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Obama Team Weighs Streamlined Auto Bankruptcy

A 'prepackaged' plan likely would include government financing, take less time

By Sarah Quinn, Newser Staff

Posted Nov 21, 2008 10:55 AM CST

(Newser) – Barack Obama’s transition team is looking at a streamlined, “prepackaged” bankruptcy for the Big Three automakers, Bloomberg reports. In a “prepack,” the companies already would have financing lined up when they go to court, and would have to reach agreements with banks, workers, and suppliers. The government likely would provide financing, but it “limits government financial commitment,” one lawyer said.

So far, though, the idea isn’t popular. Chrysler's CEO said a prepack would be “more negative” than restructuring, and officials from Ford and General Motors have examined and rejected the idea. Democratic legislators also are against bankruptcy. But if the goal is the save the companies and protect the government, “the logical step is a prepack,” a restructuring adviser said.

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General Motors CEO Richard Wagoner, Chrysler CEO Robert Nardelli, and Ford CEO Alan Mulally testify on Capitol Hill on Nov. 19, 2008, on the automotive industry bailout. (AP Photo)

Speaker of the House Nancy Pelosi, shown Nov. 18, 2008, on Capitol Hill, said of US automakers: "Unless they can show us the plan, we can't show them the money." (AP Photo)

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The difficulty is assuring the American people that the bailout money won’t simply defer the company’s failure for six to 12 months. - Martin Bienenstock, bankruptcy lawyer

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Obama Team Weighs Streamlined Auto Bankruptcy