  Xstigmatax Member Username: Xstigmatax Post Number: 9 Registered: 10-2008 |
DETROIT – General Motors Corp.'s auditors have raised "substantial doubt" about the troubled automaker's ability to continue operations, and the company said it may have to seek bankruptcy protection if it can't execute a huge restructuring plan. The automaker revealed the concerns Thursday in an annual report filed with the U.S. Securities and Exchange Commission. "The corporation's recurring losses from operations, stockholders' deficit, and inability to generate sufficient cash flow to meet its obligations and sustain its operations raise substantial doubt about its ability to continue as a going concern," auditors for the accounting firm Deloitte & Touche LLP wrote in the report. In pre-market trading, GM shares fell 14 percent from Wednesday's close, to $1.90. GM has received $13.4 billion in federal loans as it tries to survive the worst auto sales climate in 27 years. It is seeking a total of $30 billion from the government. During the past three years it has piled up $82 billion in losses, including $30.9 billion in 2008. The company faces a March 31 deadline to have signed agreements of concessions from debtholders and the United Auto Workers union to show the government it can become viable again. On Feb. 17 it submitted the restructuring plan to the Treasury Department that includes laying off 47,000 workers worldwide by the end of the year and closing five more U.S. factories. GM said in its filing that its future depends on successfully executing the plan. "If we fail to do so for any reason, we would not be able to continue as a going concern and could potentially be forced to seek relief through a filing under the U.S. Bankruptcy Code," the Detroit-based automaker said in the annual report. GM, the report said, is highly dependent on auto sales volume, which dropped rapidly last year. "There is no assurance that the global automobile market will recover or that it will not suffer a significant further downturn," the company wrote. GM has said it wants to avoid bankruptcy protection because it would scare off customers. Car buyers, the company has said, would be reluctant to buy from an automaker in Chapter 11 due to fears that it wouldn't be around long enough to honor warranties or make replacement parts. GM, in its viability plan submitted to the Treasury last month, said it explored three bankruptcy scenarios, all of which would cost the government more than $40 billion. Chief Operating Officer Fritz Henderson said at the time that the government would be the only place the company could get financing for a Chapter 11 reorganization, because the credit markets are frozen. The worst-case bankruptcy scenario would cost the government $100 billion, Henderson said, because revenue would severely drop due to a lack of sales. He said there is not a lot of research about whether people would buy cars from an automaker in bankruptcy protection, but "that which is there suggests that sales fall off a cliff." GM warned last month that its auditors may raise the "going concern" doubts, and industry analysts said auditors' statements may trigger clauses in some of GM's loans, placing them in default. But the company said in its filing that it has received waivers of the clauses for its $4.5 billion secured revolving credit facility, a $1.5 billion term loan and a $125 million secured credit facility. "Consequently, we are not in default of our covenants," the report said. "If we conclude that there is substantial doubt about our ability to continue as a going concern for the year ending Dec. 31, 2009, we will have to seek similar amendments or waivers at that time." GM spokeswoman Julie Gibson said there is no clause in the terms of the government loans that places them in default if the auditors raise doubts about GM's ability to keep operating. "That was not a condition of the loan. It's not in the agreement," she said. http://news.yahoo.com/s/ap/200 90305/ap_on_bi_ge/gm_annual_re port | ||
Thejesus Member Username: Thejesus Post Number: 3740 Registered: 06-2008 |
Personally, I think the downsides to a bankruptcy filing are being overstated. I don't buy this stuff about consumers not wanting to purchase a car from a company in Ch 11. There may be a small number of people out there who think a Chapter 11 filing means the company is going out of business, but I don't think this misunderstanding is going to be that widespread. I'm going to speculate that the real reason for the resistance to Ch 11 is to protect the shareholders' equity, as the compensation packages for management at auto companies has always seemed to rely on stock options to a greater extent than other industries, and without the super-generous severance packages you see from other companies. | ||
Sstashmoo Member Username: Sstashmoo Post Number: 3396 Registered: 02-2007 |
