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Pre-arranged bankruptcy considered by Detroit carmakers

General Motors and Chrysler are considering accepting a pre-arranged bankruptcy as the last-resort price of getting a multi billion dollar government bailout, Bloomberg and Reuters report this morning.

Representatives for three members of the US Congress have asked restructuring experts if a pre-arranged bankruptcy, negotiated with workers, creditors and lenders, could reorganize the two carmakers without resorting in liquidation.

Observers have pointed out that GM's proposed moves in order to gain the loans would be very similar to those in a bankruptcy proceeding. It plans to shed 1,750 dealers in the USA, cut healthcare benefits for retirees and close nine plants. Bankruptcy would give it added leverage to make the cuts, some analysts believe.

GM, Chrysler and Ford have asked Congress to authorise $34 billion (£23 billion) in loans and credit lines, with the promise that they will restructure and slash models, jobs and executives pay.

The Big Three's plans for survival



  • $4bn loan to stay afloat by end of 2009. Up to $18bn in emergency term loans and revolving credit lines.
  • Focus on core brands Chevrolet, Cadillac, GMC and Buick. Review other brands like Saturn, Saab and Hummer.
  • Reduce US workforce by 30,000 by 2012.
  • Chief exec to reduce pay to $1 in 2009.
  • Sell corporate aircraft


  • $9bn, 10-year bridge loan on standby.
  • Look at selling Volvo and launch a family of hybrids and battery electric vehicles ready for 2012.
  • Four plant closures between 2009 and 2011. Around 50% of future US production capacity allocated to small/medium sized vehicles.
  • Chief exec to reduce pay to $1 in 2009.
  • Sell corporate aircraft


  • $7bn loan before the end of this year.
  • 24 major product launches through to 2012 including hybrid vehicles. First full electric models launched by 2010.
  • Seek alliances with other markers, such as sharing platforms for an estimated saving of up to $9bn in costs.
  • Chief exec will be paid salary of $1 in 2009.

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