Saturday, November 22, 2008

Berkowitz w/Senator Durbin on a Pre-Packaged bankruptcy for the U. S. automakers

Senator Dick Durbin (D-IL): …So, coming through a bankruptcy under ordinary terms may be more difficult now than usual, particularly for large large, corporations.

Jeff Berkowitz: Senator, wouldn’t it be likely that Ford, Chrysler and GM would survive, coming out of bankruptcy in the sense that the issue here is legacy costs: as you know, the retirement costs, the health care costs- those union costs. Toyota and Honda are doing quite well, thank you. 20 billion dollars of profits in the last year, producing cars in the United States, but not under those legacy costs. So, if you went into bankruptcy as Jim [Anderson, IRN] has suggested, and you restructured, under the supervision of a [federal court judge], your concern about Ford [purchasers] being able to get the replacement [parts and warranties], they [the dealers] would still be there, but [Ford] would be producing under a business plan that had much lower costs- and they would be viable and wouldn’t need the U. S. government to bail them out. A pre-packaged bankruptcy, as indeed was rumored this morning [that] the transition team of President-Elect Obama was looking at. So, isn’t that the way to go?

Senator Durbin: I wouldn’t recommend it, but I’d say it is an option. And, I think it really does raise some questions about what happens. What if you are a retiree who has worked his years at the plant—have your health care, have your retirement and now you’re told it’s over. You know, we’re not going to protect you any longer. Well, that of course creates financial uncertainty, for that family, that retiree’s family and a new government obligation. It may mean that we have to step in as country to provide help where before, General Motors for example, was doing it through their retirement plan. It really has to be played out in terms of what the impact would be. If there is a literally restructuring of these companies, as we saw with United Airlines, there is a point where beyond which the pension Benefit Guaranty Corporation had to step in and say, I guess the Government is going to have to pay the pensions in some circumstance and it’s a $40,000 limit, as to how much we pay each year [per person] through the Pension Benefit Guaranty Corporation. So, it seems like an easy approach, but I am not sure that it is. I think any approach is going to be troubling and challenging and a bankruptcy could be, too.

Senator Dick Durbin’s Press Conference, November 21, 2008, Union League Club of Chicago, Chicago, IL

Jeff Berkowitz, Show Host/Producer of "Public Affairs," and Executive Legal Recruiter doing legal search can be reached at *************************************************************
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