[cole]

First , what really happens in bankruptcy? Specifically, Chapter 11 bankruptcy which would be the likely course versus alternatives which would mean dissolution of the company

Second, what is the chance of success if we provide loans to these companies?

I suggest that Chapter 11 would save GM although it would emerge from court protection significantly different. It would undoubtedly be an automobile only company with smaller market share, lower employee numbers with a sharply lower cost per employee based on court restructuring existing labor contracts. Estimates range from 25% fewer employees and 30% lower cost per employee along with 20-30% less market share. Those numbers are not pleasant to hear if you are an employee or labor union leader, but that is a scenario. How much impact on feeder businesses is a guess, but market share and lower cost needs dictates tough times ahead and the combination of events dictates really serious issues for Michigan.

One thing for sure, GM cars would continue to be made in fewer plants and probably with fewer models. Some models/divisions would probably be closed or sold off if marketable, in order to generate cash for the process. Corvette is an example and I am unsure if there are others.

Ford will survive and does not need bankruptcy protection to continue forth and could emerge from this downturn as the larger of the two companies based on its European success. Mullaly has structured them appropriately for survival and they have already downsized significantly. Any labor deals generated via court mandate would ripple through to Ford making them stronger at the far end of a GM bankruptcy

Chrysler is almost a non-factor as the investors who decided to purchase it, made a bad deal and should have their hands slapped with large losses. Chrysler needs to be shopped to a foreign company that wants its limited product lines and dealer network in the USA. They have virtually no international footprint and the synergism for a foreign investor becomes obvious. Instant foot print in the US and price is the only remaining obstacle. I suspect that left to their own devices, Cerebrus will peddle Chrysler and lick its wounds without any government aid. Aid for Chrysler would best be offered as tax incentives to a purchaser to sweeten a sales deal. No loans required and future Chrysler sales revenues pay the Chrysler bill.

Now, regarding any loans - we have yet to see a plan for any of these companies. We know Ford can survive and they are the most likely target of a loan package if its not too expensive. I would not be surprised to see Ford refuse a loan with too many encumbrances and therein lies the problem for loaning money to GM, who would likely take any deal. Bundled together, a loan package will not fly requiring separate packages for GM and Ford. Politically that is a nightmare for obvious reasons.

Assuming that GM can produce a believable plan for turnaround - which is a must in order to be able to repay a loan -what is the coast to them. Congress is full of lawyers and I suspect that any government loan is not going to be a sweet deal for GM. Bankruptcy may look better to GM in a few days.

Chrysler should be sent back with instructions to find a buyer, who can get some sweet tax deals for the next 10-20 years. Any plan that Chrysler puts forward to survive alone has to be very suspect and a merger with GM or Ford is a poor idea unless its an asset only deal leaving a lot of dead paper behind. Very unlikely.

I will be watching news reports to see how these companies approach a request for loans. I hope that we will see three separate packages offered based on the needs of each of these companies, ability to repay, plus saving as many jobs as possible.