General Motors Corp. and Chrysler LLC may have to be forced into bankruptcy by the U.S. government to assure repayment of $17.4 billion in federal bailout loans, a course of action the automakers claim would destroy them.
U.S. taxpayers currently take a backseat to prior creditors, including Citigroup Inc., JPMorgan Chase & Co. and Goldman Sachs Group Inc., according to loan agreements posted on the U.S. Treasury’s Web site. The government has hired a law firm to help establish its place at the front of the line for repayment, two people involved in the work said last week.
If federal officials fail to get a consensual agreement to change their place in line for repayment, they have the option to force the companies into bankruptcy as a condition of more bailout aid. The government would finance the bankruptcy with a so-called “debtor in possession” or DIP loan, a lender status that gives the U.S. priority over other creditors, said Don Workman, a partner at Baker & Hostetler LLP.
Seems kind of stupid, to give these companies billions only to turn around and force them into bankruptcy. Especially considering their other creditors are TARP recipients.
Also, the auto manufacturers did not get anywhere near the money the financial institutions did, so how come the banks are not being forced into bankruptcy?
Even better GM is having problems
in the Chinese market. Seems China wants U.S. made cars, not ones made in Korea and check out the mismanagement issues. How could there not be if they are retailing Aeros for $1200 dollars?