Obama decides on GM bankruptcy
posted at 4:05 pm on April 1, 2009 by Ed Morrissey
Share on Facebook | printer-friendly
This didn’t get much coverage from the mainstream media today, so I’ll run with the Reuters report from last night. After hemming and hawing over an additional request for massive taxpayer funds from GM, Barack Obama has decided that a structured bankruptcy is the best course of action after all:
President Barack Obama has determined that a prepackaged bankruptcy is the best way for General Motors Corp. to restructure and become a competitive automaker, Bloomberg reported, quoting people familiar with the matter.
Obama also is prepared to let Chrysler LLC go bankrupt and be sold off piecemeal if the third-largest U.S. automaker can’t form an alliance with Fiat SpA, Bloomberg said, citing members of Congress who have been briefed on the subject and two other people familiar with the administration’s deliberations.
Obama on Monday gave GM 60 days to come up with deeper cost and debt reductions than the biggest U.S. automaker had proposed in a viability plan submitted last month.
But a “quick and surgical” bankruptcy the Obama administration described as an option appears to be inevitable, the people familiar with the matter said in the Bloomberg report.
Yesterday, new GM CEO Fritz Henderson said the same thing, which helped Wall Street to a significant down day on the DJIA. It appears that the $14 billion we taxpayers invested in GM went for naught.
Politically, though, this won’t hurt Obama. The decision to bail out Detroit came from the George “I had to kill free market principles to save the free market” Bush in November. GM and Chrysler both took huge sums of money from the Treasury during Bush’s administration. If those funds get lost in the bankruptcy that should have taken place instead of the bailout, then we will have to blame that on Bush, not Obama.
The question will be what the Obama administration does to “structure” the bankruptcy, rather than just have GM go through the normal court process. Clearly, the automakers will have to restructure pension, health benefits, and compensation agreements with labor. If Obama allows that to happen, however, he will enrage the union bosses who backed him for the presidency, especially if it looks as though Card Check will not make it out of Congress. If Obama doesn’t allow for that restructuring, though, the bankruptcy will wind up doing nothing but wasting time and closing off the last opportunity for GM to get itself off the mat.
Given the direction of this administration so far in this crisis, I’m going to bet they take the politically prudent path, rather than the financially sound path.
You must be logged in to post a comment.
Blowback
Note from Hot Air management: This section is for comments from Hot Air's community of registered readers. Please don't assume that Hot Air management agrees with or otherwise endorses any particular comment just because we let it stand. A reminder: Anyone who fails to comply with our terms of use may lose their posting privilege.
Trackbacks/Pings
Trackback URL
Comments
Comment pages: 1 2 Next »
I’ve said it before. I’ll say it again. What a maroon.
crazy_legs on April 1, 2009 at 4:09 PM
Our chances in 2012 are looking better and better with each passing day!
Liberty or Death on April 1, 2009 at 4:09 PM
GM could’ve done it for free months ago.
lorien1973 on April 1, 2009 at 4:10 PM
this line caused an audible chuckle
you obviously haven’t been paying attention
gatorboy on April 1, 2009 at 4:10 PM
Which should be a testament, to Government. Stay the he!! out of the private sector, and let those that fail, fall.
capejasmine on April 1, 2009 at 4:11 PM
Sarah Palin is one good looking babe.
The Wall on April 1, 2009 at 4:11 PM
Day by day, the Democrats and Obama are making people numb to the word “billion”.
By 2010 and 2012, people will chuckle at out having tossed away $25 billion on the auto companies.
myrenovations on April 1, 2009 at 4:12 PM
What else do they know?
Pointed-headed lawyer/Community Organizer in Chief? 20 something Ive Leaguers? Career political hacks, like Rahm Emanuel and David Axelrod?
They know no different.
Anyone expecting financially sound policies from this pack of mutts is barking up the wrong tree.
NoDonkey on April 1, 2009 at 4:13 PM
This is gonna leave a mark. “You might want to put some ice on that.”
PappaMac on April 1, 2009 at 4:13 PM
Am I wrong in thinking that part of a bankruptcy proceeding is an audit…………..?
………. then maybe we can find out where our 14 Billion dollars disappeared to.
