GM Bankruptcy Not So Bad

This is the first somewhat upbeat story I've read on the future of GM and Chrysler, which most people seem to think are doomed no matter what. This story is from Fortune mag:

Up until a few months ago, bankruptcy for the corporate giant was nearly unthinkable. Former CEO Rick Wagoner all but refused to utter the word, so convinced was he that it would be fatal to customers' confidence in GM's brands.

Now, maybe, it doesn't look so bad. GM (GM, Fortune 500) is still selling cars and trucks, despite all the bad news associated with the company. And Chrysler is on the verge of exiting from its bankruptcy in record time. Already, we are told, the new guys from Fiat are getting ready to make over the company and blitz consumers with new and improved Italian-American products. Perhaps bankruptcy is a good thing.

But let's pause for a minute and think about what a post-bankruptcy GM will actually look like. You must read the rest

Obama Speaks on Chrysler Video

Chrysler will get a "new lease on life," Obama says. Chrysler has filed for bankruptcy while Chrysler teams up with Fiat. Obama says Chrysler and Fiat have a "strong chance of success."
Obama gets mad, slamming a group of investors and hedge funds for pushing Chrysler to bankruptcy. He says they were waiting for a government-funded bailout instead of making sacrifices as others have. (Slime)
"I don't stand with them," Obama said.

U.S. officials had offered Chrysler's secured lenders $2.25 billion in cash if they would agree to writedown the $6.9 billion in secured debt that the company owed. But a small group of hedge funds refused the 11th-hour deal.

An administration official this morning expressed disappointment, saying the holdouts had failed to "do the right thing," but that "their failure to act in either their own economic interest or the national interest does not diminish the accomplishments made by Chrysler, Fiat and its stakeholders, nor will it impede the new opportunity Chrysler now has to restructure and emerge stronger going forward."

"I don't stand with those who held out when everybody else is making sacrifices," Obama said at the White House today. WaPo

GMAC will finance new Chrysler sales. If you decide to buy a car, I hope it will be an American car, Obama said.
It's interesting to note, Obama once owned a Chrysler 300.

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More perspective on the handful of slimy hedge funds and investors from Congressman Gary Peters of Michigan:

Failure of Leadership Yet Wagoner Gets $23 Million

This is the kind of thing that has to change.

MSNBC: When General Motors Chairman and CEO Rick Wagoner leaves the automaker, he'll take with him a financial package worth an estimated $23 million.

The terms of General Motors Corp.'s government loans prevent it from giving executives severance pay, but they don't affect earned pensions.

Obama tells auto workers: "I will fight for you. You're the reason I'm here today." Obama appointed Edward Montgomery, director of recovery for auto workers and communities, to cut through the red tape to use stimulus funding to create new manufacturing jobs. Here is the announcement that Chrysler and GM just aren't cutting it: 

White House's Auto Task Force findings:

Viability of Existing Plans: The plans submitted by GM and Chrysler on February 17, 2009 did
not establish a credible path to viability. In their current form, they are not sufficient to justify a
substantial new investment of taxpayer resources. Each will have a set period of time and an adequate amount of working capital to establish a new strategy for long-term economic viability.
• General Motors: While GM’s current plan is not viable, the Administration is confident that with a more fundamental restructuring, GM will emerge from this process as a stronger more competitive business. This process will include leadership changes at GM and an increased effort by the U.S.
Treasury and outside advisors to assist with the company’s restructuring effort. Rick Wagoner is
stepping aside as Chairman and CEO. In this context, the Administration will provide GM with working capital for 60 days to develop a more aggressive restructuring plan and a credible strategy to implement such a plan. The Administration will stand behind GM’s restructuring effort.
• Chrysler: After extensive consultation with financial and industry experts, the Administration has reluctantly concluded that Chrysler is not viable as a stand-alone company. However, Chrysler has reached an understanding with Fiat that could be the basis of a path to viability. Fiat is prepared to transfer valuable technology to Chrysler and, after extensive consultation with the Administration,
has committed to building new fuel efficient cars and engines in U.S. factories. At the same time, however, there are substantial hurdles to overcome before this deal can become a reality.
Therefore, the Administration will provide Chrysler with working capital for 30 days to conclude a definitive agreement with Fiat and secure the support of necessary stakeholders. If successful, the government will consider investing up to the additional $6 billion requested by Chrysler to help this
partnership succeed. If an agreement is not reached, the government will not invest any additional taxpayer funds in Chrysler.
• A Fresh Start to Implement Aggressive Restructurings: While Chrysler and GM are different companies with different paths forward, both have unsustainable liabilities and both need a fresh start. Their best chance at success may well require utilizing the bankruptcy code in a quick and surgical way. Unlike a liquidation, where a company is broken up and sold off, or a conventional bankruptcy, where a company can get mired in litigation for several years, a structured bankruptcy
process – if needed here – would be a tool to make it easier for General Motors and Chrysler to clear away old liabilities so they can get on a path to success while they keep making cars and
providing jobs in our economy. Read more here.