Quote: "I don't buy this stuff about consumers not wanting to purchase a car from a company in Ch 11." Oh I do. A person would have to have rocks in their head to buy a forty-thousand dollar vehicle with the possibility of no parts availability in a few years. Talk about taking a hit on resale. It would be a virtual total loss. They already can't sell cars, Court reorganization and possible collapse would have a devastating effect on the market share they have left. No doubt about it. | ||
Thejesus Member Username: Thejesus Post Number: 3742 Registered: 06-2008 |
"A person would have to have rocks in their head to buy a forty-thousand dollar vehicle with the possibility of no parts availability in a few years." Why do you think there would be no parts available in a few years? | ||
Sstashmoo Member Username: Sstashmoo Post Number: 3397 Registered: 02-2007 |
Quote: "Why do you think there would be no parts available in a few years?" Considering the manufacturers still produce their own engines and drive train components, if they go, so does their production. No engines or engine parts. Nobody is going to undertake or invest in such a costly venture on the off-chance someone needs a low volume part, with such little return. And who would want aftermarket heads perhaps on their one or two year old vehicle? The people that now manufacture parts on the outside would collapse due to their drops in volume. And we know what happens when volumes drop and items become specialties, prices skyrocket. You could still get an alternator, but it might be 1500 dollars. Of course all the warranties would be gone. People aren't going to buy cars from an automaker under court protection. | ||
Crawford Member Username: Crawford Post Number: 498 Registered: 10-2006 |
Ssaschmoo, that makes no sense. Why would no parts be available? 1. Most parts aren't GM parts 2. Parts do not magically disappear when a brand is no longer produced 3. Bankruptcy does not necessarily increase the chances of the company dissolving. It may reduce the chances of liquidation. 4. Even if at worst-case doomsday GM liquidated (won't happen), the majority of its cars would continue to be produced, but under different ownership. | ||
Purpleheart Member Username: Purpleheart Post Number: 70 Registered: 01-2009 |
On a lighter note ;-) We had the 2010 Camero in the parking lot today | ||
Jiminnm Member Username: Jiminnm Post Number: 1765 Registered: 02-2005 |
Sstashmoo, you'd be right if GM filed for Chapter 7 liquidation. But, GM would not file for liquidation, they would file for Chapter 11 reorganization. That would allow them to restructure their debt (which GM has failed to do), subject every contract to court review and allow the cancellation of those that hinder GM's recovery, assure vendors who supply parts post-filing of payment, better match facilities needed and employee numbers to expected sales volumes, etc. It would also set aside funding to honor future warranty claims. GM would not go out of business, but probably emerge as a stronger company. GM today is already a failed company. Another company in a the same financial situation would have already filed bankruptcy. GM has demonstrated that it cannot continue to operate without continual financing by the Feds, and their auditor has appropriately pointed out that fact. They simply cannot sell enough cars to cover their costs and they have not come up with a way to substantially reduce those costs or increase their revenues. People aren't buying their cars today, and will continue not to buy them until there is some certainty about GM's future. Your comments about the future of lack of parts and their costs are simply not true. GM will continue to be in business after bankruptcy, hopefully with new management and a better financial footing. GM, and the country, would be far better served by funding GM's mankruptcy then to continue to try and fill the hole of GM's financial losses with billion dollar bills. | ||
Sstashmoo Member Username: Sstashmoo Post Number: 3398 Registered: 02-2007 |
""1. Most parts aren't GM parts"" It doesn't matter, these Tier suppliers will not survive on warranty numbers of parts produced. Some items have very low failure rates, someone is going to tool up in case someone needs one in ten years? ""2. Parts do not magically disappear when a brand is no longer produced"" They don't? If you knew how costly it was to engineer and produce these products we're speaking about, and take in to account the liability costs, you'd realize they would disappear very quickly. Look at older four-wheel drive trucks, call a junkyard and see what they get for a front axle or transfer case that is no longer produced. ""4. Even if at worst-case doomsday GM liquidated (won't happen),"" Well, if you know that to be fact, go load up on their two dollars stocks, obviously a bunch of people don't agree with that. ""the majority of its cars would continue to be produced, but under different ownership."" Are you saying car brands don't disappear? You haven't been around Detroit very long. The list is long. People have become so complacent with the big 3, they obviously cannot visualize a world without them. The likelihood of their dissolution is very real. | ||