Seven Percent Solution on April 1, 2009 at 4:13 PM
This won’t hurt Obama….
originalpechanga on April 1, 2009 at 4:14 PM
Thanks to all our politicians who gave all that money to GM for nothing! Wait, it wasn’t for nothing, it was so the government could violate capitalism and try and run a private corporation.
Christian Conservative on April 1, 2009 at 4:15 PM
It was the right course of action all along. The question now is who takes a haircut. Somehow the taxpayer will pick up the slack on some of the legacy (pension/retiree healthcare) costs. Obama has to payoff the unions for all the money they generate for the Democrats.
Ted Torgerson on April 1, 2009 at 4:15 PM
Most came to that conclusion when he said the word restructure.
Geez.
getalife on April 1, 2009 at 4:16 PM
Do the unions involved get to declare bankruptcy as well?
AubieJon on April 1, 2009 at 4:17 PM
Most came to the conclusion that Obama is trying to fashin a command economy when he fired the head of GM on a whim. And wants consultations on replacements for the Board.
But, hey, congrats on the command economy he’s building. You must be proud.
lorien1973 on April 1, 2009 at 4:17 PM
You know, this benefits Mitt Romney!
cs89 on April 1, 2009 at 4:18 PM
So much for those who before the election told us that we had to do something about Detroit. The heck with trying to figure out if there was anything we could do.
What was important was that the voters see the Republican party as caring about their problems.
1) We lost the election anyway.
2) We are out $14B.
3) Every time we object to Obama giving away money, he points back to prior to the election when we did the same thing.
When you abandon your principles in hopes of a temporary electoral advantage.
YOU ALWAYS LOOSE.
MarkTheGreat on April 1, 2009 at 4:18 PM
Indeed indeed. I doubt he would have fired GM’s CEO if so much anti-executive sentiment hadn’t already been built up. (Ugh. The president fired a CEO. How distasteful to say, even if the CEO did deserve to go.)
Interesting that UNICEF ads are running in the sidebar, incidentally. We’re not in Pajamas Media any more.
kc8ukw on April 1, 2009 at 4:18 PM
I thought Bush gave Detroit money to tie them over til the Obama administration could decide what to do. I could be wrong since so much money has been doled out.
Ricky on April 1, 2009 at 4:18 PM
Throw the UAW under the bus? Wow. And with card-check just on life-support.
If it does go to bankruptcy court, it is still up to the judge to accept the prepackaged plan. Can’t see any judge going against the One, but who knows. Probably file in MI, where the judges would tend to be Dem appointees.
Wethal on April 1, 2009 at 4:18 PM
Michael Steele says, “wanna get nuts? let’s get nuts!”
lorien1973 on April 1, 2009 at 4:18 PM
Just speculating here, but thowing a few thousand UAW retirees overboard in trade for giving UAW officials a majority voice on the BOD may be considered an acceptable risk.
a capella on April 1, 2009 at 4:19 PM
Hard-earned money wasted.
LastRick on April 1, 2009 at 4:20 PM
Sarah Palin everywhere on the hoome page
its all making sense now….
blatantblue on April 1, 2009 at 4:21 PM
lorien1973 on April 1, 2009 at 4:17 PM
Economy saved.
Dow up 152.
G20 regulations.
Budget to pass.
You betcha.
getalife on April 1, 2009 at 4:21 PM
Oh good, the truck with the padded walls just arrived outside my house. How timely. Let..me..just..wiggle into this…straitjacket here…
unwashed minion on April 1, 2009 at 4:21 PM
Of course. The filthy liar was already strategizing his re-election bid the morning after he was elected.
highhopes on April 1, 2009 at 4:21 PM
A structured/pre-packaged bankruptcy still has to go through filing in bankruptcy court, where the judge has the final say. Actually, since a dissatisfied party (creditor, most likely) can appeal, SCOTUS theoretically gets the last word.
The bondholders were the ones who would were holding out before. They might get a little more consideration from a judge who actually understands how to reorganize under Chapter 11.
Wethal on April 1, 2009 at 4:22 PM
You mean, the money that was unconstitutionally stolen from us.
