GM, Chrysler mull bankruptcy for bailout; UAW makes concessions

04 December 2008

As CEOs of the big three Detroit car makers return to Capitol Hill today for two days of Congressional hearings, General Motors and Chrysler are contemplating accepting a pre-arranged bankruptcy as a last resort for getting $18 billion and $7 billion in aid from the government.

Bloomberg reported citing inside sources that the two companies have asked restructuring experts for opinons on whether they were in a position to negotiate with workers, creditors and lenders, by filing for bankruptcy protection without going in for liquidation.

The CEO of GM, Rick Wagoner has often said that bankruptcy and liquidation was not an option as customers would not buy cars from a company, which is winding up.

Bloomberg reported that company officials, lenders, union officials and other interested parties are looking at "all solutions" to the financial problems faced by the two companies.

Meanwhile as the hearings go on at Capitol Hill, the United Automobile Workers union, in an about turn, has changed its previous rigid stance and said it was lending support for the $34-billion aid by making major concessions in its contracts, which according to the union could ultimately tilt the balance in favour of a bailout.

After presenting their restructuring plans justifying their appeal for as much as $34 billion instead of the $25 billion they originally wanted, UAW president Ron Gettelfinger said his union is committed to pushing for aid and announced that the union would let the three auto giants defer paying billions of dollars to the retiree healthcare trust and suspend the controversial jobs bank programme that pays laid off workers salaries for up to two years.