gov will have to provide the $$$$ for the financing in a pre-packaged bankruptcy.

The reason that the Big 3 are looking for a loan is that they can't get bank or commercial paper financing.

GM has done studies about whether or not folks would buy their product after they went bankrupt. The results were that 80% would not buy.

Chrysler changed hands recently, and their sales dropped 37%.

A Chapter 11 will become a Chapter 7 in no time if they go to bankruptcy, even with Government financing.

No one would buy their products even if customers could get loans, which a lot of people can't get now even if they can afford them.

The jerks in Congress, at the Federal Reserve and at the Treasury have not been able to get the credit market moving, and their failure will cause a lot of unnecessary bankruptcies.

The Big 3 are only the first to get out there and ask for help during this crisis.

The line will form up at the Treasury and the Capitol starting January 21.