U.S. plans to ease GM into bankruptcy: report

[DBeaSSt]

http://news.yahoo.com/s/nm/20090401/bs_nm/...tos_report_sb_4

U.S. plans to ease GM into bankruptcy: report

Reuters

WASHINGTON (Reuters) – The Obama administration is seeking to ease General Motors Corp into a "controlled" bankruptcy by persuading some creditors to agree to a plan that would divide the company into two pieces, the New York Times reported on Wednesday.

Citing people briefed on the matter, the Times said the plan is to push GM into a structured bankruptcy "somewhere between a prepackaged bankruptcy and court chaos," using taxpayer financing for leverage.

The administration is drawing in part from its experience with troubled banks, seeking to create a new, healthier GM, but leaving behind its liabilities and less valuable assets, possibly for liquidation, the Times said on its website.

Under the plan, GM would file for prearranged bankruptcy, the report said, and would then use a sale authorized under Section 363 of the U.S. bankruptcy code to sell off desirable assets to a new company financed by the government.

These more valuable assets might include Cadillac and Chevrolet, as well as assets the company needs to run its business, the Times said.

Plans are still under discussion and details are subject to change, the report said.

GM officials warned on Tuesday there was a rising chance it could file for bankruptcy by June.

One plan under discussion would be to form a new company of the automaker's best assets, while laggard brands and money-losing assets would remain under bankruptcy protection, a person familiar with that strategy told Reuters.

President Barack Obama's thinking on the crisis facing GM has not changed since Monday, a senior administration official told Reuters on Tuesday.

"Nothing has changed on this," the official said when asked about a Bloomberg report that the president has determined that a prepackaged bankruptcy is the best way for GM to restructure and become competitive. "This report is not accurate."

The White House wants the 60-day period for GM and a 30-day period for Chrysler to play out, as announced by the president on Monday, the official said, speaking on condition of anonymity.

(Additional reporting by Kevin Krolicki and Jeff Mason in Washington and Soyoung Kim in Detroit; writing by Todd Eastham; editing by Lincoln Feast)

The rumor mill appears to be in full production. Of course the administration denies it.

[vonVeezelsnider]

It needs to happen. Valuable Assets in, crap out.

[ShadowDog]

I don't view this as being such a bad thing, but that things are so bad they would require a measure such as this.

[toesuf94]

Here is the problem I have with this plan: The complete destruction of the US Dollar. Our government is buying up all of the bad debt in the country right now. AIG, bad mortgages, bad paper in the banking sector, and now will end up with the legacy costs and bad debts of GM (and others we have yet to begin to discuss). Let us not forget we are still fighting wars abroad, as well as picking up the tab for every natural disaster that GOD can throw at us! (Does anyone buy insurance anymore???) While I am all about saving GM (I Love and only buy it's products in the automotive sector) I worry that the Government meddling and printing money to cover all of this bad paper and what it is going to do to OUR standard of living, as well as that of my children.

What all of this bad debt/paper is going to do is de-value our currency and make buying our debt a bad idea to foreign investors. This is why China floated the balloon this week about a new WORLD currency that would move everyone off of the US Dollar and onto a united currency. China now holds over 3 Trillion of our bonds, and if they stop buying them, our financial sector will collapse. Thier balloon was a warning to the US to stop ruining our own currency.

So, the question in this story will be: How much bad debt will WE the People get stuck with, and will it be the straw that breaks the camel's back?