A recent NY Times op ed gave plaudits to a Senate investigation held in the 1930’s to discover the causes of the Great Depression. But the power of congressional investigators is vastly overstated and overrated. They can be stymied by resourceful, deep-pocketed corporations. Considering the current attitudes of US automakers, it’s unrealistic to expect any voluntary disclosure to Congress, any meaningful disclosure to taxpayers. But, as the Bermie Maddoff liquidation shows, bankruptcy court is another matter entirely. The trustee in the Madoff liquidation/investigation can ask the bankruptcy court to authorize subpoenas, which can be used to compel production of documents and to compel witnesses to testify. The prospect literally scares GM and Chrysler witless.

GM’s plan to Congress for its long term financial viability results in GM being insolvent in 2012 in amounts ranging from $30-43 billion. It’s not much of a plan for long term viability. UAW management points out that GM’s plan leaves some creditors making no concessions and correctly asks why it should re-schedule payments or make other concessions when other creditor groups make no concessions. While chapter 11 is no panacea, it is far better to fully restructure GM in chapter 11 than to support the half-baked plan now before Congress. Some of the problems with GM’s current plan…

Litigators use yes/no questions to focus witness testimony and prevent dodging, weaving and long-winded evasiveness. Here are 20 direct questions for Wagoner, Mulally and Nardelli. No doubt TTAC’s Best and Brightest have their own questions which they would like to have answered under oath.

1. Did you bring with you complete and current financial statements, including a balance sheet and financial projections?
2. Are all these financial statements and projections submitted to this committee also available to US taxpayers?
3. Have your financial statements and projections been shared with the UAW?
4. Have they been given to any of your bondholders?
5. Are your financial projections based on the “worst case” scenario?
6. Do you have other models/scenarios for financial projections? For example, is there a best case scenario?
7. Have you provided us with a written statement of all the assumptions you relied on in preparing the financial projections?
8. Did outside consultants/advisors assist in the preparation of your financial projections?
9. Based on the balance sheet presented to us, do your liabilities exceed your assets?
10. Have you spent more than $1 million in 2008 lobbying Congress for financial aid? More than $10 million? More than $20 million?
11. Have you had discussions with your largest bondholders about forgoing interest and principal payments until any taxpayer loan is repaid?
12. Have you asked any bondholders to convert their unsecured debt into common shares?
13. Have any bondholders agreed to convert their debt into common shares?
14. Have any of your bondholders formed a negotiating committee?
15. Do you intend to renegotiate your current labor agreements with the UAW?
16. Do you intend to reduce your dealer network?
17. Have you retained investment bankers to assist you in selling any assets?
18. Do you have collateral to secure repayment of any loan made by US taxpayers?
19. Do you personally have an employment agreement?
20. If your employment is terminated, are you entitled to a severance payment?

Speculation is rife that GM plans on shutting down or selling Saab, Pontiac and/or another brand as a prelude to a federal bailout. Common sense and recent history suggest that any such move will create a raft of breach of contract claims by jilted dealers and suppliers. As Oldsmobile’s demise proves, there’s only one possible resolution to the resulting feeding frenzy: cash termination payments. If, however, GM filed for Chapter 11 bankruptcy, these breach of contract claims would become nothing more than unsecured claims– which are resolved within the debtor’s C11 reorganization. The claimants would be legally barred from costly state court litigation. In a stroke, GM would be transformed. How great is that? But wait, there’s more!

In recent congressional testimony, GM admitted that its experts are “exploring” Chapter 11 reorganization. At the same time, GM continues to argue that a bankruptcy filing is the nuclear option– it would vaporize jobs and inflict cataclysmic damage on the overall U.S. economy. While acknowledging the danger, many argue that reorganization is both necessary and unavoidable. They suggest that GM’s recreation should somehow take place outside of the time-tested legal process known as Chapter 11. Sentiment is growing that a taxpayer-finnaced “prepackaged” Chapter 11 is the best way to solve both GM’s business and financial problems, and perhaps of other automakers. Maybe so. Let’s have a look…