LimeyGeek on April 1, 2009 at 4:23 PM
Good.
chunderroad on April 1, 2009 at 4:23 PM
This is gonna leave a mark. “You might want to put some ice on that.” PappaMac on April 1, 2009 at 4:13 PM
I love that you worked a quote from Tommy Boy into the thread. Awesome. ;)
flyawaybird on April 1, 2009 at 4:23 PM
This is just propaganda.
There’s no way Obama lets this get to a bankruptcy judge. The judge would almost certainly put too much pain on the unions for Obama to take. These are some of Obama’s main constituents. There’s no way he’ll allow them to make the necessary sacrifices that would occur in bankruptcy.
It won’t happen.
blue13326 on April 1, 2009 at 4:24 PM
Guppy
LimeyGeek on April 1, 2009 at 4:24 PM
Firing people whom he has no right to fire. Ability to nationalize businesses at will, without congressional approval, even.
It’s awesome. I totally agree. Love your overlords!
lorien1973 on April 1, 2009 at 4:24 PM
“Economy saved”? Is that why preliminary figures show 742,000 jobs were lost in March? When Bush was NOT President.
Doughboy on April 1, 2009 at 4:24 PM
Pre-packing a company the size of GM would be extremely difficult. usually the impaired creditors in such a preceding are large, can pre-negotiate the filing and aren’t worrying about the treatment of other creditors. A pre-pack/pre-negotiated bankruptcy is typically for bondholders who are going to do a debt-for-equity exchange, need to prevent holdouts, and are going to allow trade creditors to pass through unimpaired…
For GM it would take getting the union, retirees, PBGC, bondholders, trade creditors all on the same page, for some reason. The only feasible way is that Barry uses this as the basis of nationalized health care, thereby eliminating the retiree health care benefits expense. Even then, their will be a fight between bondholders and the unions on pension plans
phreshone on April 1, 2009 at 4:25 PM
Economy saved.
Dow up 152.
getalife on April 1, 2009 at 4:21 PM
Anyone ever notice that the leftist bugs never appear when the DOW is falling, as it does so often these days?
I’ll give it to Axelrod though, he is saving taxpayer money by only hiring from bottom of the barrel.
Bishop on April 1, 2009 at 4:25 PM
Does “structured” mean they get to leave all the UAW contracts in effect?
Knucklehead on April 1, 2009 at 4:26 PM
He created the rest of the jobs that weren’t lost. – getalife
lorien1973 on April 1, 2009 at 4:26 PM
How many Ipods can you get for 14 billion dollars?
Bishop on April 1, 2009 at 4:26 PM
As bad as things are and as stupid as obamas adminastration is, just looking at Palin makes me feel good.
I like this new trend of posting her picture on evey blurb.
Something about her makes me want to do things for others and be more patriotic and bang good looking conservatives milfs.
Thank you Sarah baby
kangjie on April 1, 2009 at 4:26 PM
Yeah, it is all the workers fault.
Geez.
getalife on April 1, 2009 at 4:27 PM
Whatever happens to the automakers is on Obama’s record, regardless of what Bush did back in November.
Bush gave them some carry-over money. Obama set the stipulations for further funds and fired the CEO.
Plus, if O wants to run for re-election, he is going to be singing to the UAW about everything he did to protect them.
Nobody at GM or Chrysler is sitting there thinking about how badly Bush screwed them.
BigD on April 1, 2009 at 4:27 PM
That’s truly hilarious, the Obama-Mugabe regime is calling the 400 lbs of crap in a 100 lb bag they want to pass, a “budget”?
Let’s see, if I make $50,000 a year and plan to spend $250,000 on some harebrained scheme, does that qualify as a “budget” as well?
Or just plain idiocy?
NoDonkey on April 1, 2009 at 4:27 PM
Prediction: All of legacy healthcare costs that are a big part of GM’s problem will become a Federal obligation.
Socializing medicine a little bit at a time.
Stephen Macklin on April 1, 2009 at 4:27 PM
Well, sure…those are the days in which the economy is unsaved.
Snowed In on April 1, 2009 at 4:27 PM
Yes, time to trot out the strawman. The inevitable continues.
