The government has hired a coterie of bankruptcy and investment specialists to lay out a restructure of General Motors and Chrysler, several published reports indicate. The distressed automakers, two of the biggest advertiser on television, took more than $17 billion in federals loans to continue operating. Bloomberg reports that both companies have until March 31 to present a recovery plan, or the fed can demand its money back.
The Treasury Department is said to have hired New York’s Calwalader, Wickersham & Taft; Sonnenschein, Nath & Rosenthal of Chicago, and Rothschild to provide a game plan for a government-backed restructuring.
The auto chiefs, who started panhandling the fed last Thanksgiving, have shunned filing for bankruptcy, saying it drive away potential buyers. Bankruptcy, however, would put the companies on firmer footing with creditors and unions.
U.S. auto sales collapsed in the wake of the mortgage implosion, as home equity is a major source of financing for new cars. Sales dropped 18 percent in 2008, and reached a 27-year low last month. The automotive spot ad category fell by 17 percent in 2Q08 and nearly 18 percent in 3Q08, according to the Television Advertising Bureau. The category remained No. 1, but dropped from nearly $975 million to more than $802 million year-over-year.
Spot ad spending by General Motors Corp. was actually up by nearly 44 percent in 3Q, to more than $76 million, but it was offset by a drop of nearly $100 million in spending by the GM dealers association. Spending by local GM dealerships was also down by nearly $11 million.
Chrysler remained the top spot advertiser in the quarter, spending nearly $94 million, but it was down nearly 16 percent from the $111 million the company spent in 3Q07 spot.
