BREAKING: Gov't. reportedly gearing up to push GM into bankruptcy as early as next week
by Chris Paukert on May 22nd 2009 at 12:58PM 
According to The Washington Post, the White House is readying General Motors for a bankruptcy filing that could come as early as the end of next week. According to the paper, the proceedings would likely grant GM nearly $30 billion in additional federal loans, bringing taxpayer investments into the company to almost $45 billion.
As reported earlier, the plan appears to be to give the government a 50%+ stake in The General, with the White House gaining the ability to name new board members, as it has with Chrysler, which is already in Chapter 11 status. The United Auto Workers VEBA health care fund is tipped to own nearly 40% of GM itself, a stake it would receive in exchange for giving up the $10+ billion it is already owed. That would only leave around 10% for the bondholders, who remain none too happy about the situation.
Full details available at the link below.
[Source: The Washington Post | Image: Bill Pugliano/Getty]
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Reader Comments (Page 1 of 3)
Jimbo 1:01PM (5/22/2009)
Considering that the last business day before the June 1 deadline is the end of next week, how exactly is this news?
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zamafir 1:20PM (5/22/2009)
Well, the deadline is June 1, and we've known they're going bankrupt for forever, but the recalls aren't quite coming, so i guess the bets are against people thinking critically like you?
how about:
"Gov't reportedly gearing up to push Gm into bankruptcy as early and late as next week"
James 1:24PM (5/22/2009)
GM = Government Motors
Auari 1:08PM (5/22/2009)
So guys, who do you think is going to come out on top..... GM or Chrysler.
Come out on top, I mean as a stronger company.
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Jared 1:15PM (5/22/2009)
GM may survive. Chrysler won't.
artso06 1:16PM (5/22/2009)
Wait GM's still a company?
It looks like it is now a government subdivision to me.
henrykrinkle 1:16PM (5/22/2009)
Oh, thought you meant on top of the mass grave before the taxpayers fill it in using a $50 billion bulldozer.
Judy Zik 2:30PM (5/22/2009)
GM has a few competitive products out there (trucks,Enclave & Friends, Malibu) and appears to have continued to work on new and improved products (Cruse). They also expect to continue to leverage Opel (GM will remain as an ownership partner), Holden and Daewoo. Put it all together and they have a chance. Unfortunately Lutz had everyone focused on the smoke and mirrors of the Volt being the big saviour. They need to put the focus back on their meat and potatoes everyday vehicles. I can't wait to drive a Volt too but all the chatter about it hasn't made me want to buy a Cobalt.
Chrysler on the other hand is an automaker without a lineup. Their current lineup isn't competitive. The worst part is very little is baking in the oven in Auburn Hills and now with Fiat incharge what little was being worked on will be scraped. Their "saviour" is a minimum 18 months away from putting any vehicles in showrooms. This is a company that has to survive 18 months in the worst possible economic climate with some of the worst negative press and a out of date lineup of vehicles everyone realizes are going to be orphans soon. Even when the Fiats arrive it is somewhat doubtful how many customers will return to Chrysler showrooms to buy warmed over Fiats. The few customers they have right now have been mostly based on price/value. The Fiatslers will quite likely cost more and the existing Chrysler customers are so upside down in their vehicles it will be hard for them to trade up. I am no expert on Bankruptcy but I suspect Fiat may let the new Chrysler go Chapter 7 and simply buy the assets it wants to keep.
I would bet on GM if they can axe most of their management and get someone with some business sense in.
Frank 3:31PM (5/22/2009)
Future product plans are here. It's liable to change somewhat as they exit C11 but it's a pretty good indication of what they got coming.
http://www.allpar.com/model/upcoming.html
Rainy99 1:13PM (5/22/2009)
I think GM will make it. They already have small cars and new vehicles in the pipeline. Chrysler really doesn't have anything, and they are saying it will take 18 mos. to get Fiat to US standards... and then it's convincing Americans to buy Fiats! I think liquidation is coming for Chrysler...
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John 1:12PM (5/22/2009)
For all those cheering for GM to fail, Obama now has $45 billion of your dollars wrapped up in them.
I suggest we all become cheerleaders of GM now and at least hope for some payback.
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HJC 2 1:52PM (5/22/2009)
Sounds like a good deal to me :=)
Lets look at this deal
We give GM 50B $ and get 50+% of the company
Union gives up 10B$ and gets 40% of GM
Amazing how giving union money for the election of Obama helps them
get 40% ownership
I love this administration
Do you smell something bad.... I know I do
Jimbo 2:28PM (5/22/2009)
Generally, I don't see what's so bad about the employees owning the company. Granted, I generally hate the UAW's tactics and they've been bellyaching for years that they could run the company better. So now they get their chance. If they succeed, they can sell off their shares like planned to fund the VEBA. If they fail, they lose everything and they've got no one to blame but themselves.
alex 2:57PM (5/22/2009)
Agreed. I don't understand this "they took bailout money so i'm never buying a car from them!" attitude. If everyone has this attitude, it ensures that your tax dollars are gone forever!
I'm not saying you need to buy a GM car out of charity, but if they make a car you want, not buying it to spite them is really spiting yourself because you're just making it that much less likely that they will pay your money back.
mike 3:32PM (5/22/2009)
Jimbo - the problem is the bond holders of GM. Bankruptcy law was re-written during FDR to prevent these type of sweetheart bankruptcy filings. Don't kid yourselves - that what is happening. A sweetheart deal that screws the ond holders.
GM's bondholders aren't just limited to a few big private equity (hedge) funds like Chrysler's were. They are held by a vast number of pension and mutual funds who took the lower return on GM bonds because they were assured a higher ranking of the firm's creditors should the firm default. You really can't re-write the rules in the middle of the game and expect people to keep playing the game the same way.
"Indiana Treasurer Richard Mourdock revealed this week that his state’s police and teacher pension funds have lost millions of dollars in the Chrysler “restructuring.” Indiana’s State Police Fund and Major Moves Construction Fund, which finances roads and bridges, together lost more than $1 million. And the Teacher’s Retirement Fund “suffered, at a minimum, a loss of $4.6 million due to the action of the Federal government,” reports Mr. Mourdock."
Expect that response 100-fold if the same is tried with GM.
I thought the logic behind using TARP money to prop up GM was to avoid bankruptcy. What did we get for our money, exactly?
Jimbo 1:14PM (5/22/2009)
Isn't Chrysler in Chapter 11 (restructuring), not Chapter 7 (liquidation)?
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Jared 1:16PM (5/22/2009)
Yes, Chrysler is in Ch. 11 for the moment. Unfortunately, I think it will wind up in Ch. 7 before long, however.
PiCASSO 1:16PM (5/22/2009)
Exactly the same question that I was thinking...
Erik 1:17PM (5/22/2009)
That's what I was thinking
Toby Robson 1:32PM (5/22/2009)
The question is that when they DO get to Chap 7 … who gets the liquidation dibs. UAW or bond holders that still have a stake.
It is almost as if this is an extended play to get the UAW the dollars first and foremost.