Saturday April 04, 2009 
Saturday April 04, 2009
This article belongs to the GM, Ford and Chrysler bankruptcy watch story arc.
General Motors warned on Tuesday [31 Mar 2009] there was a rising chance it could file for bankruptcy by June 2009. GM shares tumbled and its bonds fell as the markets began to price in a bankruptcy that could wipe out stock holders and force deep losses on creditors. US auto sales for March are expected to have fallen 40% from a year ago. Advisers to GM and Chrysler have been working to prepare for potential bankruptcy filings that would aim to preserve the best elements of the struggling companies while slashing debt and cutting pension and health care costs.
GM stock has lost almost half its value since Monday when Obama outlined policies sharply limiting taxpayer funds for automakers. CEO Fritz Henderson - installed in the job on Monday - said GM would have to close more plants and shed more factory jobs. His predecessor, Rick Wagoner, was forced out by the Obama administration, which gave GM 60 days to reach concessions with bondholders and the union. "By no later than June 1, if we're not able to accomplish this outside bankruptcy, we'll be in bankruptcy," Henderson said. Bondholders said they were braced for a reduced offer of "pennies on the dollar" for about $28 billion in GM debt.
- It has been the proverbial train wreck in slow motion but we are seeing the light in the tunnel which is that of an incoming train, and be careful what you wish for because you just might get it. Um wait. Talk about mixed metaphors. When some of the peakoilers started yelling "Die SUV's Die!!" (Jun 2005) it was arguably more of a tongue-in-cheek thing rather than looking for global economic collapse and a membership in the doomer faction.
But now we are approaching a state where a GM bankruptcy is not only looking possible but is getting increasingly probable, what with them hiring bankruptcy lawyers and the Obama administration's increasingly hardline stance towards the beleaguered automakers. If GM is to survive as a company, it has to cut the chains of ballooning debt and pension/healthcare expenses. We are getting closer and closer to a resolution of the question asked earlier in these pages - Could GM go bankrupt? (Oct 2005). The answer is looking more and more like a "yes". If and when GM emerges from this mess it would probably be a rather different company but that would be preferable to outright collapse and liquidation.
See also :
1. GM risks bankruptcy as it runs out of cash, losing $73 billion since 2004, suspends Chrysler merger
2. GM share price target cut to zero by Deutsche Bank
3. GM collapse could cost $200 billion in bailout, 2.5 million jobs lost
4. GM, Chrysler may go bankrupt after Senate rejects auto bailout plan as talks collapse
5. Report: GM mulling bankruptcy
(2009-04-04 14:20:37 SGT)
[Biz]
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Thanks for the informed perspective.
The change in GM management may have a wider ripple effect.
I suspect Rick Wagoner was simply rolled up, stuffed into a cannon, and fired across the bow of other recipients of bailout dollars as a warning shot.
I'm interested in your opinion.
Posted by Burr Deming on April 04, 2009 at 11:19 PM SGT #