JasonC

Is One Automaker Default Almost a Sure Thing?

GM and Ford going bankrupt won't keep them from being alive, nor from getting access to capital, nor from wasting it. It will simply wipe out the remaining capital of their stockholders - a trivial $17 billion -and stick their creditors with very large losses.

In practice, the creditors will become the new owners of GM and Ford. Or, the junior partners under the real owners, the retirees of the UAW. A bankruptcy judge might or might not also allow the companies to reduce their pension and health care obligations.

But there isn't any way in a warm place it will put either company out of business.

If both went into bankruptcy, however, it would mean nearly half a trillion in debts left with uncertain payoffs and haircuts. Every dime of it owned by somebody - much of it by banks, others owned by other people's pension funds, etc.

Half trillion dollar bankruptcy are not to be embraced rashly as though it were all some morality play but otherwise without consequence. Nobody has any idea how many other enterprises would fail in direct consequence, if these giants can't pay their debts.