LANSING – Banks that are owed millions of dollars by Chrysler Corporation are trying to force the automaker into bankruptcy, Gov. Jennifer Granholm said Wednesday, declaring the situation unacceptable. She told reporters the position of banks that were on the receiving end of billions of federal dollars to bail out the industry are threatening the death of the auto industry.
Granholm said the Obama administration has asked the banks to return with a market-based offer but have refused to date to do so, which she said is an affront to the president and the taxpayers. “It is unacceptable. I would ask that they think about the tens of thousands of workers across America whose lives hang in the balance because they want to get a better deal than what even the market would bear.”
The governor sent letters to the four banks that received $90 billion in bailout funds asking them to remember those who allowed them to be helped.
The banks, JPMorgan Chase, Citibank, Goldman Sachs and Morgan Stanley, are seeking 40 percent ownership of the company and membership on the board of directors if they are to reduce the debt the automaker owes them to $4.5 billion from $6.9 billion.
Granholm, who called the banks position “very risky” if the hope is for a better offer under bankruptcy, urged them to accept the president’s request to come up with a market-based offer. The governor said the banks should be forced to make concessions as has the industry and workers and that they are better positioned to do so in light of first quarter profits.
The letter, which also went to investment funds Oppenheimer Funds, Elliott Management, Perella Weinberg Partners, and Stairway Capital Management, said, “Your action is inconsistent with what should be our common objective in helping advance America’s economic recovery.”
In her responses to reporters’ questions, the governor said, “We need a viable manufacturing industry and the president has said so. They (Chrysler) are asking for a bridge to get there. They need financial institutions to support that bridge, these very financial institutions that have caused the meltdown of the United States economy.”
THE WHITE HOUSE AND THE MICHIGAN DELEGATION: A meeting by Democratic members of Michigan’s Congressional delegation with top Obama administration officials to discuss the auto restructuring drew a protest from Republican members who declared the future of the industry is not a partisan matter.
The meeting came a little more than a week before Chrysler hits its April 30 deadline for a restructuring plan and General Motors announced it might not make a $1 billion bond payment on June 1 if it is unable by then to complete its plan to swap $28 billion in unsecured bond debt for equity in the company.
The eight Democratic Michigan members of the U.S. House and both Democratic U.S. Senate members met at the White House with chief of staff Rahm Emanuel and Larry Summers, director of the National Economic Council.
In a statement, the members said the discussion included the positive prospects of an alliance between Chrysler and Fiat, but also frank discussion of “our very serious concerns about bankruptcy for Chrysler and GM.” They said the administration spoke frankly about its efforts to see the companies be restructured outside of a judicial process.
“We all recognize, however, that the Administration and the companies must continue to prepare contingency plans to avoid liquidation or a protracted restructuring process should the ongoing negotiations for out-of-court resolution fail,” they said.
But four of the six Republican members of the Michigan delegation called on the administration to include members of both parties in discussions about the auto industry’s restructuring.
The letter to the White House said, “Saving jobs and keeping factories open is not a partisan issue. We need to help all of the workers, retirees and communities in Michigan that will be affected by restructuring, not just the Democrats or those living in Democrat districts. Our constituents, whose jobs and future are being shaped by your Task Force, deserve their elected representatives to be heard.”
It was signed by Rep. Dave Camp (R-Midland), Rep. Mike Rogers (R-Brighton), Rep. Pete Hoekstra (R-Holland) and Rep. Thaddeus McCotter (R-Livonia).
COX URGES BANKRUPTCY FILING IN MICHIGAN: If an automaker is forced to declare bankruptcy, Attorney General Mike Cox said Wednesday it should be in Michigan to make it convenient for the various parties that would be involved. Speculation has centered on a filing in Delaware, which is the legal corporate home of the companies, or New York.
Cox noted that tax obligations, workers compensation claims, unemployment insurance and environmental regulations make the state a significant creditor to the companies most in danger of bankruptcy. He also said the vast majority of creditors to the companies are in Michigan and he sought a meeting with the companies prior to any filing they may choose to make.
Given how much the companies and the state are intertwined, he said any filing other than in Michigan would be “bizarre.”
“I am gravely concerned about the impact of any bankruptcy filing in a jurisdiction outside Michigan,” Cox said in letters to the CEOs of GM and Chrysler. “The costs for many of these creditors (in Michigan) to participate in a New York or Delaware bankruptcy is overwhelming and would undoubtedly lead to unjust bills.”
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