White House Favors Managed Bankruptcy for Chrysler, GM

By Harry Kimball,  Newser Staff
Posted Mar 30, 2009 4:05 PM CDT
Fiat is poised to purchase parts of Chrysler.   (AP Photo)
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(Newser) – The Obama administration’s favored plan to rescue GM and Chysler is a managed bankruptcy that would relieve them of their biggest liabilities by splitting the carmakers into “good” and “bad” components, the Wall Street Journal reports. The “good” GM would  comprise profitable brands like Chevy and Cadillac as a standalone concern. The “good” Chrysler would become a subsidiary of Fiat, if that deal is finalized.

The "old GM" would be carry the company's debt as well as tens of billions of dollars in retiree and health care obligations that have hobbled the automaker in recent decades, the Journal says; it would include weaker brands like Hummer and Saturn. At Chrysler bankruptcy would be used to force creditors and labor unions to accept huge reductions.