GM, Chrysler Mull 'Packaged' Bankruptcy to Get Bailout

Execs say that's 'way down the list,' but Detroit desperate for federal bailout
By Kevin Spak,  Newser Staff
Posted Dec 4, 2008 9:45 AM CST
General Motors CEO Rick Wagoner is in the passenger seat on the drive from Detroit to Washington yesterday to testify in a Congressional hearing on the auto industry bailout.   (AP Photo)
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(Newser) – Bankruptcy is officially on the table for General Motors and Chrysler, a source tells Bloomberg. The companies may accept a pre-packaged bankruptcy, which would force the union and creditors to make concessions, in order to get government help. At least three congressmen have had their staffs explore the possibility. GM CEO Rick Wagoner has argued against bankruptcy, saying it would force the company to liquidate.

Wagoner claims that consumers would shun an automaker in Chapter 11, afraid that their warranties wouldn’t be honored. But bankruptcy advocates say the government could simply guarantee the warranties as part of the rescue. “Bankruptcy is the only thing that can work,” said one law professor. “If I own bonds, GM can’t force me to take less than 100 cents on the dollar outside a bankruptcy court.”