White House considered “managed bankruptcy” option

After a week of signaling a clear intent to put together a rescue package for the Big Three automakers to help them avoid bankruptcy, the White House said Thursday that they were also considering the option of an “orderly bankruptcy.”

President George W. Bush is weighing the option of a managed bankruptcy as it works out details of an aid package that is close to being finalized, the White House said.

In an interview with the American Enterprise Institute, Bush said he was worried about the impact a “disorderly bankruptcy” might have on financial markets and whether or not U.S. automakers can become viable…

There is an “orderly way to do bankruptcies that provides for more of a soft landing,” White House spokeswoman Dana Perino said. “That would be one of the options. I’m not saying that is necessarily what would be announced.”

In a managed bankruptcy, the government, the companies and the union would negotiate concessions and restructuring requirements in advance and present the entire package to a bankruptcy judge. Automakers and those who depend on them say that this option would further reduce demand and destabilize the industry:

Annette Sykora, Chairman of the National Automobile Dealers Association, objected to such a move.

“Bankruptcy, whether it’s structured or not, would destroy demand for that company’s vehicles and put dealers out of business,” Sykora said in a statement .

“Dealers are already having a hard time getting credit to operate their businesses. A bankruptcy would further threaten the availability of credit not only for consumers, but also for dealers’ financing of the vehicle inventory on their lots.”