Top Republicans Call for GM to Declare Bankruptcy
Sen. John McCain said the Obama administration should've let General
Motors fold, rather than keeping it on life support.
General Motors should hand over the factory keys to a bankruptcy court,
two top Republicans said Sunday.
Sen. John McCain, R-Ariz., said the best thing for the ailing automaker
to do would be to go into Chapter 11 to reorganize some of its business
agreements and come out stronger than before.
"I think the best thing that could probably happen to General Motors, in
my view, is they go into Chapter 11, they reorganize, they renegotiate
... the union-management contracts and come out of it a stronger,
better, leaner, more competitive automotive industry," McCain told "FOX
House Republican leader John Boehner said the nation's largest auto
company must demonstrate a viable and long-term business plan if it
wants more federal money.
But Rep. Thaddeus McCotter, R-Mich., told FOX News on Sunday that he
disagrees with sending the auto companies into bankruptcy, calling it a
"shallow approach" to dealing with a failure that would affect hundreds
of thousands of workers.
"If GM and Chrysler are allowed to go in bankruptcy they will not come
out," McCotter said. "This will exacerbate the foreclosure crisis, it
will continue to hurt the credit crisis."
President Obama's task force on the auto industry is headed to Detroit
on Monday for meetings with auto industry executives from both General
Motors and Chrysler, which have received $13 billion and $4 billion,
respectively, from the federal government.
McCotter said he was "glad to see they are engaging in the process with
the auto industry," though he expressed concern that the presidential
panel has a "dearth" of professionals from the auto industry.
McCain said the Obama administration didn't make the tough choice by
letting GM fail, and instead has trapped itself in spending billions on
a company barely on life support.
Both companies have until the end of the month to demonstrate their
ability to reduce their debt loads and qualify for more federal funding.
Part of the restructuring taking place is through negotiations with the
labor unions to reduce the companies' per-worker expense, which is
compounded by retirement and health care costs.
GM lost $31 billion in 2008, and its stocks continue to dive -- dropping
32 percent on Friday. Company reps have said that GM needs $30 billion
in total to stay afloat. The company issued a statement on Friday
repeating its desire to stay out of bankruptcy court, which would likely
force liquidating GM assets.
"The company firmly believes an in-court restructuring would carry with
it tremendous costs and risks, the most significant being a dramatic
deterioration of revenue due to lost sales," the statement reads.
Boehner said GM has avoided tough choices in the last 30 years and has
to work with employees and creditors to plan a stable path ahead.
Anything short of that would be "throwing good money after bad," he said.
Democratic National Committee Chairman Tim Kaine said GM's failing can
be attributed to the overwhelming cost of health care. He said that's
why Obama is addressing health care at the same time he is shoring up
the banks, working on a budget for next year and trying to help the auto
"What is probably the most cited reason for GM's difficulties -- or one
of the most cited is the legacy costs on health care and retiree health
care that GM has to carry that other automobile companies, particularly
those in foreign companies, don't," Kaine, Virginia's governor, said.
"So the president was elected to try to deal with this health care
challenge, which is -- can be a choker on the economy. ... If we can
start to get that right, that can be part of growing out of these
economic doldrums," he said.
McCotter said that if the automakers aren't saved that will mean the
government will have to spend "$200 billion to have auto families go
into the social safety net," a direct cost to taxpayers and not merely a
loan, he noted.
McCotter added that the two companies are "actually restructuring" -- as
compared to Wall Street's banks -- and they shouldn't be allowed to fail
as they are trying to correct their problems.
"It would seem to me a very bad message to send ... that those who are
restructuring will be punished," he said.