It’s not the workers’ fault, cuz Obama made sure there are 742,000 less of them in March. Duh!
lorien1973 on April 1, 2009 at 4:28 PM
Suspect that’s the “hope”. Bondholders will (should) melt down the company before that happens.
phreshone on April 1, 2009 at 4:28 PM
No, Bush gave the money so GM and Chrysler wouldn’t go bankrupt in the last few months of his Presidency. He essentially kicked the can down the road and left it up to Obama to deal with it.
It was a no-win scenario for the guy. Stick to his conservative principles(assuming he had any left by that point) and the automakers go belly up, causing ripple effects that make the economy even worse than it already is. Or bail them out in order to tide them over, wasting billions of taxpayer dollars in the process and tarnishing the GOP brand even more.
Doughboy on April 1, 2009 at 4:28 PM
Obama leaves the country.
Dow rises.
faraway on April 1, 2009 at 4:29 PM
When someone files for bankruptcy reorganization, the judge works out a plan with all interested parties. A prepackaged plan has been worked out by the parties themselves before filing. The judge may approve it (you did his work for him) or not. But as phreshone explains, packaging needs all parties to be on the same page before filing.
Wethal on April 1, 2009 at 4:30 PM
Yeah. Bush gave those up during no child left behind and the medicare deal.
lorien1973 on April 1, 2009 at 4:30 PM
Like a stone.
Snowed In on April 1, 2009 at 4:30 PM
and not a second’s hesitation….
this is political aikido on the part of all involved…
The UAW is acting angry about the bankruptcy but is shedding geezer bennies and keeping the host alive to leech from
Ogabe gets to play all sides of economic perception
The company gets to shed the geezer bennies and by the end of this suspects there will be public sympathy….
sven10077 on April 1, 2009 at 4:31 PM
This “ripple effect” nonsense needs to stop – it is economic mumbo jumbo for the illiterate masses.
Our economy would be far healthier today if Bush had let failures fail.
LimeyGeek on April 1, 2009 at 4:31 PM
Hey y’all, I just saved 3-4 million American jobs. How, you ask? I just say it, and it is so.
Cool how that works, huh?
hillbillyjim on April 1, 2009 at 4:31 PM
Letting the Tedster write your education treatiste=s fake conservative
sven10077 on April 1, 2009 at 4:31 PM
As I said before, the GM board should refuse to resign.
Obama can’t make them.
MayBee on April 1, 2009 at 4:32 PM
Well, sure…those are the days in which the economy is unsaved.
Snowed In on April 1, 2009 at 4:27 PM
No doubt due to Dubya using his Mission Impossible gear to infiltrate the White House and re-institute the “Bush Depression.”
Bishop on April 1, 2009 at 4:32 PM
You bet it is and I hope they enjoy unemployment in lovely Michigan.
Three car domestic car companies down the tubes. What do they have in common?
The UAW. Unworkable work rules. Unsustainable benefit packages. Union thugs skimming off of the top.
Same thing happened in my home town in the 70’s. Lots of different steel companies went out of business. They all has one fatal flaw in common.
The United Steel Workers.
Unions kill jobs. The workers who vote for unions and keep unions in, deserve it when they find their dumb asses out of work.
Because no one buys shoddily produced, overpriced products of union labor when they aren’t forced to.
NoDonkey on April 1, 2009 at 4:32 PM
If he had let them go under, the Dems would have hung this around the GOP’s neck for years. GM went bankrupt under Bush! It’s his fault (not the UAW). Imagine the ads.
Wethal on April 1, 2009 at 4:32 PM
The big 0 is counting on all those who turn 18 before 2012 to replace the votes he loses from the UAW.
And those teens cannot wait to prove their collective stupidity!
calguyintexas on April 1, 2009 at 4:32 PM
we’d be six months into the reset and proper valuation of risk would be on the way….instead he gave political cover to a Marxist.
sven10077 on April 1, 2009 at 4:32 PM
Not the workers, the unions. There’s a big difference.
MarkTheGreat on April 1, 2009 at 4:32 PM
Broken watches and correct time….
Ford can turn a profit as can the Asians and Euro plants but somehow the UAW’s “finest” cannot….
“hope”
sven10077 on April 1, 2009 at 4:33 PM
He’s buying their votes with paid-for “volunteerism” and expanded ed benefits.
