Bush Considering 'Orderly' Auto Bankruptcy

Alan Reuther, the United Auto Workers' legislative director, said the union urged the administration during a meeting this week to follow the provisions included in the House-passed auto aid bill.

In this Dec. 12, 2008 file photo, workers leave the Chrysler Truck Assembly plant in Warren, Mich....

In this Dec. 12, 2008 file photo, workers leave the Chrysler Truck Assembly plant in Warren, Mich. Chrysler LLC on Wednesday, Dec. 17, 2008 said it would extend its holiday for an additional three weeks to adjust production with slowing demand and conserve cash. The move affects all 30 manufacturing plants. Operations will be idled at the end of the Friday, Dec. 19th shift. The earliest plants will reopen is Jan. 19, 2009. A few plants will reopen on Jan. 26. (AP Photo/Paul Sancya, file)

(AP)

"It's our hope that the House bill that was passed is what they will use as a guide, so to speak, when they start releasing funds," UAW President Ron Gettelfinger told WXYZ-TV in Detroit.

Congressional aides in both parties who have been closely following the discussions suggested the talk of bankruptcy could be a tactic to extract more hefty concessions from the companies and union in exchange for granting short-term loans from Treasury's financial industry rescue fund.

Perino said one factor preventing an announcement of action by the administration is that discussions continue with the various sides that would have to sign on to a managed bankruptcy — entities such as labor and equity holders in addition to the companies themselves.

A senior administration official said the talks between Bush officials and the Big Three and their stakeholders amount to information-gathering, not negotiating.

The White House has repeatedly emphasized its opposition to "disorderly bankruptcy" — presumably a Chapter 7 filing that would effectively shut down a company and require liquidation of assets. That has left on the table the possibility of forcing one or more automakers into a Chapter 11 bankruptcy, which allows a firm to keep operating while under a court's purview.

Harlan Platt, who teaches corporate turnarounds at Northeastern University in Boston, said the government may be waiting for an offer of an ownership stake in the companies, much as it received in return for capital plowed into banks. "You really have to ask the question: If this is good enough for Wall Street, why isn't it good enough for Detroit?" he said.

On Thursday, spokesmen for Chrysler, GM and Ford generally referred to their previous comments that bankruptcy was not a workable solution. The car companies argue that no one would buy a vehicle from a bankrupt company for fear that the company might not be around to honor warranties.

"We continue to work with the administration to find a solution to this liquidity crisis," said GM spokesman Tony Cervone.