Professorscott Member Username: Professorscott Post Number: 1861 Registered: 12-2006 |
This whole discussion kinda reminds the Prof of the mid 1960s when everyone was saying the New York Central was too big to fail. Turns out it wasn't. | ||
Thejesus Member Username: Thejesus Post Number: 3745 Registered: 06-2008 |
"Considering the manufacturers still produce their own engines and drive train components, if they go, so does their production. No engines or engine parts." ok, see, this is the misunderstanding I was referring to. Filing for Chapter 11 does not mean the company is going to cease to exist. On the contrary, the whole purpose of Chapter 11 is to allow a company to continue operating as a going concern while being able to eliminate some of its debt obligations, defer its interest payments and restructure unfavorable contracts. | ||
Professorscott Member Username: Professorscott Post Number: 1862 Registered: 12-2006 |
We all need to remember that there are two outcomes to chapter 11 bankruptcy. Some companies come out of bankruptcy as stronger (and usually much, much smaller) companies, and continue going forward, with the former shareholders usually wiped out. Other companies can't come out of chapter 11, eventually switch to chapter 7, liquidate and fail. I think it's a completely open bet as to which outcome would be in the cards for GM. And I agree with one of SStashmoo's points: if GM or Chrysler or both disappear as companies, they almost certainly take all of their nameplates with them. The tea leaves I'm reading say that one of the two might survive to 2011, but not both. I hope my tea leaves are wrong. | ||
Denbytar64 Member Username: Denbytar64 Post Number: 147 Registered: 03-2008 |
Should have let them go bankrupt from the begining...look at all the money that was wasted when they could have been restructuring. Thank you unions...enjoy your big lalapaloza in Miami. | ||
Thejesus Member Username: Thejesus Post Number: 3746 Registered: 06-2008 |
Sstashmoo and Prof scott: You both are missing the point. Nobody is making the argument that the Detroit automakers will not cease to exist. The point is simply that a chapter 11 filing does not mean they ARE going to cease to exist. In fact, as Crawford points out, filing for Chapter 11 protection might actually increase the chances that the will CONTINUE to exist. You both seem to be confusing a Chapter 11 restructuring with a Chapter 7 liquidation. | ||
Bob Member Username: Bob Post Number: 1289 Registered: 11-2003 |
A successful Chapter 11 would make them able to restructure debt and franchises in a way that will make GM in great shape to benefit when people actually start buying cars again. The other thing that is a worry is that people will not buy cars from a company in Chapter 11. They were talking about this on WWJ, and an analyst said if the government gave certain assurances, then that could actually help spur people to by cars. A lot of what ifs in uncharted economic territory. | ||
Thejesus Member Username: Thejesus Post Number: 3747 Registered: 06-2008 |
"Some companies come out of bankruptcy as stronger (and usually much, much smaller) companies, and continue going forward, with the former shareholders usually wiped out. Other companies can't come out of chapter 11, eventually switch to chapter 7, liquidate and fail." This is right. However, if GM fails, it won't be BECAUSE they filed for chapter 11 protection. Rather, it will be because their Chapter 11 restructuring was an inadequate means of repairing their balance sheet in this tough economic environment. Eliminating debt obligations is not going help if there's no income stream. | ||
Jiminnm Member Username: Jiminnm Post Number: 1768 Registered: 02-2005 |
"""4. Even if at worst-case doomsday GM liquidated (won't happen),"" Well, if you know that to be fact, go load up on their two dollars stocks, obviously a bunch of people don't agree with that." You apparently do not understand how bankruptcy functions, sstashmoo. When a company files bankruptcy, the entity essentially then belongs to the company's creditors. The common stock of the company becomes worthless (as in goes to zero) to all holders. New stock will be issued, much of it to creditors, when the company comes out of bankruptcy. If one thinks GM is going to file bankruptcy, then owning their common stock is foolish. GM stock is trading at $2 or so today because folks understand that GM cannot make a profit, and may well file bankruptcy. The only reason GM stock has any value today is due to day traders, who hope to make a profit on any movements (up or down). Prof, I think Chrysler is in worse shape than GM. The plan they filed with the Feds did not address facility or employee reductions anywhere near their loss of sales volume. Their 2009 cars received poor evaluations from Consumer Reports. I suspect their current sales levels may reflect drastic price reductions (if local pricing is indicative of the market). My guess is that Cerberus is hoping Fiat will take the company. If that doesn't happen quickly, they will almost certainly file for bankruptcy. In the end, a decade or two from now, there may well be only one US auto company. | ||
