U.S. Government may force GM and Chrysler into Bankruptcy

[XDCX]

The fact that the U.S. Government retained the services of a Law Firm that specializes in bankruptcies didn't go unnoticed by our members.

While it was initially unclear what issue the Government wanted counsel on, it's starting to make sense now. It appears that the TARP loans issued to Chrysler and GM are in a secondary position to loans issued by Citibank, Chase and Goldman Sachs. That means that if either company were to declare bankruptcy the aforementioned banks would get paid before the tax payers would.

Apparently the U.S. Government is working with the various bond holder in an effort to ensure that the TARP loans have a senior position. In the event the bond holders are not willing to take a secondary position, the U.S. Government may force GM and Chrysler into bankruptcy so they can take a lead role by providing DIP (Debtor in Possession) financing.

Although I don't claim to understand the complexities associated with this posturing, I don't like the fact that bankruptcy for GM and Chrysler is starting to fill the headlines again. While GM and Chrysler both publicly oppose any form of bankruptcy, I wonder if that's their internal position?

A Chapter 11 filing would solve a lot of problems for GM and Chrysler - many of them at the expense of their dealer network.

Here's a link to the news report: http://www.bloomberg.com/apps/news?p...d=awUP2iWPHQ2E

[XDCX]

Here's another news report that speculates that bankruptcy looks increasingly likely for GM and Chrysler.

An interesting "spin" that this report suggests is that GM may be looking at acquiring large portions of the Delphi unit that they sold several years ago. The thought is that GM and Delphi together would make the corporation "too big to fail" - just like Citibank and Bank of America.

Here's a link to the news report: http://www.moneymorning.com/2009/02/...l-motors-tarp/