DOBBS: New reports tonight that General Motors is stepping up its preparation for a possible bankruptcy. General Motors, however, still hoping to win concessions from both creditors and unions to stay in business. The Obama administration has set a June 1st deadline for General Motors to put in place a plan for restructuring or be forced into bankruptcy.

Detroit obviously a part of Thaddeus McCotter’s district and he joins us here tonight. I know this has got to be a difficult time for all of the folks, not just General Motors and Chrysler and Detroit and the automobile industry, but for everyone in your district, everyone in the state of Michigan, in fact the whole country.

REP. THADDEUS MCCOTTER (R), MICHICAN: Yes Lou, that’s absolutely right. One of the things that’s most pressing upon the people in Michigan and the manufacturing community in general is the uncertainty about the process that is currently taking place regarding the structure. The administration said that 50,000 jobs between Chrysler and GM were not enough to show viability.

DOBBS: The elimination of 50,000?

MCCOTTER: The elimination. And so in their place, they’ve not given us what number they think will be viable in the future. Instead, they’ve given us policy goals, not a path to profitability that the companies can follow. And the people in Michigan and throughout America can know with certainty what is going to happen to them.

DOBBS: Fritz Henderson, the new CEO of General Motors indicating that he is in prepared for the possibility of that bankruptcy and has accelerated those preparations. Do you have any signals that that is a greater likelihood tonight than it was, say, a week ago?

MCCOTTER: Clearly Fritz Henderson is very smart. He would be not be doing his job if he were not preparing for the administration has said there’s a substantial likelihood of occurring. But GM and Chrysler in its own situation want to avoid bankruptcy. That’s why they’re going to do everything they can with the unions, trying to get the bond holders to the table and do the best they can to beat that deadline to avoid the bankruptcy. But he has to as a part of his due diligence understand that that’s a distinct likelihood if the restructuring doesn’t take place.

DOBBS: When I talked with him here last week, I got the distinct impression he was still hopeful that he could negotiate with both his unions and the bond holders, the creditors of the company. Do you share that — I won’t put it that way. I won’t call it optimism. Are you as confident tonight as you would be, say, a week ago?

MCCOTTER: What I’d really like to know, Lou, to have any confidence in the bond holders, is are there bond holders with GM bonds that have credit default swaps with AIG? Because as you know, what happens is, they get par value if you go under bankruptcy. This means in an attempt to get the bond holders to the table, would be futile because they would make out better in bankruptcy and the very workers’ tax dollars used to reward them for the effort. I’ve sent a letter to Geithner. I’ve sent a letter to Bernanke asking are there bond holders of GM that have credit default swap/insurance with AIG and if so in what amounts? So that as we restructure, we know what everyone has at the table or under it. I’ve yet to get my response.

DOBBS: Well, one hopes you get that straightaway. And I’m sure that the treasury secretary has considered that possibility.

Turning to General Motors, it’s clear that there’s going to be a tremendous negative impact again either way this goes on the people of Detroit, people of Michigan. Where does Detroit go from here? Whether it is a structured or prepackaged bankruptcy, whether it is a regular bankruptcy, whether you avoid bankruptcy. There still will be a tremendous cut in employment in Detroit. Where do we go from here?

MCCOTTER: As we already have the highest unemployment rate in the country, and we are expecting an economic Katrina for the auto industry even with both options, one or the other, that will happen.

But we face it with a grim determination that we’ll get through this. This is the arsenal of democracy. This is the engine of prosperity. These are the people who put the world on wheels. It’s going to be very painful, we know that. But we expect to prove the critics wrong in the end and have a viable auto industry. And to tie it back to what you’ve been talking about with some of the overseas competitors we have. There are many such as Communist China that would love to have an auto industry. It’s time for Americans to understand why it’s important for us to keep our own as well.

DOBBS: All right, we’ll leave it there. And I’ll say absolutely. Congressman, good to have you with us, Thaddeus McCotter.