Bob Member Username: Bob Post Number: 1290 Registered: 11-2003 |
And GM won't be the only company to fail if people don't start opening their wallet, of course when people are unemployed, they have no money to spend, which brings us back to the problem with the current economy. Even Toyota is having the same problem. | ||
Sstashmoo Member Username: Sstashmoo Post Number: 3400 Registered: 02-2007 |
Quote: "The point is simply that a chapter 11 filing does not mean they ARE going to cease to exist." And it's no guarantee that they WILL continue to exist, and that is what a car buyer is looking for. Support down the road. You understand what Chapter 11 is, the majority of car-buyers equate the term "bankruptcy" with one thing. | ||
Thejesus Member Username: Thejesus Post Number: 3748 Registered: 06-2008 |
"They were talking about this on WWJ, and an analyst said if the government gave certain assurances, then that could actually help spur people to by cars." Yep, there's a new loan program the fed is creating using TARP money whereby groups of car loans would be pooled and sold to investors as a collateralized debt obligation that the federal government will back to the tune of 94%. In other words, investors purchasing these instruments will only have to put up 6% of their own cash while the federal government would cover the other 94%. If the investment is successful, the investors would retain the interest payments and would only have to pay back the government at a very low interest rate. If they fail, then the investor is only out 6% of the instrument's value and the federal government is out the other 94%. They're going to start doing it through Toyota dealerships this year and, if its successful, the program will widen to include other automakers. You can read more about it here: http://online.wsj.com/article/ SB123609012856118765.html | ||
Sstashmoo Member Username: Sstashmoo Post Number: 3401 Registered: 02-2007 |
Quote: "When a company files bankruptcy, the entity essentially then belongs to the company's creditors. The common stock of the company becomes worthless (as in goes to zero) to all holders." I didn't know that. Another reason they can't file. Imagine the negative press. | ||
Thejesus Member Username: Thejesus Post Number: 3749 Registered: 06-2008 |
"And it's no guarantee that they WILL continue to exist, and that is what a car buyer is looking for." Except nobody here made that argument, so your point is moot. "You understand what Chapter 11 is, the majority of car-buyers equate the term "bankruptcy" with one thing." I have a hard time believing that the majority of people who could afford a new car in this economic environment are as misinformed as you regarding debt restructuring. | ||
Thejesus Member Username: Thejesus Post Number: 3750 Registered: 06-2008 |
"I didn't know that. Another reason they can't file. Imagine the negative press." *slaps self on forehead* | ||
Bte_in_va Member Username: Bte_in_va Post Number: 20 Registered: 12-2006 |
airplanes dont drop out of the sky when the airlines file for bankruptcy... | ||
Sstashmoo Member Username: Sstashmoo Post Number: 3402 Registered: 02-2007 |
Oh fuck, here come the personal insults. I'll take that as a win. | ||
Lilpup Member Username: Lilpup Post Number: 5372 Registered: 06-2004 |
Would a GM bankruptcy right now push the national economy completely over the edge? | ||
Professorscott Member Username: Professorscott Post Number: 1864 Registered: 12-2006 |
Is the national economy not already completely over the edge? | ||
Thejesus Member Username: Thejesus Post Number: 3752 Registered: 06-2008 |
Sstash, Nobody is insulting you and nobody is trying to win. If you go back to my first post in this thread, I was reiterating my belief that the number of people such as yourself who misunderstand a chapter 11 filing to mean that a company will no longer exist is probably pretty small. You just have a misunderstanding of how debt restructuring works and you agreed to as much in your response to Jiminnm, so I'm not sure why you feel insulted now. What I can't figure out is why you would contribute so much to this conversation when you were not even aware that in a chapter 11 filing stockholders' equity gets wiped out to the benefit of creditors, which is really the essence of a chapter 11 filing. | ||
Ktkeller08 Member Username: Ktkeller08 Post Number: 35 Registered: 10-2008 |