Wethal on April 1, 2009 at 4:34 PM
And prevented Obama from running the company to boot.
jimmy2shoes on April 1, 2009 at 4:34 PM
I assume the ’structuring’ will be for us to pay the health and retiree costs via taxpayer dollars, and then not let GM rewrite the union contracts, thus not solving the problem, just pushing the problem down the road.
Vashta.Nerada on April 1, 2009 at 4:34 PM
Dow rises?
Dow triples if he doesn’t return.
If he takes the entire corrupt and incompetent Democrat Congress with him, we’ll all be millionaires.
Democrats: America’s dead weight worthless anchor
NoDonkey on April 1, 2009 at 4:34 PM
I’m not so sure if the “poor workers” really had issues with Hoffa types they’d decertify but they won’t….
also if they were really “just normal blue collar All American gun-owning, God fearing moderates, who want protection from evil managers” they’d fight against the UAW using their dues to fund the circle jerk with the donks….
nah I am losing my sense of humor towards them.
sven10077 on April 1, 2009 at 4:36 PM
#1. All of the companies that needed “bailing out” should have been allowed to fail and go bankrupt the first time around (that’s what bankruptcy if for, restructuring). By going bankrupt, GM (et al) are able to re-negotiate their contract with the UAW and start making cars with a better business model.
#2. Does no one find it infuriating that Obama first asks for the resignation of the GM CEO and THEN suggests bankruptcy?!? If this isn’t socialism, I don’t know what is.
If you’re going to bailout the company, its like giving your drug addicted child money to go buy more drugs, and then expecting that they won’t come back and ask for more money later.
Geministorm on April 1, 2009 at 4:36 PM
april fools with sarah palin on every thread…. lets make this perm please – she brightens up mah day
Donut on April 1, 2009 at 4:37 PM
lorien1973
You say so much w/so few words. You crack me up!
JAM on April 1, 2009 at 4:37 PM
I LOVE the Sarah Palin pictures! I vote for permanent too.
ORconservative on April 1, 2009 at 4:39 PM
Pretty much. The irony is that it could be very beneficial to the GOP politically down the road. Think about it. The only realistic outcomes with GM at this point are:
1) They file for bankruptcy, leading to renegotiated union contracts which gives them a shot at profitability in the future.
2) They go through a prepackaged bankruptcy which protects the UAW, essentially dooming GM.
3) They’re continuously propped up by the Obama Administration with bailout money.
No matter what happens, Obama loses. Option #1 is the best outcome and even there, he’ll be forced to piss off the UAW bigtime.
Doughboy on April 1, 2009 at 4:39 PM
Not enough time to catch up on every posting here – so apologies if I’m repeating another’s thoughts:
Interesting how bankruptcy (which would mean restructuring deals with the UAW) was never an option BEFORE our Government, run now by the Democrats, took over GM.
I seem to remember statements to the effect of how we could not allow these institutions to fail.
Of course, failing, prior to the rebirth of ‘Government Motors’ – would allow the owner & board to be the ones negotiating with UAW in restructuring.
Now that Obama and his people essentially call the shots – how much better will the deal be for the union?
I smell a well-thought out strategy here that is coming to fruition – even as much as I hate to give them that much credit.
This – depending on the outcome of those negotiations – may show a wonderful payback for the union support of Obama & the Dems – all made possible by taxpayer money & sleight of hand maneuvering.
jrlingreenbay on April 1, 2009 at 4:39 PM
Yes, Bush gave them the money, but, as I recall, Obama, Pelosi, Reed, et.al. were screaming at him to do so. Bush shouldn’t have done it, but if the media does it job (yeah, right), Obama cannot be held blameless for the original loans.
mwdiver on April 1, 2009 at 4:40 PM
phreshone, sounds like you know a little about Chapter 11 and 7. I think Obama will do a little restructuring of the bankruptcy proceedings normally followed, after all, he has ignored long standing case law not to mention dancing around the constitution on a regular basis.
