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As Deadline Nears, GM May be Headed for Bankruptcy

May 22, 2009 at 6:00 PM EST
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Kwame Holman provides an update on reports that General Motors is likely to file for bankruptcy and that Chrysler is looking to conclude its bankruptcy proceedings.
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JIM LEHRER: General Motors moved ever closer to bankruptcy today, while there was word Chrysler is heading for a quick conclusion to its bankruptcy proceedings.

NewsHour correspondent Kwame Holman has our lead story report.

KWAME HOLMAN: Officially, GM has until month’s end to restructure on its own and stay out of federal bankruptcy protection, the so-called Chapter 11. But the Washington Post reported today the Obama administration is ready to steer the automaker into bankruptcy court before next week is out.

As part of the plan, GM could receive another $30 billion in additional public financing, for a total federal investment of $45 billion. The government would take at least a 50 percent stake in the company, with the United Auto Workers controlling up to 39 percent.

Chrysler already is in Chapter 11 under similar terms, but reports today said it could emerge from the process as early as next week.

A White House economic adviser, Austan Goolsbee, would not confirm or deny the news on GM’s fate. But he did say, “I think the government is going to let it play out, but not in a passive sense.”

Here at the Capitol, the latest reports of a forced bankruptcy for GM came hours after Congress left for a week-long Memorial Day recess. But a handful of lawmakers from auto states stayed around to raise objections.

Some of them were among three dozen members of the House who wrote to President Obama warning his policy will wipe out American jobs and shift car production to China.

Democrat Dennis Kucinich of Ohio.

REP. DENNIS KUCINICH, D-Ohio: What’s happening in our country? We’re letting go of what has made us great. And I’m not prepared to let that go without a fight. And that’s why we’re challenging the very existence of this auto task force, that it go slow on trying to push GM into bankruptcy. They should not have pushed Chrysler into bankruptcy. We should try to keep these plants open.

KWAME HOLMAN: Kucinich and fellow Ohioan Steve LaTourette, a Republican, also warned against letting GM and Chrysler force several thousand dealerships out of business.

REP. STEVEN LATOURETTE, R-Ohio: Just take a deep breath, if you would, and let’s let the Congress look at it. And here’s what we’re concerned about. One, I think it’s a strange marketing plan that you think you’re going to sell more stuff with less stores. I never saw anybody in business who said, “Boy, if I could just have, you know, 3,000 less stores, I bet I could sell more cars.”

KWAME HOLMAN: Also today, four Republican congressmen — Jeb Hensarling and Pete sessions of Texas, Eric cantor of Virginia, and Mike Pence of Indiana — sent a letter to Treasury Secretary Timothy Geithner. They said the plans for GM favor the United Auto Workers “over the rights and claims of the company’s diverse group of bondholders.”

In the last 24 hours, GM reached tentative deals for concessions from union members in the U.S. and Canada. The bondholders refused again today to forgive $27 billion in debt and accept a 10 percent stake in the company.