General Motors has been arguably on the path to bankruptcy since the 1970s, but managed to limp through four decades before ultimately succumbing to Chapter 11 this month. The automaker’s descent into bankruptcy increased rapidly over the last few months, but a new report indicates the company’s downfall could have come much sooner.
In a recent interview with Fox News, former Vice President Dick Cheney revealed that President George W. Bush was fully aware of GM’s need to file for bankruptcy protection, but opted to punt the decision to the next administration.
“I thought that, eventually, the right outcome was going to be bankruptcy,†Cheney said of GM. “It had to go through such a dramatic restructuring to have any chance of survival that they had to be able to renegotiate labor contracts and so forth, and the President decided that he did not want to be the one who pulled the plug just before he left office.â€
Instead of letting GM slip into bankruptcy on his watch, President Bush carved out more than $17 billion in emergency loans from the Troubled Asset Relief Program to keep the automaker afloat until the next President took office. That initial $17.4 billion has now snowballed into more than $50 billion in government loans.
Moreover, President Bush’s decision to use TARP funds to temporarily keep GM and Chrysler out of bankruptcy could push the Detroit automakers into Chapter 7 liquidation. A federal court of appeals is slated to hear objections against Chrysler’s sale to Fiat, with one of the objections involving the use of TARP funds.
