Robert A. Weigand

GM: Buyout Better than Bailout

You may well be right, Mr. Jimmy -- GM may be too far gone for anyone to fix. The timing of the huge economic downdraft makes the simple solution of just letting GM disappear problematic, however. Two or three years ago the economy was in a better position to absorb a GM bankruptcy (which probably leads to liquidation, because their revenues will vanish if they enter bankruptcy). It's virtually inevitable that the federal government will do something to prop up this zombie value-destroyer a little longer. When that happens, I want to see a mechanism that allows some possibility of upside to the taxpayer, and limits the chance that the first $50 billion begets the second $50 billion, etc.


On Nov 21 08:32 AM Mister Jimmy wrote:

> Where have you been, Rob? Cerberus is a private equity firm. They
> bought Chrysler and then realized how incredibly challenging it is
> to design and build product, satisfy legacy obligations and deal
> with Federal emission and CAFE mandates and the UAW. It seems that
> all those New York MBA's really know how to do is churn worthless
> financial instruments. They've proven they can't run a car company.

GM: Buyout Better than Bailout

Sadly I must agree with this comment -- the extent to which private equity has truly added value vs. skimmed fees and repackaged the same tired old assets, remains an open question. I think the same questions pertain to active equity management and most hedge fund strategies as well.


On Nov 21 06:50 AM eternitus wrote:

> Pension funds should buy the companies if there is such great value.
> Truth is there is no value. Too much debt and labor is too expensive.
> Also, PE is really just a leveraged arbitrage play. Buy at low valuations,
> wait until markets get bubbly and ipo, rinse and repeat. What they
> are good at is eliminating corporate waste do to poor governance
> (every company wastes millions- corp boards are foxes guarding henhouses...
> esp when the chair is also the CEO.) But mainly its a huge arb play.