Published on ShanghaiDaily.com (http://www.shanghaidaily.com/)
http://www.shanghaidaily.com/sp/article/2008/200812/20081208/article_383628.htm
Autos reject bankruptcy
Created: 2008-12-8
Author:Jeff Green
FINANCING a bankruptcy by General Motors Corp or Chrysler LLC would cost at least twice as much as the auto makers say they need in United States government bailout loans, Chrysler and a restructuring expert said.
Chrysler, which said it hired the Jones Day law firm to review bankruptcy as an option it later rejected, would need US$20 billion for bankruptcy financing, triple its US$7 billion loan request, according to a company report to Congress, Bloomberg News reported.
A GM bankruptcy would cost US$40 billion to US$50 billion to finance, Edward Altman, a professor at New York University's Stern School, told Congress.
GM is seeking US$18 billion in bailout loans.
"Unfortunately, this traditional loan, even for US$18 billion, is inadequate and is destined to fail in the current environment and will likely be followed by additional requests for more rescue funds or a bankruptcy petition," said Altman. He urged the government to push banks that received other bailout aid to provide bankruptcy loans for car makers.
But GM CEO Rick Wagoner told Congress that GM wasn't pursuing that option because it would scare away buyers and further siphon off revenue, forcing liquidation. Even a government-backed bankruptcy would be too difficult and risky, GM lead director George Fisher said.
Chrysler, which said it hired the Jones Day law firm to review bankruptcy as an option it later rejected, would need US$20 billion for bankruptcy financing, triple its US$7 billion loan request, according to a company report to Congress, Bloomberg News reported.
A GM bankruptcy would cost US$40 billion to US$50 billion to finance, Edward Altman, a professor at New York University's Stern School, told Congress.
GM is seeking US$18 billion in bailout loans.
"Unfortunately, this traditional loan, even for US$18 billion, is inadequate and is destined to fail in the current environment and will likely be followed by additional requests for more rescue funds or a bankruptcy petition," said Altman. He urged the government to push banks that received other bailout aid to provide bankruptcy loans for car makers.
But GM CEO Rick Wagoner told Congress that GM wasn't pursuing that option because it would scare away buyers and further siphon off revenue, forcing liquidation. Even a government-backed bankruptcy would be too difficult and risky, GM lead director George Fisher said.
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