What the Government Learned From Chrysler
When the government sent Chrysler into bankruptcy a few weeks ago, there was an argument going around that the move was basically a ploy to pressure GM's bondholders into cooperation. It was the government executing a hostage for effect. That no longer seems to be the case. David Cho, Peter Whoriskey and Kendra Marr report that the government is about to send GM down the same road. They write:
Under orders from the Obama administration, GM has offered to give the bondholders a 10 percent equity stake in the restructured company in exchange for giving up their bonds.
So far, however, the investors have resisted that proposal and if no accord is reached by June 1, GM will follow Chrysler into bankruptcy.
The speed with which the Chrysler bankruptcy has proceeded has given the administration more confidence that the best path for GM may be a similar trip, where the claims of disgruntled creditors and dealers can be more easily resolved.
The Chrysler bankruptcy, in other words, wasn't a ploy. It was practice. And it worked.
(Photo credit: David Zalubowski -- Associated Press)
May 22, 2009; 12:00 PM ET
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