GM and Chrysler May Indeed Go Bankrupt

The Big Three automotive soap opera appeared to reach a happier-than-expected finale in mid-December, when General Motors and Chrysler LLC received a $17.4 billion low-interest loan from the United States Government. After Ford announced it does not yet need government assistance to survive the current economic and sales crisis, apparently GM and Chrysler are not off the hook yet.

According to Bloomberg, the aforementioned 2/3 of Detroit's automakers may have to be forced into bankruptcy by the government itself in order to assure the repayment of the $17.4 billion in federal bailout loans. This would of course mean we might as well say goodbye to both companies.

The United States Treasury website has loan agreements posted which specify that taxpayers are currently behind prior creditors such as the Citigroup Inc. or Goldman Sachs Group Inc. on the repayment list. Bloomberg quotes two persons who say that the government has hired a law firm to aid getting in front of the line for repayment.

If the government officials do not manage to change their place in line for repayment, they can force the companies into bankruptcy as a condition for giving them more bailout money. According to bankruptcy lawyer Don Workman, quoted by Bloomberg, the federal officials would actually finance the bankruptcies with a “debtor in possession” loan, which would give the government priority over the other creditors.

Both General Motors and Chrysler LLC have ran from the Chapter 11 restructuring plan like ants from a forest fire, consensually saying that would scare customers even more and eventually lead to liquidation. In the meantime, the two companies are actively working for the February 17 deadline, when they will have to show a plan on how are they going to repay the bailout money and reduce their costs of labour.
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About the author: Alex Oagana
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Alex handled his first real steering wheel at the age of five (on a field) and started practicing "Scandinavian Flicks" at 14 (on non-public gravel roads). Following his time at the University of Journalism, he landed his first real job at the local franchise of Top Gear magazine a few years before Mircea (Panait). Not long after, Alex entered the New Media realm with the project.
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