Auto Makers are playing Chicken with the feds

na-au110_autos_g_20081119151405Thu Nov 20, 2008 – GM is saying to the Feds, that bankruptcy is not an option. This from the Wall Street Journal:

A full-court effort by U.S. auto makers to secure federal aid appeared to be on the rocks after the companies failed to convince lawmakers of the urgent need for a rescue.

GM is privately resisting suggestions from advisers that it make preparations for a bankruptcy filing, despite telling Congress this week it could soon run out of cash, according to people familiar with the matter.

The company’s view is that consumers won’t buy cars from a bankrupt auto maker. GM is concerned that if it were even to take steps in that direction, such as hiring bankruptcy counsel, the move would leak and unnerve potential GM customers.

Because of its refusal to make plans for a bankruptcy, GM is “courting a Lehman-like situation,” said a person familiar with the matter. Lehman Brothers, the storied investment bank, collapsed into a court-protected reorganization unprepared to remain in business. “They are on the train tracks and won’t get off them,” the person said.

By not preparing for bankruptcy, GM is playing a game of chicken with the federal government; supply us with capital, or face the consequences.

Published in: on November 23, 2008 at 05:00  Leave a Comment  

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