GM and Chrysler consider bankruptcy

General Motors and Chrysler are understood to be considering accepting a pre-arranged bankruptcy. The troubled carmakers are believed to be considering the move as the last resort to earn the $25bn (£17bn) US government bail-out it has applied for.

Reports suggest that members of the US Congress have asked consultants if a pre-arranged bankruptcy – negotiated with workers, creditors and lenders – could be used to reorganise the businesses without liquidation.

The speculation comes as Congress prepares to discuss the bail-out proposals submitted by Ford, GM and Chrysler on Tuesday (December 2).

As part of the plans, Ford chief executive Alan Mulally vowed to work for an annual salary of $1 (69p), instead of $2m ($1.4m), if the carmaker accepted the federal aid.

Details of the plans submitted by the “Detroit three”, which consists of GM, Chrysler and Ford, includes Chrysler chief executive Bob Nardelli asking for a $7bn (£4.8bn) bridging loan by December 31 to help the carmaker survive until market conditions improve.

GM has promised that by 2012 it will have fewer brands and nameplates, thousands fewer dealers and employees, and much less debt on its balance sheet, under a restructuring plan. Meanwhile, Ford does not expect to make money until at least 2011.

Congress will discuss the case on Friday and could vote on the rescue plan as early as next week.

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