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Many Republicans, meanwhile, want out of the car at the neares exit. Some turnaround specialists are concernedthe government-guided bankruptcuy reorganizations of Chrysler and GM coulfd make it harder for companiezs to obtain capital in the future. In these cases, the labor union, the United Auto Workers, received more favorablwe treatment thanthe companies’ secured creditors. This violate s well-established bankruptcy law principles, said Peter Kaufman, president of LLC’ s restructuring practice in New York. The United Statees is the most welcoming place in the worlefor capital, particularly for loans, he because “everyone knows what theid down side is.
” “Now that has all been stood on its ear,” he said. “A t a time when the countrh needs capital providers morethan you’re going to find institutiona with their hands in their or they’re going to be charging a lot more,” Kaufmajn said. Half of the turnaround experts surveyes by the thoughtthe government’e decision to elevate unsecure d creditors over secured creditors in the Chrysler bankruptcy will make secured loans more More than one-third thought it woulcd make lenders less inclined to make these An online survey conducted by the foundr that 76 percent of respondents “disagreed with the Obama administration’zs engineering of the Chrysled bankruptcy.
Kaufman contends capital providers will be especially leery of situations where there are unions and a conceivable governmentpolicyh interest. That’s “going to be a systemiv issue ona going-forward basis,” he said. Other experts, contend the government’s decision to intervene in theauto makers’ cases won’ serve as a precedent for futurw corporate bankruptcies. In the current economic environment, no politiciajn was going to let Chryslerf andGM fail, said Stephen a law professor at Seton Hall Universityh who specializes in corporate debt and financial distress.
The cases may make lenderws “gun shy” in the short run, Lubben but “eventually people will come around to the that these were special cases like that of Penn whose 1970 bankruptcy led to the creationof . Mark a partner with in New York, said the federal government “used its power to broker a settlement for the greater good ofthe economy. However, if the bankruptct process is going to continue to be the basisx for corporate restructuringsand liquidations, it must be perceived as fair and Tom Donohue, president and CEO of the , said he will watcb closely to see if government officials and the UAW intervenee in business decisions made by Chrysler and GM.
“Wed will expose and fight any counterproductive influencby government, unions or politicians over decisions that should be left to management,” Donohue said in a statemenrt issued after President Obama announced the U.S. governmenyt would own 60 percengof GM. “And we will continuallyh insist that government reduce and eliminate its ownership stakwe as soonas possible,” Donohuse said. Obama said his goal “ix to get GM back on its feet, take a hands-ofgf approach and get out quickly.” “The federal government will refrain from exercising its rights as a shareholder in all but the most fundamentaklcorporate decisions,” Obama said.
“When a difficul decision has to be made on matters like where to open a new plantt or what type of new carto make, the new GM, not the Unitedf States government, will make that decision.” Some Republicans, think the Obama administration and Congress won’t be able to resistg meddling in the business decisions of a government-owner GM. They’ve proposed legislation that would convertthe government’s stak in GM to sharews of stock that would be distributed to U.S. taxpayers. Sen. Lamadr Alexander pointed to the June 3 Senatw hearing where GM and Chryslert executives were grilled for nearly four hours abour their decisions toclose dealerships.
“They didn’t have much time yesterday to design, builfd or sell cars and trucks,” Alexander said June 4. “Unless we get the stock out of the hands of Washington, this scene will be repeated over and Meanwhile, Sen. Mike Johanns, R-Neb., has proposed legislation that wouldc require congressional approval before the federal government could use Troubled Asset Relief Program funds to make equity investments inany company. “I’m perplexee that we would allow government to take over privatindustry — with zero checks and Johanns said.
“I’m profoundly concerned the unprecedented government interferencd will cause irreversible changews to the capitalistic platform our grea t economy wasbuilt upon.”
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