Bankruptcy was characterized as a destructive measure to General Motors by supporters of the auto bailout a few months ago, but the Obama administration is preparing the public for the possibility that GM will go bankrupt. Will Michigan’s senators modify their no-bankruptcy positions at all now that the White House and GM are drifting toward the option?

Treasury Secretary Timothy Geithner and newly named GM CEO Fritz Henderson both said this weekend that bankruptcy remains a likely option for the company.

But U.S. Sen. Debbie Stabenow, a Lansing Democrat, isn’t softening on the bankruptcy option. She said doesn’t support bankruptcy as a first, second or third option for GM.

 

Stabenow voiced her opposition in terms of the multibillion-dollar liability the federal government would have to take on for 600,000 retirees who could lose their pensions.

“People who gave up wage increases multiple times in order to make sure they had a pension and had health care. And so, there are tens of billions of dollars — I’ve heard upwards of $80 billion — in federal requirements, federal dollars that would be needed potentially if they went into bankruptcy,” Stabenow said in a CNN interview, adding that retirees could lose their health care if GM sheds it in bankruptcy court.

U.S. Sen. Carl Levin said last week that President Obama is wrong to talk about bankruptcy openly because it will erode GM’s standing and force it into bankruptcy.

“It undermines the companies’ economic position to talk about bankruptcy,” the Detroit Democrat told The Detroit News . “I know why he’s doing it. How do you persuade the bondholders, without letting them know it’s a serious option?”

As for Chrysler, Stabenow said she was glad the administration didn’t walk away from it and is trying to obtain a merger with Fiat.

Under the latest merger scenario proposed by the government, Fiat would own 20 percent and the remaining shares would be “allocated among a variety of secured creditors that include at least five banks and U.S. taxpayers.” The United Auto Workers, Daimler AG and Cerberus Capital Management could be shareholders as well.