I don't get how this changes anything. So an auditor says the company can't make it without more government money... didn't we already know this last year already? And I highly doubt that the government is not going to give them more money since they already gave them over 13bil, and the only financing GM could get in bankruptcy is... well the government. So the government's options are: 1.) Give them more money 2.) Let them go bankrupt, then give them more money. 3.) Do nothing and let everything go to hell. I doubt 3 is what they'll choose. But still, I just don't see why everyone seems so surprised from this news. | ||
Professorscott Member Username: Professorscott Post Number: 1867 Registered: 12-2006 |
Another thing about chapter 11: it requires a company to first line up Debtor-in-Possession financing, which in GM's case means they would have to find someone to loan them tens of billions of dollars to get through the bankruptcy process. Who right now is in a position to do this? The government has already considered, at some level, serving in this capacity, but it's not automatic that they'd do so, and the kind of money GM would need to line up just doesn't seem to exist in the private capital markets right now. So it's not certain that it is even possible for GM to file under chapter 11. | ||
Ktkeller08 Member Username: Ktkeller08 Post Number: 36 Registered: 10-2008 |
Professorscott, you're right. I messed up my 2.) but that's what i meant, nobody is going to provide Debtor-in-Possession financing for GM at a time like this. Therefore, I think the Government would have to provide that financing. That's a main reason why I don't think they'll let GM go bankrupt because either they have to provide the financing or there is going to be one heck of a messy bankruptcy in which GM gets liquidated. | ||
Jackie5275 Member Username: Jackie5275 Post Number: 15 Registered: 08-2007 |
I would hate to see GM have to go into either chapter 7 or 11 bankruptcy, not just for all the recent reasons of bad economy, frozen credit, bad public image, etc, but because I think it would be horribly messy & lengthy. I think about Delphi, who was supposed to be out of chapter 11 by now, but isn't. How long have they been in chapter 11? Since 2005, 2006? I can't remember now. However, Steve Miller, who was supposed to save them, hasn't gotten them out yet. Most of the folks running that show are from GM originally. If they can't get out yet, how long would it take GM? | ||
Lilpup Member Username: Lilpup Post Number: 5373 Registered: 06-2004 |
quote:It doesn't seem to be given the way people are rooting against GM. | ||
Digitalvision Member Username: Digitalvision Post Number: 1391 Registered: 11-2003 |
PS, I have heard various assurances that in fact the government would be the debtor-in-possession and that is their plan. Especially if the government is the one who decides that bankruptcy is the best course. There's too many jobs and too many pension obligations and other costs the government would have to take on - it'd be cheaper in the long run to be the debtor in possession. I see that as a slam-dunk, and much more tolerable than the bailouts to the rest of the country (which I'll never understand how the country hates GM, but that's life). | ||
Aha Member Username: Aha Post Number: 2 Registered: 03-2009 |
Just a hypothetical question here...What are the chances that a reorganization produces an independent Chevrolet, Cadillac and Buick...Reconstituted, could these units emerge independently out of a GM demise... | ||
Thejesus Member Username: Thejesus Post Number: 3754 Registered: 06-2008 |
^that's more likely to happen in a chapter 7 liquidation (which is not what is going on here), where all of GM's assets would be sold off, including its brands...and even then, those brands would almost certainly get snatched up by other car companies rather than operate as independent brands | ||
Professorscott Member Username: Professorscott Post Number: 1868 Registered: 12-2006 |
I would be absolutely astonished if anyone bought a single GM brand in a liquidation, should that occur. In fact one of the things in favor of keeping GM together is that a liquidation would bring precious little money for the creditors at all. Let's look at a brand, pick one; let's try Chevrolet. Who is out there that would be willing to pay for that brand, and exactly what would they be purchasing? Ford certainly isn't in the market, so that leaves auto companies based outside the US and non-auto companies. Nissan or Toyota buying Chevy? I can't imagine. Someone outside the industry trying to come in and own and manage a brand? Even harder to imagine. Now, let's look at the assets. The vehicles which have already been produced have some value, sure. The factories are unlikely to attract any interest, except perhaps a few overseas. (Who needs extra auto manufacturing capacity nowadays?) What else does GM own that might be worth anything to anyone? So while I can't buy the argument that GM is too big to fail - nobody is, ever - I am warmer to the argument that GM is too worthless to fail; that is, their creditors are at least somewhat likely to be partially paid back if GM can operate profitably ever, while if GM is broken up there'll be almost no money to go toward paying back anybody. | ||
