White House: "quick and surgical" bankruptcy may be GM and Chrysler's best chance for survival.

[Clio the Leo]

Obama Admin Gives Failing Grades To GM, Chrysler Plans

By Henry J. Pulizzi

Of DOW JONES NEWSWIRES

WASHINGTON (Dow Jones)--The Obama administration gave failing marks to the restructuring plans of General Motors Corp. (GM) and Chrysler LLC, a decision that moves the struggling auto makers - and a giant piece of the U.S. economy - closer to collapse.

Administration officials, briefing reporters ahead of a speech Monday morning by President Barack Obama, said the government will give the auto makers enough working capital to work with stakeholders to craft more aggressive strategies. It warned, however, that a "quick and surgical" bankruptcy may be each company's best chance for survival.

In GM's case, the government will provide working capital for 60 days. Though it said the company's current plan isn't viable, it expressed confidence the auto maker can survive. To help give GM a fresh start, the White House asked Chief Executive Rick Wagoner to step down.

The White House's view of Chrysler was more harsh: it doesn't believe the company is viable as a standalone entity. Chrysler's potential deal with Italian automaker Fiat (FIAZY), however, could provide a "path to viability," the administration said. The government will give Chrysler working capital for 30 days, a period it says is sufficient to wrap up the agreement with Fiat.

The administration said Fiat has committed to building new fuel efficient cars and engines in the U.S. as part of a deal with Chrysler.

If that deal is a success, the administration said it will consider investing up to $6 billion in Chrysler, an amount the company already has requested. If the Fiat deal doesn't come to fruition, however, Chrysler won't receive any more taxpayer funds, the administration said.

An administration official said he couldn't put a figure on the amount of working capital the government will provide while the auto makers hone their plans.

(more)
http://online.wsj.com/article/BT-CO-20090330-700004.html

[AllentownJake]

1. Wish we played the same hardball with the banks that we do with companies that make products.

[Teaser]

2. It's harder to do that with banks

because they have made themselves part of every aspect of the economy. Every industry, every business, every individual has interactions with banks, and a domino effect of bank failures can more quickly percolate (in the technical diffusion sense) across domain boundaries in the economy. That is slower with large industries like automakers.

[Mass]

3. The domino effect if Chrysler or GM fails is going to be huge as well.

How many companies do you think work for them (including banking industries...)?

[Teaser]

5. no doubt. But the force multiplier for big banks is still larger.

.

[indimuse]

4. a.k.a..

*banksters* just sayin... :)

[Teaser]

6. again, no doubt.

no industry or sector should be allowed to become "too big too fail".

But, unfortunately, here we are. Going forward, I suggest that be a stipulation: if you get to be "too big too fail", we will act to make you small enough to be able to fail again.

[tritsofme]

7. If the Feds provide DIP financing, liquidation will not be a problem.

We have just been delaying the inevitable for the last few months with GM.