Detroit will be offered government cash, new rules

Before you go, we thought you'd like these...
Before you go close icon

As might have been expected, the Administration will try to keep GM (GM) and Chrysler out of Chapter 11, but it wants conditions that the car companies may not be able to provide. A new task force has been in Detroit for several weeks reviewing the prospects of the industry.

According toThe Wall Street Journal, "the task force is expected to say that it sees viable futures for both GM and Chrysler, but only if there are sacrifices from their managements, unions and GM's bondholders."

That is a very big "if." While the UAW has been fairly cooperative, it will probably still have to give more concessions on pension and retirement benefits. But the real roadblock to a restructuring is the debt holders. They have been willing to face the risk of Chapter 11 since the beginning of the talks with the two car companies. It is hard to see why they would change their position now.

Creditors did come to an agreement to restructure debt with Ford (F), but the terms were not onerous. GM has already said that it cannot accept the Ford arrangements as a road map for its own negotiations, signaling that it wants a better deal.

The Administration may want to restructure Detroit, but the obstacles are still great.

Douglas A. McIntyre is an editor at 24/7 Wall St.

Read Full Story

Markets

S&P 500 2,191.95 0.87 0.04%
DJIA 19,170.42 -21.51 -0.11%
NASDAQ 5,255.65 4.55 0.09%
DAX 10,513.35 -20.70 -0.20%
HANG SENG 22,564.82 -313.41 -1.37%
NIKKEI 225 18,426.08 -87.04 -0.47%
USD (per EUR) 1.07 0.00 0.06%
USD (per CHF) 1.01 0.00 -0.01%
JPY (per USD) 113.48 -0.41 -0.36%
GBP (per USD) 1.27 0.01 1.16%

From Our Partners