GM-Chrysler deal on again? GM & Chrysler plan bankruptcy?

[mart]

GM-Chrysler deal on again? GM & Chrysler plan bankruptcy?

1) US senators grill auto CEOs, eye GM-Chrysler deal
2) Senator pans loans to Chrysler if it's for sale
3) GM, Chrysler considering bankruptcy to get
bailout: report
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1) Reuters, via The Guardian (UK)
http://www.guardian.co.uk/
Thursday December 4, 2008

http://www.guardian.co.uk/business/feedarticle/8112045

US senators grill auto CEOs, eye GM-Chrysler deal

By John Crawley and Kevin Drawbaugh

WASHINGTON, Dec 4 (Reuters) - The CEOs of General Motors
Corp and Chrysler LLC said they would consider restarting talks
about a merger during a nearly six-hour congressional grilling on the
industry's pleas for $34 billion in government aid.

The CEOs of GM, Chrysler and Ford Motor Co all promised to
refocus their businesses on higher fuel efficiency vehicles and lower
production costs as conditions of any federal bailout, and the heads
of GM and Chrysler said they would consider a merger if that was
also a condition.

"I would be very willing to look at it seriously," GM CEO Rick
Wagoner told the Senate Banking Committee, adding that merger
talks earlier this year were dropped on concerns GM did not have
the financing to merge with Chrysler.

Chrysler CEO Robert Nardelli said his job would likely be the first
to go in a merger with GM, but if that would save Chrysler and its
workers "I would do it."

The merger idea was pressed by Utah Republican Sen. Robert
Bennett and Tennessee Republican Sen. Bob Corker.

"I'd like to see that happen," Corker said. "I hope that's an
outcome... our country cannot really deal with three separate
automakers."

But United Auto Workers President Ron Gettelfinger questioned
claims of cost savings from a merger and told the committee such
a deal would bring "unbelievable" job losses.

Shares in both GM and Ford closed lower in a day of broadly
bearish trading as Detroit's once mighty Big Three again came
hat in hand to Washington with no clear prospect of getting the
money they seek. The same CEOs failed to secure federal help
two weeks ago in an earlier round of congressional hearings.

They warned again that a steep slump in car sales and sluggish
world credit markets are threatening their futures and millions
of good-paying jobs.

This time the executives did not fly in on the corporate jets that
drew sharp criticism on their last visit.

GM's Wagoner arrived at the Capitol building in a light blue
Chevrolet Volt electric prototype, but drove most of the way
from Detroit in a Chevrolet Malibu Hybrid. Ford CEO Alan
Mulally came in a white Ford Escape Hybrid, and Chrysler's
Nardelli arrived in a white EV electric vehicle.

With the government showering a $700 billion bailout fund
on distressed banks and Wall Street, there is wide agreement
among lawmakers and the Bush administration that the
automakers need help too, but deep division about how to
go about it.

MORE DEBATE AHEAD

No resolution of the auto aid issue is expected until next week
at the earliest, when the full Congress reconvenes.

"We need to sit down over the next 24 to 48 hours and see
what we can do to pull something together," said Banking
Committee Chairman Christopher Dodd, a Connecticut
Democrat.

The CEOs will appear before the House of Representatives
Financial Services Committee on Friday.
Lawmakers are suspicious of Detroit's promises to reform,
given its past failures to ween itself from gasoline guzzlers
and make cars that consumers want to buy.

"I don't trust the car companies' leadership," said New York
Democratic Sen. Charles Schumer at the Senate hearing.
But in a comment reflecting many lawmakers' sentiments, he
added, "We can't let the industry fail."

GM wants $4 billion and Chrysler $7 billion by year's end.
GM also wants another $8 billion in early 2009 and a $6
billion line of credit if its cash position erodes further. Ford
says it has enough funds now but wants a $9 billion line of
credit.

An economist told the committee that the estimated $34
billion overall cost of the bailout cost could rise. Two
weeks ago, the automakers had estimated they needed
$25 billion.

The industry may need $75 billion to $125 billion to avoid
bankruptcy and the companies may well return asking for
more money later if they get the $34 billion they want now,
said Mark Zandi, chief economist of Moody's
Economy.com.

