The GM Meltdown

Amid all the debate about the cost to the government of a GM bankruptcy, no one seems to have stopped to ponder the mark-to-market cost to shareholders of unrelated companes. But today, with a GM bankruptcy looming, stocks in general, and financials in particular, are having another one of those days: the S&P 500 is now solidly in sub-700 territory, Citigroup is less than $1, and Wells Fargo is down 18% at less than $8.

Meanwhile, the message from Treasury and the Fed is essentially unchanged from when Hank Paulson was making decisions six months ago -- something which certainly makes it seem as though the government has finally run out of ammunition and is essentially powerless in the face of the sheer magnitude of this financial crisis.

With the "Bernanke put" a distant memory, investors are now waking up to the fact that no one can save them. This isn't the bottom. But I think it might, finally, be the point at which a clear-eyed realism is replacing hopes for some kind of quick and impressive rebound.

(Image via Scheiber)

Comments

[Thadeus Tho...:]

See. ..like I said.

Mar 05 02:27 PM

[Tesa:]

Panic(2) = Coke is more expensive that GM stock and "C" = realism!
Panic(3) = government is run out money.

Mar 05 02:33 PM

[Mister Jimmy:]

Sorry, Felix, but there will be no GM bankruptcy. The Feds will assist GM in working it out., without a BK filing. Lots of reasons for it: 1) the Obama team owes the UAW, 2) it would be counter-productive to the new stimulus plan, and 3) it would be far more costly to the taxpayer and everyone else involved to formally declare any form of BK. The BK card is really being used as leverage, at this point, to get concessions from stakeholders, and today's audit comments are for the conditions at the close of 2008. No surprises to GM or the Obama team there.

Mar 05 02:58 PM

[Jimbowillie:]

GM should have been allowed to enter bankruptsy long ago where they would have been able to shed much of the legacy costs, eliminated the union interference and slimmed down the product line that would allow them to grow again.

Mar 05 03:11 PM

[User 370586:]

Screw the over paid and under worked unions. I spent over 20 years in the Automotive Industry. It always baffeled me that the UAW paid workers over $30.00 an hour to put a $5.00 part on a car or truck. BY BY UAW

Mar 05 04:52 PM

[SouthernCEO:]

I hate to see GM, or anybody for that matter, go bankrupt but I can't see any other way. At this point it is useless to talk about whose at fault. GM's in a hole and how they got there is history and that can't be changed. The gov't is just as broke so they can do little. I am afraid that to survive jobs and lives are going to have to be affected. Stock holders, bond holders, UAW members, retirees have some tough decisions to make. This isn't about what's fair or what was promised, it's about survival. FYI I have always driven an American made car and have always had good service so I can't bash the quality. I just hope I don't have to tell my grand children stories about driving a Chevy in the old days and have them not know what I'm talking about.

Mar 05 05:01 PM

[User 158164:]

I don't know what you clowns do for a living, but after reading "bankruptsy" and "BY BY", I figure it must involve turning burgers over.

Mar 05 05:34 PM

[Dagger:]

Maybe Americans should go back to the days when they supported their neighbors and weren't just out for themselves. If there weren't so many import lovers out there GM would be in a better position. That along with all the greedy bankers has killed this country- It'll never be the same.


On Mar 05 02:08 PM Thadeus Thornton III wrote:

> So why is this article titled as "The GM Meltdown"? More Alpha
> sensationalism to attract a ew readers? Are you guys so hungry for
> traffic flow here that you need "GM" as a drawing car? I am sorry
> , but there are more than a few writers ***(and I use the term loosely
> )*** here that just love to either bash GM or use it in some way
> to foment reaction.
>
> One starts to ponder why so many Alpha contributors seem to beat
> the GM problems to death when it's the financials who keep getting
> absolute GOBS of money to keep going with hardly a question or comment.
> (Well, ok Citigroup is mentioned, but still, why the title?) Maybe
> these guys have Honda or Toyota stock and want GM to fail so that
> their portfolio might recover a bit with GM out of the way. Or they
> all drive imports and are just having some kind of sadistic revenge
> thing going on. I mean, really. . .

