DETROIT -- Michigans attorney general today urged General Motors and Chrysler to file bankruptcy -- if, eventually, they must -- in their home state rather than in Delaware or New York.
Attorney General Mike Cox, in letters delivered today to GM CEO Fritz Henderson and Chrysler CEO Bob Nardelli, urged them to meet with him and his staff before any Chapter 11 filing.
Any potential bankruptcy filing outside the state of Michigan seems bizarre, Cox wrote, adding that the companies health has been intertwined with that of the state for decades.
The automakers are surviving on $17.4 billion in federal loans. President Barack Obama last month rebuffed their plea for up to $21.6 billion, saying Chrysler had 30 days and GM had 60 days to complete satisfactory restructuring plans or risk being forced into bankruptcy.
Since then, GM officials have said they are preparing for bankruptcy as a possibility if the automaker cant successfully restructure out of court. Speculation about which U.S. Bankruptcy Court would receive the filing has centered on the Eastern District of Michigan in Detroit, the Southern District of New York in New York and the District in Delaware in Wilmington, Del., where GM is incorporated.
A filing outside Michigan would inconvenience and unfairly impact the vast majority of your creditors who are located in Michigan, Cox wrote. The cost for many of these creditors to participate in a New York or Delaware bankruptcy is overwhelming and would undoubtedly lead to unjust results.
But at least one large bondholder has ruled out the Detroit court as being more favorable to the UAW, Reuters said last week, citing an unidentified source. The perception is GM and the union would have a home court advantage in Michigan, and the case might draw protests in Detroit and enflame emotional confrontations, Reuters reported.
But Michigan is home for Chrysler and GM, Cox wrote. The state is the site of your corporate headquarters, most of your manufacturing facilities, hundreds of thousands of your active and retired employees and home to the vast majority of your suppliers and their employees, he said.
Cox said the companies debts to the state include tax obligations, workers compensation claims, unemployment insurance and environmental settlements.