The chief executive of General Motors today seconded the notion that the Obama administration is backing away from supporting a "structured bankruptcy" of GM and Chrysler, as it sees the rapid deterioration of the vast chain of parts and services companies that serve the U.S. auto companies.
Rick Wagoner, in Washington for meetings with task force officials, told reporters at a press conference that "the concerns about the supply chain have risen pretty rapidly recently," and that this is leading the Obama task force to take "a very broad view" to "make sure that anything they do doesn't fix one problem here and not there."
Wagoner's comments came one day after financier Steve Rattner, who is heading the Obama auto task force, said that "bankruptcy is not our goal nor a desirable outcome."
GM and Chrysler face a March 31 deadline to come to terms with unions, bondholders and the government on a plan to keep the companies in business, under the terms of a deal that has granted them $17.4 billion in short-term government financing. Investors and many commentators seem to expect that would include a structured or "pre-packaged" bankruptcy, designed to get the companies back to normal operations in 60 to 90 days, as the only way to force needed concessions on unions and bondholders.
But Wagoner said this undercounts the uncertainties in any bankruptcy filing. Such a course "brings significant risks and put things out of the control" of management and the board of directors, Wagoner said. "It could work, but it might not work." In particular, he said that if the quick timetable gets slowed down to more than a couple months, then GM would be forced to liquidate.
Wagoner said that Obama officials aren't hasty to force a bankruptcy, and he suggested they may have learned a lesson from the Bush administration's forced bankruptcy of Lehman Brothers, a decision now seen by most as a mistake.
Wagoner said that the furor over bonus payments to American International Group should serve as reminder of how different is the proposed bailout of the auto companies. With unions, suppliers, dealers and bondholders all expected to absorb losses, and with compensation cuts and no bonuses for top executives, "everybody has got skin in the game at GM."
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