U.S. hires advisers for counsel on GM, Chrysler rescue

U.S. hires advisers for counsel on GM, Chrysler rescue

Automotive News | February 5, 2009 – 9:00 pm EST


NEW YORK/DETROIT (Reuters) — The U.S. government has retained two law firms with extensive bankruptcy experience and the investment bank Rothschild to advise officials on the taxpayer-backed restructuring of General Motors and Chrysler LLC, a person with direct knowledge of the work said.

New York law firm Cadwalader, Wickersham & Taft LLP was hired by the U.S. Treasury last month and will consider a range of possibilities for the struggling automakers including the prospect of a bankruptcy funded by the U.S. government, the person said.

Cadwalader is joined by Chicago-based law firm Sonnenschein, Nath & Rosenthal and Rothschild in working with U.S. officials as they prepare to review turnaround plans being readied by the two automakers, the person said.

A spokeswoman for Sonnenschein in Los Angeles confirmed that the firm had been engaged to advise Treasury on "ongoing matters related to the 2008-2009 developments within the U.S. automobile industry."

The lawyers from Sonnenschein who are advising the U.S. government are from the firm’s capital markets practice based in New York, the spokeswoman, Melissa Anderson, said.

Representatives for Rothschild, GM, Chrysler and the U.S. Treasury could not be immediately reached for comment. Cadwalader had no comment.

GM and Chrysler executives have previously ruled out a bankruptcy filing, saying that it would quickly spin out of control into a liquidation because buyers would be scared away from purchasing new cars and trucks from a bankrupt automaker. GM and Chrysler sales fell about 50 percent last month as U.S. vehicle sales sank to the lowest monthly total in 27 years.

Some outside analysts have argued that without the threat of bankruptcy, the companies lack the leverage that they need to extract deep concessions from bondholders and the UAW.

GM and Chrysler face a Feb. 17 deadline to submit updated restructuring plans to the U.S. government.

GM has been given $13.4 billion in emergency loans. Chrysler, which has a pending alliance with Italy’s Fiat S.p.A., has been given $4 billion and is seeking another $3 billion.

Both companies have until the end of March to demonstrate that they can be made "viable" under the terms of a bailout approved in late December by the Bush administration.

The Obama administration has not yet appointed a "car czar" or other officials who would oversee the restructuring of the cash-strapped auto industry.

Other requests for aid remain pending. Ford Motor Co. has asked for a $9 billion line of credit if market conditions worsen. Auto-parts suppliers have asked for more than $20 billion in government aid that would be either channeled through the car companies or loans that would provided to them directly.


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