Chapter 11 is, in actuality, the only way they’re going to get out from under all the problems they have. It’s not a great idea, but it’s the best of the bad choices remaining.
For example, the only way GM’s going to be able to trim dealerships is bankruptcy. The legal actions from when they closed Oldsmobile are still ongoing and have already run into the BILLIONS.
Look inside GM’s plan to Congress. Therein, on p. 11, is the following:
“GM’s Plan includes, and is conditioned upon, significant sacrifice and deleveraging of GM’s balance sheet...
GM will immediately engage current lenders, bond holders, and its unions to satisfactorily negotiate the changes necessary to achieve this capital structure.”
OK, so how does one negotiate changes to all those terms, especially the bond holders, without doing a Chap11?
Chap11 is the ONLY way to legally re-open the terms of bonds, labor contracts, revolvers, etc and change where the money flows.
For the first time today, the auto industry is mentioning something I have been talking about for more than a month: A government assisted Chapter 11 bankruptcy. Under this plan, the government will provide all of the necessary debtor in possession financing and insure the warranties. This would remove two of the major hurdles folks who are against chapter 11 are concerned about.
The legal actions from when they closed Oldsmobile are still ongoing and have already run into the BILLIONS.
For years I always drove an Oldsmobile. When they eliminated Olds, I stopped buying GM cars. End of message.
I purchased a Jeep and have been satisfied to a point. My next vehicle will be a Honda.