Other News...
sponsored by Richardson Repair & A-Plus Flooring

Paulson: 'Orderly' auto bankruptcy might be best

Send a link to a friend

[December 20, 2008]  WASHINGTON (AP) -- The Bush administration is convinced the ailing economy could not withstand the demise of Detroit's Big Three and is looking at "orderly" bankruptcy to keep the automakers from collapsing.

A White House decision on helping the industry could come as early as Friday - none too soon for carmakers suffering from their slowest sales in 26 years and dwindling operating cash.

RestaurantBush administration officials were reviewing several approaches to assisting the automakers, including short-term loans from the Treasury Department's $700 billion Wall Street rescue program. But Treasury Secretary Henry Paulson told a business forum in New York on Thursday night that while bankruptcy for the automakers should be averted if possible, an "orderly" reorganization might be the best solution.

"If the right outcome is reorganization or bankruptcy, then isn't it better to get there through an orderly process?" Paulson asked.

Paulson said President George W. Bush wants to avoid bankruptcy - "if it can be avoided." But Paulson said the No. 1 priority was getting U.S. automakers back on a viable path. Part of that effort, he said, would require all sides making sacrifices to boost competitiveness with foreign carmakers.

"It's difficult to do such things outside of reorganization," he said. "But sometimes that can be successfully done."

"When you look at the size of this industry and look at all those that it touches in terms of suppliers and dealers ... it would seem to be an imprudent risk to take," he said.

Medical

The Big Three automakers said anew on Thursday that bankruptcy wasn't the answer, as did an official of the United Auto Workers who called the idea unworkable and even dangerous. For unions, bankruptcy could mean voided labor contracts and renegotiation of benefits. 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 or maintain a supply of spare parts.

The National Automobile Dealers Association also spoke out against bankruptcy "in any way shape or form, orderly or disorderly, prepackaged or unpackaged, managed or unmanaged," said spokesman Bailey Wood.

The White House has repeatedly emphasized its opposition to "disorderly bankruptcy" - presumably filing under Chapter 7 of the bankruptcy act that would effectively shut down a company and require sale of its assets. That has left the possibility of one or more of the automakers filing under the act's Chapter 11, which allows a firm to operate while it reorganizes under a court's supervision.

[to top of second column]

"A disorderly bankruptcy of these companies is just not acceptable," White House press secretary Dana Perino told CNN's Larry King Thursday night. "It would be such a severe body blow to our economy right now, that we just could not sustain it."

While they wait for a rescue package, the automakers have announced extended holiday shutdowns. Chrysler is closing all 30 of its North American manufacturing plants for four weeks because of slumping sales; Ford will shut 10 North American assembly plants for an extra week in January, and General Motors will temporarily close 20 factories - many for the entire month of January - to cut vehicle production.

---

Associated Press writers Julie Hirschfeld Davis and Ken Thomas in Washington, Tom Krisher and David Goodman in Detroit and Bree Fowler and Stevenson Jacobs in New York contributed to this report.

[Associated Press; By DEB RIECHMANN]

Copyright 2008 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

Internet

< Top Stories index

Back to top


 

News | Sports | Business | Rural Review | Teaching & Learning | Home and Family | Tourism | Obituaries

Community | Perspectives | Law & Courts | Leisure Time | Spiritual Life | Health & Fitness | Teen Scene
Calendar | Letters to the Editor