Skip to content
Ralph Nader > Special Features > Nader On GM Bankruptcy

Dear President Obama and Mr. Henderson,

We are writing to follow up on our letter of May 26. We wish to reiterate our overriding message: Before any irreversible moves are made — including, especially, entrance into voluntary bankruptcy — the GM/task force reorganization plan should be submitted to Congress for deliberative review and decision. We also wish to highlight several major concerns with a precipitous bankruptcy declaration that have emerged over the last several days.

First, the previously understood rationale for bankruptcy no longer applies. We noted in our prior letter that there were creative negotiating strategies to address the problem of reaching an accommodation with the bondholders. Recent developments indicate that claim to be true, as GM and the auto task force have revised the proposed allocation of equity in a restructured GM, and reached agreement with at least the most prominent bondholders. Although a June 1 bond payment is due, it certainly seems that that payment could easily be wrapped into the new bondholder offer, as effectively will be the case if GM enters bankruptcy.

With the bondholder problem moving toward resolution, or at least now clearly resolvable, there is no evident rationale for bankruptcy other than an unstoppable momentum of some hidden agendas. Given the high stakes, including the many concerns we raised in our previous letter (among them, the effects on consumer confidence in the GM brand and the socio-economic impacts of potentially excessive downsizing), inertia is no reason at all.

Second, the matter of how GM’s holdings in China will be treated in bankruptcy, an issue we highlighted in the previous letter, continues to demand attention before a filing. Kevin Wale, President and Managing Director of GM China, told CNN that “Our business is run as separate joint-ventures here in China in partnership with SAIC — so we’re profitable, we fund our own investment and we would be largely independent of any action that took place in the US.” Yet the GM assets and profits in China must be included in any bankruptcy proceeding, and available to creditors, claimants and litigants who could, conceivably, petition to take the company into Chapter 7 liquidation. Has GM clearly presented to the government its valuable holdings, large profits and contractual obligations in China? The task force has indicated some uncertainty about these questions.

Third, proceedings in the Chrysler bankruptcy have highlighted the manifold injustice being perpetrated on victims of defective Chrysler products — and likely to be perpetrated on victims of GM products. In the Chrysler proceeding, top Chrysler officials have acknowledged that they were ready and able to do a deal with Fiat that established successor liability for the emergent Fiat/”good Chrysler” company. In the course of bankruptcy or in preparing for bankruptcy, however, they reversed course, apparently just because they could. Now, hundreds of Chrysler victims are on track to have their claims extinguished, unless the bankruptcy judge or other court overrules this element of the bankruptcy plan.

There are many differences between the bankruptcy of the private company, Chrysler and the pending GM bankruptcy, but the GM restructuring plan is similar to Chrysler in the anticipated creation of a bad/old GM and a new/good GM that emerges without liabilities. Do you plan to follow the Chrysler approach? Have you given consideration to the suffering of real adults and children that will follow from such a move? Not to mention the political backlash.

One such real person is Amanda Dinnigan, a 10-year-old girl from Long Island, New York. Amanda was injured by an allegedly faulty seatbelt in a GMC Envoy that snapped her neck in a crash. Her father, an ironworker, estimates her healthcare costs at $500,000 a year. Her lost quality of life will obviously be tragic. Will a discretionary decision not to establish successorship liability in a discretionary (voluntary) bankruptcy leave Amanda and her family — and thousands of others like them with no access to justice? If you intend to proceed with maneuvers effectively to extinguish their claims, you should at least talk to some of them first, and confront the human consequences of such actions.

The GM/task force bankruptcy plans appear geared to saving the General Motors entity — but at a harsh and often avoidable cost to workers, communities, suppliers, consumers, dealers, and the nation’s manufacturing capacity.

At this late stage we again urge you to reconsider the bankruptcy filing plans, and to enable deliberative and meaningful Congressional review — as many Members of Congress are seeking — of the restructuring plans before irreversible steps are taken. After all, Congress is more than a potted plant. The first branch legislated, after public hearings, the 1979 Chrysler bailout and the complex Conrail restructuring a few years later.


Ralph Nader

Robert Weissman,

Essential Action

Charlie Cray,

Center for Corporate Policy