Can’t the secured creditors force a bankruptcy? Not that they would since the main secured creditor is the Government. Wherever they file I assume it will be a lib friendly venue.
hip shot on April 1, 2009 at 4:44 PM
Umm, hello? The Congress holds the purse strings. The current PotUS voted on the bailout, so its just as much his as anyone’s. The money was GIVEN to P4|_||_50n (I hesitate to even spell out the Name-Which-Must-Not-Be-Spoken, lest the Dow fall 300 pts.) to distribute as he saw fit.
Geministorm on April 1, 2009 at 4:44 PM
Gm needs to lose the union strangle , i don’t see how obama will do that.
the_nile on April 1, 2009 at 4:46 PM
Everyone is talking about how bankruptcy works, but if we’ve learned anything with the new president it’s that HE GETS TO MAKE IT UP AS HE GOES! Whatever laws are in effect now, they will be changed to allow Obama to do as he pleases.
efemdy on April 1, 2009 at 4:48 PM
But then, we needed the Stimulus & Bailout Bills right away to prevent a catastrophe.
[P.S. Thanks, Ed]
Loxodonta on April 1, 2009 at 4:48 PM
Obama is the new Teflon Don. Nothing sticks. So don’t get your hopes up.
Mr_Magoo on April 1, 2009 at 4:50 PM
Not just Ed, though. Let’s be fair.
lorien1973 on April 1, 2009 at 4:53 PM
Do I sense a Card Check/GM Union deal trade? Which basically means all those Union Workers leaving GM would end up forcing other plants to go union.
hawksruleva on April 1, 2009 at 4:54 PM
The REST of the story.
Yoop on April 1, 2009 at 4:55 PM
The Japanese won’t hire them…
sven10077 on April 1, 2009 at 4:55 PM
As I recall, the original money came from what Congress approved (but hadn’t been disbursed yet, to the dismay of the Dem leadership)to help the automakers build more “green” vehicles. When Bush refused to give them any of the TARP money, Obama, Reed, and Pelosi were begging
Bush to redirect that money to “save” Detroit.
I don’t see where we are in any disagreement as to who is to blame.
mwdiver on April 1, 2009 at 4:56 PM
clinton and obama are only teflon because of a sycophantic press. that’s reality, like it or not.
lorien1973 on April 1, 2009 at 4:56 PM
The real question here is what is going to happen to the union contracts. The UAW, and especially the unemployment and labor-bank provisions, have been an enormous drain on GM’s solvency.
If those contracts stand, then there’s no point in trying to salvage GM through structured bankruptcy.
That is the risk of an Obamunist-mediated bankruptcy: that the social agenda remain in place at the cost of the company.
Dark Horse on April 1, 2009 at 5:01 PM
This is like someone sinking thousands upon thousands of dollars into an obviously lemon car and then, and then!,after all that expense, deciding that maybe they better just have it towed to the junk yard and sold for whatever can be gotten for scrap metal, after all.
Brilliant!!!
MB4 on April 1, 2009 at 5:03 PM
-
It is April 1st or something?
-
And if the Taliban take out Washington, is that a bad thing?
-
Time adjustment:
George Orwell’s
1984, make that 2010.-esblowfeld on April 1, 2009 at 5:04 PM
ODS Exhibit A:
November:
Limbaugh/Hannity/Levin and their listeners: Clearly they’ve demonstrated that their business model fails. The big three should be allowed to go through bankruptcy. It worked for the airline industry, why can’t it work for the big three. This is all about protecting unions!
April:
Obama’s pushing for one of the big three to go through a structured bankruptcy?!? What a maroon, what a fascist, what a communist, talk about central planning, what a total marixst jerk, I hate him.
DeathToMediaHacks on April 1, 2009 at 5:04 PM
Obama would drive the McDonald’s franchise into the ground if he was in charge of it.
MB4 on April 1, 2009 at 5:05 PM
Union! Union!
Greg Toombs on April 1, 2009 at 5:05 PM
According to the WSJ, the “good” GM would have Chevy, GMC, Cadillac, Buick and the $20 billion or so in federal debt. The “bad” Gm would have Pontiac, Saturn, Saab, Hummer, and the rest of the debt.
steveegg on April 1, 2009 at 5:07 PM
Honda! Honda!
Toyota! Toyota!
MB4 on April 1, 2009 at 5:09 PM
Comment pages: 1 2 Next »