DETROIT ? General Motors Corp. has hired lawyers and bankers to consider whether to file for bankruptcy protection, several people familiar with the matter told The Wall Street Journal, while Senate lawmakers embarked on a last-ditch effort to break an impasse on Congress’s auto-bailout package.
GM management recently tapped bankruptcy veteran Harvey Miller of the New York law firm, Weil Gotshal & Manges LP, to handle what would be one of the largest and most controversial filings in U.S. history. Others involved in the matter include restructuring veterans Jay Alix, Evercore Partners’ William Repko and Blackstone Group’s Arthur Newman.
GM Chief Executive Rick Wagoner has been reluctant to publicly embrace bankruptcy, fearing that it would scare off potential car buyers, and he “still believes the company can’t and shouldn’t file,” but he decided in the past few weeks to hire the outside advisers, said a person familiar with the matter.
Support among Senate Republicans for a Big Three bailout was at a impasse Thursday.
The Senate’s top Republican, Mitch McConnell of Kentucky, came out against the White House-backed package that was passed by the House Wednesday, adding to doubts about whether industry allies can muster the votes needed. Sen. McConnell suggested the legislation would be a waste of taxpayer dollars because it doesn’t require auto makers and their unions, suppliers, creditors and dealers to make changes needed to return the companies to a sound financial footing.
“We simply cannot ask the American taxpayer to subsidize failure,” said Sen. McConnell, suggesting the Big Three would have to find a way to survive without congressional help. “The best route for the long-term viability of the ailing auto companies may be a rocky one.”
Behind the scenes, top Democrats, including Senate Banking Chairman Christopher Dodd of Connecticut, explored ways to toughen the $14 billion bailout package to raise Republican support in the Senate.
One focus was a proposal from Sen. Bob Corker, a Tennessee Republican, to strengthen the powers of a proposed “car czar,” the official who would be responsible for overseeing a restructuring of the industry. Sen. Corker is seeking commitments to revamp the industry’s debt load and bring labor costs in line with wages paid by Toyota Motor Corp. and Nissan Motor Co. in the U.S., among other things.
“Its showtime here,” said Sen. Corker, an industry critic who is emerging as a pivotal player in efforts to develop a bill.
GM and its dealers are meeting late this week to discuss launching a new advertising campaign to spark sales amid concerns about GM’s health. GM will also discuss plans for its Saturn division, which it may shutter. One option includes putting the division into bankruptcy protection, as it is technically a separate entity.
One mounting fear is that even with a bailout, GM may be forced to file for protection from creditors. GM executives are worrying that suppliers could tighten credit terms, and the government could swiftly recall its loans.
GM’s 13-member board is subjecting Wagoner to deepening scrutiny. The board is now meeting three times per week and receiving constant updates on the financial situation.
“This is an urgent situation and we need to deal with it,” said Kent Kresa, a GM director since 2003.
Kresa said GM management was constantly caught off guard by declines in the U.S. auto market. While executives were continuously revising sales projections, the managers never fully understood how bad the situation could get, he added. “I can honestly say no one ever projected this happening.”
Now, as GM operates near its minimum-required funding options, Kresa said the board continues to “keep all options open.” At a recent meeting, members decided to dismiss the idea of filing for Chapter 11 protection, at least for now, reasoning that if the company were in bankruptcy court, people wouldn’t by its cars.
So far, only a handful of Republicans in the Senate have suggested they’re willing to support the rescue package. Among them is Sen. Chuck Hagel (R., Neb.), who is “inclined” to back the bill, his office said. But many more Republicans, especially conservatives, are voicing opposition. Some raise concerns about government intervention in the marketplace. Others are demanding the pending bill be strengthened to exact concessions from the industry.
“There is a lot of resistance,” said Sen. John Thune (R., S.D.). “It’s going to be really hard for anything to get to 60.”
Senate Majority Leader Harry Reid (D., Nev.) hopes to push a bill through this week, but the closed-door discussions so far offered no firm guarantee that Republicans would relent.
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