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Managed Bankruptcies Likely for GM, Chrysler


April 7, 2009

Executives at General Motors and Chrysler are hurrying to put in place workable plans to restore their faltering businesses. Last week, President Obama said the turnaround plans the automakers presented to Congress earlier this year hadn’t gone far enough and he gave them one last chance to turn their operations around. If they are unsuccessful, he might force GM into a quick, managed bankruptcy.

MSNBC reports that with a June 1 deadline to accomplish changes sought by the government, GM may close more of its plants and it is likely to offer another buyout program to workers as it looks to cut labor costs. Among GM’s and Chrysler’s biggest challenges has been trying to secure ample labor cost concessions from the United Auto Workers union. The feeling among many industry observers is that managed bankruptcy may be the only way to force through necessary changes to the union contracts. Generally speaking, bankruptcy would break the onerous union contracts and allow the companies to renegotiate.


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