GM in Default

[guido911]

Well color me shocked:

http://www.businessinsider.com/gm-defaults-2009-4

Chapter 11, here you come.  UAW contracts, there they go. 

[cannon_fodder]

I don't think anyone can argue with a straight face that they are a viable company.  But if I were to place a bet I'd venture to guess they get the extra $5,000,000,000 from the government to cling on for another month or two.  The net result of the ~$15 billion the government gives them will be nothing.

IMHO.

[Conan71]

They are still advertising heavily.  I would imagine they are on COD basis with their ad agency and media outlets. 

I heard on the radio last night they were going to shutter some plants for nine weeks to get rid of inventory and save operating costs.  Has it dawned on anyone this company is incredibly slow to react???  GM is a T-Rex.

[Gaspar]

Anyone wanna bet that we hear an announcement within the next week or so that it is imperative "for the sake of the country" that we inject 20 billion into GM and appoint a "Car Tsar" to run the company under the federal government. 

They will use the term "Temporary Nationalization" which is about as honest as a "Temporary Tax".

The BS hobgoblin will be "If GM fails to be a viable company on its own, we face a total collapse of the US economy".  This is an excellent opportunity for the UAW to achieve a concrete voice in government.  After all, never let a crisis go to waste.

[Conan71]

In other news Gold Man Sacks upgraded Ford the other day.  They aren't perfect, but there's a model of a far better run company.

[rwarn17588]

... Gold Man Sacks ...

Are you referring to Tulsa's outsized mascot near Expo Square?

Funniest unintentional misspelling of the day.

Back on topic: Yes, Ford is a very good car company these days. Even Consumer Reports, who has batted American-made vehicles for decades, says that Ford now rivals the Japanese companies for overall quality.

[cannon_fodder]

Conan has consistently referred to it as Gold Man Sacks, I don't think it was in error.  But agree, it is funny. 

FORD made the needed cuts about 5 years ago, or at least started the process.  They were punished for it by the market and creditors too.  People accused them of selling the company down the river and assuming a weak position.  Proud to say I saw the writing on the wall and invested in Ford (and lost money, but not as much as if I had bought GM...).   I honestly think FORD is a viable company and will surpass GM in size in the near future.  Their products are being more highly rated, they have a better reputation, they sold off non-core elements, spent money updating facilities.  They give me hope for the US Auto Industry (US owned and run).

I would not be too surprised if GM went into Federal Receivership, but I don't think there will be a nationalization without a declaration of bankruptcy.  Too much political capital would have to be spent and it represents an impossible black hole.  If the Feds took it over, where would the losses stop?  We all know they couldn't destroy labor, sell of pieces, or liquidate units to foreign auto makers because of politics.   It would just continue to operate.

The notion that GM has or will become a going concern by May 1st to get the extra $5bil is a joke.  May as well just give $2.5bil to Michigan to help with unemployment insurance and the other $2.5bil in something that will matter.  At this point I honestly think it's just pissing in the ocean.

[Hawkins]

Well color me shocked:

http://www.businessinsider.com/gm-defaults-2009-4

Chapter 11, here you come.  UAW contracts, there they go. 

Oddly, this isn't mentioned frontpage on Yahoofinance today, and people are still trading GM's stock.

I can't imagine why anyone would buy that stock right now (even daytraders), but then again, nothing that happens in the stock market makes any sense anyway.

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[Conan71]

Oddly, this isn't mentioned frontpage on Yahoofinance today, and people are still trading GM's stock.

I can't imagine why anyone would buy that stock right now (even daytraders), but then again, nothing that happens in the stock market makes any sense anyway.

--

There's your answer- day traders.  People who have time to sit around and pay attention to what's happening with it and who are good at shorting have been making money on it.  I've stayed clear of GM. 

Meanwhile, I'm averaged in on Ford at $2.21 a share.  I'm happy with the direction it's going.  I wish I'd bought a bigger chunk at $1.60.  I keep an eye on what my stocks are doing just about every day, but I definitely wouldn't consider myself a day trader.

[FOTD]

Anyone wanna bet that we hear an announcement within the next week or so that it is imperative "for the sake of the country" that we inject 20 billion into GM and appoint a "Car Tsar" to run the company under the federal government. 

They will use the term "Temporary Nationalization" which is about as honest as a "Temporary Tax".

The BS hobgoblin will be "If GM fails to be a viable company on its own, we face a total collapse of the US economy".  This is an excellent opportunity for the UAW to achieve a concrete voice in government.  After all, never let a crisis go to waste.

Nope. The bondholders will have to take action. Obama is willing to let GM go through bankruptcy to restructure rather than throw more money into a failing welfare company. Stockholders in GM will get screwed....not that they haven't already.

[Conan71]

Nope. The bondholders will have to take action. Obama is willing to let GM go through bankruptcy to restructure rather than throw more money into a failing welfare company. Stockholders in GM will get screwed....not that they haven't already.

I guess we will find out soon enough.  The gov't has been so fearful of letting large companies reorganize up to now.  I'm going to be pretty furious if they dump any more money into this T-Rex of a company.

[nathanm]

I think it was worth giving GM a chance. Now that they've squandered their chance, throwing more money at them would just be throwing good money after bad, unless it's done in the form of DIP financing so the company can restructure in BK or operate in BK until the pieces are sold off. And then only if the banks refuse.

I think an "orderly" failure is the order of the day.

[Gaspar]

DETROIT — The Treasury Department is preparing a Chapter 11 bankruptcy filing for Chrysler that could come as soon as next week, people with direct knowledge of the action said Thursday.

[cannon_fodder]

Looks like this will get ugly.  Purportedly, the government will offer 22 cents on the dollar to creditors and a 5% equity stake - forcing them to take a $5 Billion bath.  However, most of those creditors are secured - by plant, inventory, and other assets.  As secured creditors, they take above and beyond all others (including the government).    They are demanding 65 cents on the dollar and a 40% equity stake.

People usually don't walk away from $4,000,000,000 without a fight, particularly if you are secured.  Do you have any idea how many hours of attorney work you can get for $4,000,000,000.00?  Like 9,500 years worth of attorneys.

Also, as part of the deal the Fiat 20% stake would move forward.  Which triggers $6,000,000,000 in US government money, bringing the total to $10 Billion.  Which is above the mean estimated value of the entire company.  Which is nice.

http://www.nytimes.com/2009/04/24/business/24chrysler.html?_r=1

[FOTD]

Appears the FED and Treasury combined are the new mega bank/workout department for the benefit of retaining jobs throughout America. In the automobile industry as in the financial industry, Mergers and Acquisitions and bankruptcy can be enabled and cleaned up through only the governments supervision, regulation, and oversight on deals of this magnitude.

The obvious point is our government is taking charge of bad management that resulted from many years of lousy regulations and poor oversight but mainly decisions based from greed and "afluenza". Those jobs being saved will rescue the economy. And much of the money forwarded is being paid back over time. The auto industry is being forced to comply with change and that's going to be worth the taxpayers investment in non tangibles.

It's helped to have forward thinkers and "brainiacs" in charge of the USA for a change. Wait and see.

Yes we can.