GM's Next Last Chance 34 comments
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We’ve got breaking news on GM. Tim Geithner, Larry Summers meeting with the cabinet level auto task force today, this is according to the Treasury, about GM and Chrysler. So, as we talk about it, GM stock plunging again, down another 13.5% to $1.60. Tim Geithner, Larry Summers and the auto task force which is headed up by former banker Steve Rattner. They will all be meeting today to discuss GM and Chrysler, accord to go a story, Dagen, you might have read in the Wall Street Journal apparently GM’s upper management is getting a little more comfortable with the idea after possible pre-packaged I mean, look at this.
They’ve already put in what, $18 billion taxpayer dollars into GM and hasn’t helped the equity at all. Now they need government money to do the pre-packaged bankruptcy, to fund the bankruptcy…One of the hallmarks of a bankruptcy is that the equity is wiped out. We’ve talked about this many times, right. Is that the equity becomes worthless because you’re at the very bottom of the creditor food chain so if you’re looking at a company whose equity, basically I think it’s fair to say with GM, has almost entirely been wiped out.
Fox Business Network coverage of the General Motors (GM) debacle was spot on this morning. At what point does the government say, enough is enough? Unfortunately that point is probably long after the taxpayers would like. We wrote (GM, Ford…Who’s Next?) when the first round of bailouts were on the table, that bankruptcy is the way to go for GM because there was no way that they could cut costs enough to make it a viable business without filing bankruptcy. Bankruptcy, even a prepackaged bankruptcy, would give GM a little bit of wiggle room in its current labor and retirement obligations. Sales have continued to worsen and at these levels there is no way the company can remain in business in its current form.
GM is backed into a corner; with slumping sales, a still massive debt burden, and taxpayers who do not want to see another multi-billion dollar handout go to waste. No wonder the article in the Wall Street Journal says GM management is more open to bankruptcy. [Ed. note: GM denied this today.] After all, they could get more money from the government to facilitate a prepackaged bankruptcy. At what point to we say enough is enough. Yesterday the auditors of GM’s books went on record as saying, there remains “substantial doubt” about the viability of the company, at least they are being honest. Is the government doing its fiduciary duty when it continues to sink money into a company that the auditors don’t believe in?
Of course, no one likes to see bankruptcy in an iconic America company, but that does not necessarily mean the company is finished. It gives them an opportunity to right the ship because right now, they need that so desperately. This would be unfortunate for shareholders and some bond holders but the bailouts are likely only delaying the inevitable.
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The autoworkers didn't cause the demise of our domestic auto industry by themselves, but you have to admit they didn't help any. Indeed, I suspect they were in the front row urging on the MI delegation in Congress to limit the impacts of CAFE.
So your solution is to socialize not only the auto but our nation's medical industry? Former British PM Margaret Thatcher explained the downside to that as well as anyone when she said, "The problem with socialism is eventually you run out of other peoples money."
thanks for your comment.
lots of them died in the 1930's - stutz, pope, mercer, graham, aub-cor-dues, etc.
i remember when the big 3 got together with the steel companies & made a deal to cut off preston tucker's steel supply.
they tried to do the same thing to kaiser but henry said up yours & built his own steel mill. henry dropped out of autos when consumer demand was satisfied & the profitability went away, but geneva steel was still operating the last i heard.
> jack
So your proposed solutions won't ultimately work for either our auto or medical industries. But it will achieve your objective. It will get someone else to pay for them.
I'm afraid Cramer may be right. He believes that under our current regime the Dow could fall to 5320. Look out below!
Not to mention Packard and Auburn, two iconic American car companies.
It amazes me that our government has decided to literally go to war with much of American business at the very time we need them most. For the life of me, I don't see how this can possibly end well.
In every case, there was the usual gloom and doom from the media, lots of foot-dragging, hand-wringing and pontificating from congress and the executive branch, but ultimately some entities were sacrificed on the public alter after some definitive action was finally taken. This generally resulted in the termination of the entity and perhaps a 'purp walk' for a few well-deserved individuals. Banks that went belly-up during the S & L crisis, Enron, WorldCom, etc. all come to mind.
Today it looks like GM, Chrysler, AIG, and Citigroup would appear to be the among the most likely/deserved candidates for sacrifice via a structured bankruptcy process, with the possibility of restructure and rebirth into some smaller form that is able to function and compete without a government handout.
On Mar 07 11:39 AM Teutonic Knight wrote:
> For its key stakeholders, management, employees, subcontractors,
> and vendors, the past 5 months had just been "Borrowed Money, and
> Borrowed Time". Essentially GM had been on government payroll (or
> bankroll, whatever you would like to call it).
packard made a pretty good solid machine as late as 1954 but when chrysler bought briggs body & cut off their source of coachwork, doom descended.
i remember the 1935 auburn phaeton, lovely car, once in a while i see one fully restored.
> jack
On Mar 07 12:10 PM Teutonic Knight wrote:
> Just a note to acknowledge and paying credit to the source, the phrase
> "Borrowed Money, Borrowed Time" was the title of a non-fiction book
> by a British author on the former British Crown Colony Hong Kong
> (now SAR) facing the 1997 expiry of its New Territory Lease.
>
> On Mar 07 11:39 AM Teutonic Knight wrote:
I worked as a government accountant for years, and the officials are all the same: They throw money at something to create the appearance that they are "doin' sumfin!"
Although bankruptcy is the right answer, although Obama did a 180 and supposedly supports it, and although both parties are coming to a concensus, I cannot believe that Congress would do the right thing-They rarely have before. Rather than allow the layoffs, I think they will throw more money at GM. 92.19% yield, if it survives long enough...
OK, now we have the title right, for real credit where credit is due, we need the name of the long forgotten authoer, bless his (or her) soul,
On Mar 07 01:56 PM ferguson wrote:
> Teutonic KInight,
> OK, now we have the title right, for real credit where credit is
> due, we need the name of the long forgotten authoer, bless his (or
> her) soul,
Yes they will be available in the USA before the recovery comes full circle.
GM has no interest, support for, or care for the american jobs, "the 80% in the supply chain". They are buying everything form LCC Low Cost Countries.
So just give the bail out money directly to the shareholders for their past support and let it be sold to for its remaining assests in Flint and Detroit.