For almost 5 months now, I’ve continually said the total bailout price for the Automakers will be well above the requested $17.4B. Based on information readily available in SEC filings, public statements on what automakers expect in sales volume, as well as documented labor agreements, it was painfully obvious GM and Chrysler executives were being overly optimistic – if not simply full of crap.
Steven Rattner, the Chief auto advisor for the administration, stated that both General Motors and Chrysler may need significantly more than the previously requested funding amount. While Rattner did not say what the total cost may add to, this is a significant announcement as Rattner is the individual who will recommend if one, or both, car companies should file for bankruptcy.
The task force will give its “sense of direction” by March 31, Rattner said. The companies have received $17.4 billion since December and asked for the additional $21.6 billion in aid last month, an amount that depends on achieving turnaround plans that are “somewhat ambitious,” Rattner said.
“It could be considerably higher, I won’t deny that,” Rattner said, when asked whether U.S. aid sought could rise. “Like all management teams they tend to take a reasonably, slightly perhaps, optimistic, view of their business. So it could be more, I can’t rule that out.”
Obviously, Rattner has some experience with the politics of business. He was careful to pick his words about both companies and their management, while not giving a significant sense of what may come next. I suspect he knows how the situation will unfold, he simply cannot show his hand in public as of yet.
I believe GM and/or Chrysler should seek bankruptcy – I’m not going to continue to beat that drum over and over on my blog – but let me simply point one thing out. If the government had intentions of allowing bankruptcy to occur, why would they just approve a $5 billion bailout of the auto suppliers?
Just asking.
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