"I'm skeptical, doubtful that it's going to end at $34 billion,"
Zandi said.

On a combined basis, sales by the three automakers plunged
40 percent in November. The economy, already a year into
recession, would suffer "severe and sweeping" damage if one
or more of the automakers failed, Dodd said.

But Alabama Sen. Richard Shelby, the top Republican on the
committee, voiced doubts shared by some senators on whether
taxpayer funds are well-spent helping struggling businesses.

Shelby opposed the $700-billion bailout of Wall Street and the
banks and "applying the same standard, I intend to oppose
bailing out the Big Three auto manufacturers," he said.

WHITE HOUSE RESERVING JUDGMENT

The three companies submitted plans to Congress Tuesday
intended to show that they can still be viable businesses.
Congress last month demanded the plans.

The White House said on Thursday it was too early to judge
the viability plans and that the administration wanted to hear
the testimony to Congress first.

The Bush administration, along with some auto state senators
from both parties, has favored helping the industry by
redirecting $25 billion in funds from an existing Energy
Department fuel-efficiency retooling loan program.

But many Democrats oppose this and want part of the
administration's $700-billion bank bailout, known as the
Troubled Asset Relief Program, dedicated to automakers.
This approach has been opposed by the administration,
however.

The three CEOs said they would accept some sort of
oversight board as a condition of a bailout. They also
vowed to reshape their business models. For instance,
GM -- the world's largest automaker -- plans to sell
its Saab unit and drop its Pontiac and Saturn labels.

BANKRUPTCY DEBATED

GM has repeatedly dismissed filing for bankruptcy as an
option, saying it would damage consumer confidence in its
products. Wagoner told reporters before the hearing that
bankruptcy is "not our plan" and said it would be a shame
for the United States to drop out of the auto race.

Ford and Chrysler also object to bankruptcy to save their
industry. But some lawmakers are exploring the possibility
of conditioning federal aid on an speedy court restructuring
of one or more of the Detroit manufacturers.

The head of the Government Accountability Office (GAO),
the investigative arm of Congress, said Congress could
consider a two-step approach with an immediate cash infusion
to avert any collapse, followed by a program for distributing
more loans over time based on certain criteria being met.

Gene Dodaro, acting GAO comptroller general, said an oversight
board could administer the financing. He added that the Bush
administration has legal authority to use money from its bank rescue
program to help Detroit. Moreover, Dodaro said, the Federal
Reserve could step in under certain circumstances.

Shares of GM closed regular trading Thursday down 16.1
percent at $4.11, while Ford ended 6.7 percent lower at $2.66,
both on the New York Stock Exchange.

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2) CNN
http://money.cnn.com
December 04, 2008: 03:38 PM EST

http://money.cnn.com/news/newsfeeds/art ... c3eaf0.htm

Senator pans loans to Chrysler if it's for sale

Senator questions government loans to Chrysler, says money
would keep it afloat until sale


NEW YORK (Associated Press) - A U.S. senator is questioning
whether the federal government should loan money to Chrysler
LLC, saying that the cash would just keep it in business long
enough to be sold.

Sen. Bob Corker, R-Tenn., a critic of the industry, said Thursday
during a Senate Banking Committee hearing in Washington that
Chrysler's private equity owner won't put any more money into
the business and intends to sell it.

By loaning Chrysler the $7 billion it requested, the government
would just be providing capital to keep the automaker afloat
until a sale by Cerberus Capital Management LP, Corker said.

"You want to hang around long enough so you can date
somebody and hopefully get married soon before you run out
of money," he told CEO Robert Nardelli, who heads the
Auburn Hills, Mich.-based company.

Nardelli told the committee that he never thinks about a sale,
and that he and other Chrysler employees are working hard
to make Chrysler stand on its own.

But Corker and Committee Chairman Chris Dodd, D-Conn.,
pointed out that Chrysler's viability plan submitted to Congress
says it is looking for alliances and consolidation. Corker said
Chrysler has been in talks with General Motors Corp. about
GM acquiring Chrysler, which was later confirmed by GM
Chairman and CEO Rick Wagoner.

"That hardly sounds like a go-it-alone deal," Dodd said.