Read more about Chrysler and GM viability and warranties for those GMs and Chryslers you own here.
Americans say let 'em die. Those would be the Americans who don't live in Detroit.

No More Money for Chrysler and GM

Obama will make an announcement this morning about the fate of the automakers at 11 am.
The question everyone seems to be asking now is: why isn't Obama firing banking execs? I suspect the Obama administration isn't firing banking execs because while they're greedy they're not incompetent. But the automaker execs seem to be clearly incompetent.
The car companies are going to get extra time to come up with better plans. For Chrysler it's merge with Fiat or else.

NYT: The White House on Sunday pushed out the chairman of General Motors and instructed Chrysler to form a partnership with the Italian automaker Fiat within 30 days as conditions for receiving another much-needed round of government aid.

The decision to ask G.M.’s chairman and chief executive, Rick Wagoner, to resign caught Detroit and Washington by surprise, and it underscored the Obama administration’s determination to keep a tight rein on the companies it is bailing out — a level of government involvement in business perhaps not seen since the Great Depression.

President Obama is scheduled to announce details of the auto package at the White House on Monday, but two senior officials, offering a preview on condition of anonymity, made clear that some form of bankruptcy — a quick, court-supervised restructuring, as they described it — could still be an option for one or both companies.

Mr. Obama’s auto industry task force, in a report released Sunday night assessing the viability of both companies and detailing the administration’s new plans for them, concluded that Chrysler could not survive as a stand-alone company.
The report said the company would get no more help from the government unless it can finalize a proposed alliance with the Italian automaker Fiat by April 30. It must also reduce its debt and health-care obligations.

If a deal is reached between Chrysler and Fiat, the administration says it would consider another loan of $6 billion to Chrysler.

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Jennifer Granholm is mad, calls Rick Wagoner a "sacrificial lamb:"

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Auto Plan Out By March 31 Makers Hopeful

Bankruptcy is not the goal, says Steven Rattner, head of the auto task force. An upside to the AIG rage-- it has focused congress on AIG, allowing the auto task force to actually get some work done. Chrysler, barely making it, likely to partner with Fiat.

Obama's Task Force Meets With Chrysler Seeking $22 Billion More

Forbes: Top executives of Chrysler LLC were meeting Wednesday with members of the Obama administration's auto task force, discussing requests for billions in new loans to keep the troubled automaker afloat.

Chrysler Chairman and CEO Bob Nardelli, Vice Chairman Tom LaSorda and Chief Financial Officer Ron Kolka were meeting with the administration panel, said a Chrysler official, who spoke on condition of anonymity because the talks were private.

What they're asking for:

Struggling to survive, Chrysler and General Motors Corp. (nyse: GM - news - people ) have received $17.4 billion in federal loans. They are seeking an additional $21.6 billion to keep operating during a difficult recession and a major plunge in auto sales.

Auburn Hills, Mich.-based Chrysler has received $4 billion in loans and wants another $5 billion in federal aid and the approval of an alliance with Italian automaker Fiat (nyse: FIA - news - people ) SpA.

The company said in a Feb. 17 progress report to the Obama administration that it needed the loans to stave off a liquidation of the company. The automaker lost $8 billion last year.