General Motors and Chrysler may be strongly opposed to a Chapter 11 bankruptcy filing, but the U.S. Treasury Department could be planning to force their hand in the matter. Per a new report, the Treasury Department is readying a $40 billion financing package, should either of the Detroit automakers file for bankruptcy protection.
A person close to the situation revealed to Bloomberg that “everything is on the table†for GM and Chrysler, including possible Chapter 11 filings for both companies. President Obama wants all scenarios to be planned out, but is reportedly keeping bankruptcy talks quiet as to not upset the UAW.
There is an ongoing debate as to which scenario is best for the automakers and the U.S. government – further government funding or a privately-funded bankruptcy plan – but it sounds as if the Obama administration would prefer to hand off the problem to the financial sector. The government has already approached Citigroup and J.P. Morgan Chase to provided bankruptcy financing, should GM and Chrysler require it.
GM and Chrysler claim the cost of bankruptcy would run the government $125 billion, but several experts believe that is on the high side. The $40 billion the Treasury Department is looking to secure would go towards the day-to-day operations of both companies, as well as repaying the $17.4 billion already doled out to the ailing automakers.
As it stands now, GM has received $13.4 billion in government funds and has requested an additional $16.6 billion, totaling $30 billion. The Detroit-based automaker has also requested another $7.7 billion to aid in the development of more fuel efficient vehicles.
Chrysler has received $4 billion and has submitted a request for an additional $5 billion.
It remains to be seen which scenario will play out, but it sounds as if two of the three big U.S. automakers could be filing for bankruptcy protection within the next few weeks.