Mar 05 06:44 PM

[lbator:]

If we let GM go belly-up as they deserve, then the market may rebound on the knoweldge that the market has eliminated a failed enterprise.

Mar 05 07:42 PM

[babyray:]

Bet you wouldnt last one day on a assemblyline making 65 jobs per hour.

Mar 05 10:15 PM

[TB3:]

I've read enough articles by SA authors at this point that if I'm looking for a good laugh, I'll click on and read one. However if I have other important things to do, I pass. Now where is that sock drawer?

Mar 05 10:53 PM

[367851:]

Can we just let GM go and move on? I think it is time to let it go.

Mar 05 11:57 PM

[martin41358:]

user370586 ... that;s like saying the carpenter was overpaid because he only hammered twenty dollars worth of nails!!!

On Mar 05 04:52 PM User 370586 wrote:

> Screw the over paid and under worked unions. I spent over 20 years
> in the Automotive Industry. It always baffeled me that the UAW paid
> workers over $30.00 an hour to put a $5.00 part on a car or truck.
> BY BY UAW

Mar 06 12:00 AM

[367851:]

Let's let Citi go too. Let's just let it go and see what happens. It won't be the end of the world. Just let it go.

Mar 06 12:03 AM

[martin41358:]

and I will sell you a bowl of chilli on tuesday and you will sell me a burger on wednesday .... great plan 367851 !!!!!!

Mar 06 12:09 AM

[samwise:]

GM is going to declare bankruptcy. That is now a fact. Aren't we in a position now that the crisis has passed and cold, hard reality has set in to debate the efficacy and consequences of these extraordinary "interventions" by our Federal Government? Clearly all of them have failed quite spectacularly. What are the fiscal consquences for such breathtaking capital loss at the Federal level? Will the Feds default on the Fannie and Fred bonds it has guranteed, for example?Obviously prices are being driven higher to the maximum extent possible by the "capitalists" which are producers of any good or service right now--oil and the price of gasoline are definitely moving higher and so is food--all in a statistically significant and punitive ways. Social unrest is definitely on the rise as well. So government sponsored anarchy seems to be the plan. You can't tell me there aren't terrific investment opportunities with such manifest incompetence. Railroads come to mind since they are business to business and aren't impacted in such a fundamental way by the collapse of American consumerism as the motors, banks and governments.

Mar 06 03:23 PM

[misiosnechacz:]

I wish them well. But CEO's of GM they are from diffrent planet I think. GM and Chrysler they should have green light to do whatever takes to survive. Don't bother about healthcare, UAW and all that shite. If they are going down they won't see a cent, peny or columbian peso.
This week GM CEO's presented "plan" to German goverment (they were asking for 3.3 bln euros). There was no bussines plan at all and it was all in english. How would you feel if they presented their plan to Congres in spanish. they should change the team and current GM board should be selling burgers and big fries for the rest of their lives. You cant just say give us 20 billions or we will fail and three months later the same again. They have to do better or someone will have to pull the plug.

Mar 07 06:50 PM

[a. palmer jr.:]

I'm not sure any business should be bailed out in a capatalist society. That sends a message that the government will take care of you if you hire enough taxpayers and voters. I think it would be better if we practice more survival of the fittest then maybe we could compete with the Japanese and Chinese. First we have to get the government to stay out of business and do what they do best...nothing!!

Mar 07 07:34 PM

[Ned S:]

Dunno if Mr Obama will let GM go or not - But until he does (and a lot more like GM), stocks can't stage a real recovery because we are stuck with all these "Dead men walking" businesses.

Mar 08 12:39 AM

[Ned S:]

Dow 10,000 at best until the dead get coverered with six foot of dirt or Mr Bernanke and Co devalue the currency enough that even owning quite sick US stocks seems better than holding USD. Sorry - But Big Bad Ben really doesn't want you in cash. Surely you have noticed?

Mar 24 06:09 AM