Magic Carpet Ride

Author:
Publish date:

Remember the good ole' days? You know, back when it was believable fantasy that Chrysler and General Motors would be fine if only they could get several billion dollars to patch things up for the several months it was going to take until unit sales got back up to 2007 levels? Back when the cash sent to GM and Chrysler was a "loan" that might be paid back? Times have changed. Even GM's own CFO admits that about the only hope for GM at this point is the total socialization of the automobile market in the United States. Can you remember a time in recent memory when this paragraph from GM's CFO would have been greeted with anything but howling laughter?

Young said there were sales bright spots in such markets as China, Germany and Brazil, where governments implemented programs to stimulate demand. Results in those countries support GM's argument in favor of U.S. incentives to promote auto purchases, he said.

So not only do we have to pay you to stay alive, we have to pay customers to buy your product? We pay customers to push revenue to pay ourselves back with and increase the number of cars on the road at a time when consuming oil is one of the nation's cardinal sins. Mind you, this plan is actually delivered with a straight face.
Well, there is always the forward, out of the box thinking that gives us brilliant epiphanies like the GM-Segway PUMA partnership. (Crashtesting should be interesting to watch here). That ought to bolster revenues!
As for bondholders? Those evil fat cats with the arrogance to expect bankruptcy law to have meaning? Prepare to be demonized: The Treasury isn't planning to give bondholders more than 10% of equity in any case. Bondholders value their stake at 58% which would frustrate the government's plan to control the company post-bankruptcy. This makes GM's bankruptcy, which seems a near certainty now, likely to be the massive, megabudget Hollywood blockbuster remake of that little independent picture "Chrysler," that was filmed by the no-name director with some stolen film stock, a few friends and $15,000 in a Mexican border town. Remember, GM's debt is all over the place, not concentrated 70% with four TARP wards.

General Motors Corp. said its first- quarter net loss widened to $5.98 billion as sales plunged by almost half, ratcheting up the prospect of a bankruptcy filing by a U.S.-imposed June 1 deadline.
The net loss of $9.78 a share swelled from $3.3 billion, or $5.74, a year earlier, Detroit-based GM said today. Revenue tumbled 47 percent to $22.4 billion, while cash consumption almost doubled from the previous quarter.
The results add to the pressure on GM as it races to cut costs and debt to avoid bankruptcy. With bondholders resisting a plan ordered by the Obama administration to exchange $27 billion in debt for a minority stake in a reorganized GM, the 100-year- old automaker may end up in court.

But don't worry. According to GM, GM is ready to go "in and out" of bankruptcy "quickly."
That's a relief.
GM Loss Widens to $5.98 Billion as Bankruptcy Deadline Nears [Bloomberg]

Related