McCain calls for GM's bankruptcy

Republican lawmakers said Congress should stop providing General Motors with federal aid and let the company file for bankruptcy if necessary.

"The best thing that could probably happen to General Motors, in my view, is they go into Chapter 11," Senator John McCain said on the Fox News Sunday programme.

The carmaker could reorganise and renegotiate its labour contracts to come out "stronger, better, leaner," McCain, from Arizona, said.

GM is cutting executive pay and will eliminate 47,000 jobs this year as part of a restructuring required to keep US$13.4 billion in US loans. Chief executive officer Rick Wagoner wants the US Treasury to lend the carmaker as much as US$16.6 billion more to survive.

GM, the largest US carmaker, has lost US$82 billion since its last annual profit in 2004 and has been fending off speculation about bankruptcy for more than two years. US sales plunged 18 per cent to a 16-year low in 2008, affecting GM, Ford and Chrysler.

Senator Richard Shelby, the top ranking Republican on the Banking Committee, said on ABC's This Week programme that "subsidisation of anything for very long never works".

"The automobile business - those companies, Chrysler, Ford and General Motors - they're in deep trouble," Shelby, of Alabama, said. "I've suggested they go into Chapter 11. That's where they belong. And they could reorganise."

House Minority Leader John Boehner said the Government shouldn't give GM any more money "until General Motors shows that they can be a viable company for the long term".

"Anything short of that is just throwing good money after bad," Boehner said on CBS' Face the Nation programme yesterday.

The Federal Reserve's Term Asset-Backed Securities Loan Facility programme, or TALF, may help struggling carmakers raise cash to make loans to consumers. TALF's aim is to bring investors back to the market for bonds backed by auto loans, credit cards, student loans and small businesses.

The Fed will start disbursing TALF funds on March 25 to prop up the market for consumer and small business loans. The programme was originally set to start in February.

"Any money we give to the auto industry must be a lifeline, not life support," House Speaker Nancy Pelosi said last week. She said the ultimate decision remained with the Administration. "This isn't endless. But there has to be a sign of viability. And this needs to happen, and it needs to happen soon."

In a statement released two days ago responding to a Wall Street Journal report, the carmaker said that "GM has not changed its position on bankruptcy".

"As we've demonstrated through a series of actions, GM is moving quickly and aggressively to restructure the business, and achieving that outside of court remains the best solution for GM and its constituents," spokeswoman Renee Rashid-Merem said in a March 6 interview.

- BLOOMBERG