Nov. 19 (Bloomberg) -- General Motors Corp., Ford Motor Co. and Chrysler LLC's chief executive officers told Congress they studied bankruptcy before dismissing the idea as unworkable and asking the U.S. government for money to survive.

In recounting the deliberations, they spotlighted the industry's objections to a so-called prepackaged bankruptcy as championed by some Republican lawmakers. While proponents say such a filing would let U.S. automakers survive, the companies say going to court would end in their liquidation.

``We have looked at all aspects, whether it's a prepackage, whether it's prenegotiated,'' Chrysler CEO Robert Nardelli said today. The options are all ``more negative and most costly'' than restructuring as a condition of receiving federal aid.

Nardelli disclosed Chrysler's internal assessment of bankruptcy during testimony yesterday to a Senate committee, and repeated it today. GM CEO Rick Wagoner and Ford CEO Alan Mulally also said under questioning that their companies had considered reorganizing in court protection.

``We have,'' Wagoner said. ``Our experts have knowledge in this area.'' GM said Nov. 7 it may not have enough operating cash to last through year's end.

Mulally told the House Financial Services Committee that ``it's not a viable option, so we have no plans for bankruptcy.''

Opposition from Republicans may doom Democrats' bid to tap the $700 billion bank-rescue plan for automaker loans, pushing any new aid into 2009 after House Speaker Nancy Pelosi said she doesn't intend to reconvene in December after Congress's lame- duck session ends this week.

`Fresh Capital'

``Without fresh capital, we project that GM may not have sufficient liquidity to make it to year end,'' Deutsche Bank AG analysts including Rod Lache in New York wrote in a note to investors today.

A GM bankruptcy is the ``only way'' for the biggest U.S. automaker to end union costs that make it uncompetitive, Republican Senator James DeMint of South Carolina said in an interview on Bloomberg Radio.

Nardelli, who said Chrysler is down to $6.1 billion in cash and burning about $1 billion more each month, told senators yesterday that bankruptcy would take too much time.

``To a certain degree, all of these take an extensive amount of time,'' he said of the options for arranging a filing for court protection. Auburn Hills, Michigan-based Chrysler would need support from ``all the players, all of the suppliers, all of the vendors, all of the labor,'' he said.

`Very Fragile'

``In fact, we are in a very fragile position,'' he said of Chrysler, whose 26 percent U.S. sales decline this year through October is the most among major automakers.

The median time for a prepackaged bankruptcy is 45 days, according to Lynn LoPucki, who teaches bankruptcy law at Harvard University and the University of California at Los Angeles. The median time for an ordinary bankruptcy is about 1 1/2 years, or more than 10 times as long, he said.

For GM, a prepackaged bankruptcy plan with federal assistance would involve fewer taxpayer dollars than a bailout done outside of court, said Mark Bane, a bankruptcy lawyer at Ropes & Gray in New York. He isn't involved in GM's case.

The Detroit-based automaker could use court protection to reduce debt, reject unfavorable contracts and minimize the risk that it would need a future bailout, Bane said in an interview.

Federal Role

``It creates the environment to deal with GM's problems, but limits government financial commitment,'' he said.

A sprint through bankruptcy might not work for GM, because prepackaged bankruptcies typically address ``financial issues and not operational issues,'' said Tom Macauley, a bankruptcy partner at Zuckerman Spaeder LLP in Wilmington, Delaware.

``GM's problems are that it's unprofitable and needs to renegotiate contracts and do what is really an operational restructuring,'' Macauley said. ``A financial fix isn't going to do it.''

Government backing for a bankruptcy would split the difference between Republicans demanding the automakers reorganize in court and Democrats insisting on a federal rescue due to the industry's economic heft, said James Harris, president of restructuring-advisory firm Seneca Financial Group Inc. in New York.

``Given what's happening in Washington, a prepackaged bankruptcy does make some sense,'' Harris said.

Assessing Risk

The collapse of GM would cost the government as much as $200 billion should the biggest U.S. automaker be forced to liquidate, Nariman Behravesh, chief economist at IHS Global Insight Inc. in Lexington, Massachusetts, estimates.

A GM failure would mean ``more aid to specific states like Michigan, Ohio, and Indiana, and more money into unemployment and extended benefits,'' Behravesh said Nov. 15. Mulally, who said Dearborn, Michigan-based Ford isn't yet running out of money, told senators yesterday that one bankruptcy may topple the other automakers.

Aid will likely be delayed until Congress attaches more conditions, JPMorgan Chase & Co. analyst Himanshu Patel in New York wrote in a report today.

``The tone of the hearing conducted on behalf of the Senate Banking, Housing and Urban Affairs Committee and the direction of questioning did not change our view that federal aid is more likely than not,'' Patel wrote. ``However, we feel it is clearer now that the timing of any such aid is not imminent.''

To contact the reporter on this story: Jeff Green in Southfield, Michigan at jgreen16@bloomberg.net

Last Updated: November 19, 2008 17:19 EST