GM - what are the chances of bankruptcy?

After missing out on the free money give way on NWAC and DPH, you guys think GM has any chance of bankruptcy? I doubt it, obvious the feds will bail them out or some billionaire will buy it out preserve the heritage - someone richer than kirkourian (what was he thinking?). Still looks weak though.

 

isnt this the same guy who was gnna call it quits in july traing 200 lots? LOL

 

Unless you trade derivatives, I don't see how you could have made money betting against NWAC or DPH.

 

bankruptcy would give them a major advantage in their market. I have no doubt that if it's possible they will do whatever they can to get out from under some of their committments (pensions, etc)., because it would help them tremendously and give them a hell of an edge. It's not like they would dissolve..

 

GM essentially filled it's gap from the liftoff back in early May. Maybe it rallies a bit.

That being said, I look at a short in GM like being short a call. Without vast improvement in revenue the under funded pension liabilities at GM will slowly decay the stock to zero. That could be years away. You can't have a preemptive bankruptcy.

This would be a good question for a lawyer. Could a white knight buy the business, strip the pension liabilities, and re-organize without shareholder dilution? Or is it illegal under the existing agreements with labor for the company as is to cram those labor benefits onto the Federal government without present equity participants going to zero?

 

If you can wait it out, have some balls and cheap carry costs, you could spread some GM preferreds against the common. You would get paid 4-5% on the yield spread to hold the position. The common would disintegrate well before the preferreds.

 

I agree, the feds will bail them out no matter what. You imagine no more GM?

Maybe if they came out with a car that's good on gas and looks half decent, some people may buy them.

 

The question is not whether UAW is going to run GM into the ground, the question is when.

 

If you are the government, would you let your biggest car manufacturer go sour?

Probably not.

 

Not only GM, but Ford, and possibly Chrysler - one or all.

The mercedes benz arm of Chrysler is already tottering on the edge of insolvency.

Check out my post on GM and Delphi.

It's not the bankruptcy of GM that is at stake here: It is the financial global firestorm that may follow: and the government will be powerless against it.

My understanding is, top financial advisors at the biggest investment houses are currrently recommending their wealthy clients to go into foreign bonds.

An indicator they expect forthcoming US-based financial turbulence.

fx