But Nardelli said when the company refers to alliances it is
talking of deals such as one between Chrysler and Nissan
Motor Co. to make pickup trucks for the Japanese
automaker, putting factories to more efficient use.

"It is sharing manufacturing facilities to avoid heavy capital
expenditures on transmissions, on axles," Nardelli said.
"That's really trying to improve our viability, not selling
ourself."

Chrysler also is making minivans for Volkswagen AG, and
it has signed a deal for Nissan to manufacture small cars to
be sold by Chrysler.

Cerberus purchased 80.1 percent of Chrysler last year
from Daimler AG in a $7.4 billion deal. Unlike Ford Motor
Co. and GM, it is not publicly held, and some lawmakers
have questioned whether the government should put money
into a private company.

But Nardelli said investors in Cerberus are the same as those
who put money into the other automakers, such as pension
funds.

Chrysler, Corker said, hasn't invested in product development
and doesn't have technology to compete with other automakers.

Nardelli said some of the criticism was "spot on" and said
Chrysler was "somewhat hollowed out" by Daimler, which
tried to sell European designs in the U.S. Some of those
designs were canceled when he arrived, Nardelli said.
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3) Reuters News Agency
http://www.reuters.com
Thu Dec 4, 2008 8:06am ES

http://www.reuters.com/article/americas ... XO20081204

GM, Chrysler considering bankruptcy to get
bailout: report

(Reuters) - General Motors Corp and Chrysler LLC are
considering accepting a pre-arranged bankruptcy as the
last-resort price of getting a multi-billion dollar government
bailout, Bloomberg reported, citing a person familiar with
internal discussions.

In response to automakers' bailout plea, staff for three
members of Congress have asked restructuring experts if a
pre-arranged bankruptcy -- negotiated with workers,
creditors and lenders -- could be used to reorganize the
sector without liquidation, Bloomberg said.

General Motors and Chrysler could not be immediately
reached for comment by Reuters.

Industry executives and analysts say the immediate carnage
from a bankruptcy of General Motors Corp, Ford Motor
Co or Chrysler would spread throughout an industry that is
bleeding cash in a global slowdown.

All three automakers have urged Congress to authorize $34
billion in loans and credit lines, saying they will restructure,
and cut models, jobs and executive pay to remain viable.

The White House did not dismiss the industry's $34 billion
figure on Wednesday but said it was too early to say what
it might support on an emergency basis.

Senate Majority leader Harry Reid wants to try to find a way
to avert threatened bankruptcies in the U.S. auto industry with
Detroit Three chief executives readying for a make-or-break
hearing on Thursday on the bailout request.

Negotiations currently are splintered among small groups,
making it unlikely that a proposed solution such as bankruptcy
would emerge until next week at the earliest, the person briefed
on internal talks told Bloomberg.

GM's failure alone would mean more than $200 billion in
interest-bearing debt at the carmaker and its GMAC financing
arm could be worthless for countless retirees and taxpayers,
further upsetting consumption patterns.
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[scottm]

Chrysler Hires Law Firm Jones Day as Bankruptcy Counsel
http://online.wsj.com/article/SB122849949643583239.html

Chrysler LLC has hired a prominent law firm to provide counsel on a possible bankruptcy filing, people familiar with the matter said, adding to concerns the auto maker could go into default by the end of the month.

[scottm]

Deal reached in principle on $15B auto bailout
http://apnews.myway.com/article/20081210/D94VQGEO0.html

A government "car czar" with the power to force U.S. automakers into bankruptcy would dole out $15 billion in emergency loans to the failing industry under an emerging deal between the White House and congressional Democrats.

Officials struck an agreement in principle on the measure Tuesday and hoped to finalize it and schedule swift House and Senate votes as early as Wednesday. Money could be disbursed within days to cash-starved General Motors Corp. (GM) and Chrysler LLC, while Ford Motor Co. (F) - which has said it has enough liquidity to stay afloat - would be eligible for federal aid.

All three would have to negotiate with labor unions, creditors and others and submit blueprints by March 31 to an industry czar named by President George W. Bush showing how they would restructure to ensure their survival. If not, the emergency loans would be revoked, the companies cut off from further federal help, and the government overseer could order his own overhaul, including forcing them into bankruptcy.