GM is being directed towards bankruptcy.

Interesting things have come about. GM is now being led to bankruptcy.

http://www.washingtonpost.com/wp-dyn/content/article/2009/05/21/AR2009052104467.html

The Obama administration is preparing to send General Motors into bankruptcy as early as the end of next week under a plan that would give the automaker tens of billions of dollars more in public financing as the company seeks to shrink and reemerge as a global competitor, sources familiar with the discussions said.

The government previously indicated that it planned to take at least 50 percent of the restructured company, and likely would take the right to name members to its board of directors, as it has at Chrysler, where the government will control four of nine seats.

The United Auto Workers retiree health fund is set to own as much as 39 percent of the restructured GM, in exchange for giving up its claim to at least $10 billion that the company owes it. Yesterday, the union announced that it reached an agreement with GM that will reduce the company's labor costs.

Interesting how the United Auto Workers retiree health fund is getting pushed to priority one. The many investment groups are being pushed aside. Even those who are secured debt holders. The United Auto Workers retiree health fund is NOT a secured debt holder.

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.

In the Chrysler proceedings, the court has yet to stand in the way of plans to create a new company led by Italian carmaker Fiat. Chrysler's existing assets would be sold to the new company and the new entity could be up and running as soon as next week.

That's because Chrysler is asking U.S. Bankruptcy Judge Arthur Gonzalez to waive the customary 10-day waiting period before the order approving the sale becomes effective. The hearing on the sale is scheduled for next Wednesday at 10 a.m.

Gonzalez has already granted a similar request to expedite proceedings. Time and again in court, Chrysler executives and attorneys have argued -- and the court has agreed -- that Chrysler's core assets are "wasting" and that an immediate sale must take place to preserve value.

The administration is taking steps to prepare. It is drafting the paperwork for a $4.7 billion loan to sustain Chrysler after it emerges from bankruptcy. On Wednesday, the automaker announced that C. Robert Kidder, former chairman of Borden Chemical and of Duracell International will become the company's new chairman. He will succeed Robert L. Nardelli.

There is a need to shove everything through as quickly as possible. If the government can shove the bankruptcy, and the purchase by Fiat through quickly enough, there will be no precedence for appropriate action on behalf of the debt holders. In other words, the only thing the debt holders will be able to do is sue Chrysler after the fact. Assuming that the debt holders win in court; all of Chrysler's assets will have already been distributed elsewhere, and they money would have to be paid out over a long period of time. This action must be done quickly. If the process is stalled too long UNITED STATES LAW might get in the way of the Obama administration's "restructuring".

Judiciary Committee chairman Rep. John Conyers Jr. (D-Mich.) said he hopes to meet with White House officials today to discuss changing Chrysler's bankruptcy plan and GM's future. Conyers did not outline what he wanted, but a nine-person panel he assembled for a hearing yesterday offered a hint. Liberal consumer advocate Ralph Nader, a conservative Heritage Foundation analyst and minority auto dealers all criticized the automakers' restructuring.

Conyers and other committee members attacked the administration for abusing bankruptcy laws, unfairly eliminating dealerships and jeopardizing consumer safety.

"GM now stands for Government Motors," said Rep. Lamar Smith (R-Tex.). "While the UAW is cashing in, it's the dealers, creditors and American taxpayers who are being forced to cash out."

This exemplifies the government taking care of the United Auto Workers retiree health fund. The only problem is that the method is illegal. The United Auto Workers retiree health fund is NOT a secured debt holder of GM, or Chrysler. So why then is the United Auto Workers retiree health fund pay-out placed before the secured debt holders? After all UNITED STATES LAW states otherwise...

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