I’ll admit I’m surprised.  My inner cynic suspected the Bush administration would try a pre-packaged Ch. 11 bankruptcy for GM or Chrysler, or that they would dither and play Hamlet so long that the Chrysler, GM, or some big Tier 1 would end up in bankruptcy anyway for Christmas.

Instead, GM/Chrysler get their bridge loans.  See NYTimes (registration reqd) or FreePress.

The good side is that the package includes restrictions and a March 31 deadline that will enable the companies to play hardball with their debt holders (especially the banks), as well as dealers and the union.  The union has already shown a willingness to help & play,  but contrary to what some Republican Senators and Wall Streeters believe, the problem now isn’t so much the union contract as the debt-laden capital structure.  The banks haven’t shown a willingness to play yet.  Maybe now they will.  With the fed gov money getting priority over all other debt, a fed gov decision in late March that the restructuring hasn’t happened will greatly raise the risks for current debt holders.  The balance of power in the game of chicken between firm and banks just changed.

The downside is the timing and amounts. See the FreePress.  It seems Bush/Paulson want to tempt fate.  There’s no slack here folks.  That’s tight.  If the economy takes another surprise hit in the next 40 days, this might not work.