Thejesus Member Username: Thejesus Post Number: 3755 Registered: 06-2008 |
Just speculating... The Corvette alone may be reason enough for someone to buy the Chevrolet brand. Iconic automobiles are few and far between and could be an image boost for a lesser-known company. Or, the Corvette nameplate could be sold off individually the same way Chyrsler is talking about doing with the Viper You could see a newer player such as Tata motors come in and snatch up GMC trucks in an effort to enter that historically lucrative market Cadillac has been a money-maker for GM even during the years when the other brands weren't pulling their weight, although that may be less true in this economy Hummer is a niche market and has been a money maker for GM up until gas went north of $4, and it's very likely sales will improve with gas prices now back to reasonable levels. (Message edited by thejesus on March 05, 2009) | ||
Sstashmoo Member Username: Sstashmoo Post Number: 3404 Registered: 02-2007 |
What about legacy and liability issues with a successor parent? How could someone else pick up Chevrolet perhaps and make it profitable while GM cannot with Government help/taxpayer loans? Like Cerberus snapping up Chrysler, I'll bet they'd like a do-over on that. If these car companies start going in to bankruptcy, it's over for them. And your guess that everyone knows the exact details of each type of bankruptcy is wrong. The press had half the US believing Obama was Muslim when he declared emphatically he was not on numerous occasions. The term "bankruptcy" will scare off what little market share they have left. | ||
Professorscott Member Username: Professorscott Post Number: 1873 Registered: 12-2006 |
You're right, Sstashmoo, on all points. Regarding what people believe, I think it was P. T. Barnum who said "nobody ever went broke underestimating the intelligence of the American public." | ||
Lilpup Member Username: Lilpup Post Number: 5374 Registered: 06-2004 |
P.T. Barnum was the showman. The brains behind the business operation belonged to Detroiter James Bailey (kinda like Ford and Couzens). | ||
Aha Member Username: Aha Post Number: 4 Registered: 03-2009 |
I submit another scenario...a Ford-GM merger...Would this be the kinder solution to a GM disintegration...Could the UAW force some kind of merger just to save jobs... | ||
Gene Member Username: Gene Post Number: 207 Registered: 10-2006 |
Alea Jacta Est GM I hope they don't go under just yet. My 2007 Cadillac CTS will be back at the dealer tomorrow for the fifth time for the same leaking rear end. I for one will never buy another UAW American made vehicle, heck they have only been making them for 100 years and still cant get it right. Did anyone hear what Joe "Gasbag" Biden had to say at the closed to the media UAW meeting at an exclusive Miami resort? | ||
Mopardan Member Username: Mopardan Post Number: 239 Registered: 11-2008 |
http://www.allpar.com/news/ind ex.php/2009/03/chrysler-cuts-c alled-insufficient/ Chrysler cuts called insufficient From the article: "Critics of Chrysler’s plan point to the cuts that have been made by General Motors and the additional dismantling of it’s international operations. They fail to note that GM is looking to various national governments for infusions of cash as much as four times the amount being requested by Chrysler." Little to no problems encountered with my '03 Durango & the wife's '99 Grand Caravan still cranking away with over 130k miles. The U.S. guys survive this & we'll keep buying from 'em. (Message edited by MoparDan on March 05, 2009) | ||
Glowblue Member Username: Glowblue Post Number: 181 Registered: 09-2008 |
quote: Actually it was, because once the Penn Central went bankrupt, the feds quickly nationalized it (along with a bunch of other bankrupt Northeastern railroads) rather than leave the Northeast without rail service. Thus Conrail was born. | ||
Mopardan Member Username: Mopardan Post Number: 242 Registered: 11-2008 |
http://biz.yahoo.com/ap/090306 /general_motors_ahead_of_the_b ell.html?.v=1 From the article: "Thursday's news sent GM's shares, which in recent months have fallen to a price less than what it currently costs for a gallon of gas in most areas, down as much as 18 percent during that day's session and helped pull down the overall market as well. GM is also hoping to get help from other countries. The automaker's Adam Opel AG subsidiary wants to secure at least $3.8 billion from the German government. GM and Opel said Friday they would provide the German government more information about their restructuring plans in hopes of securing the aid. GM shares fell 14 cents, or 7.5 percent, to $1.72 in Friday premarket trading after closing Thursday at $1.86." | ||
Burnsie Member Username: Burnsie Post Number: 1189 Registered: 11-2003 |
Glowblue-- The Penn Central went bankrupt in June 1970. Conrail didn't start up until 4/1/76. It wasn't a process done "quickly" by any means. | ||
_sj_ Member Username: _sj_ Post Number: 1716 Registered: 12-2003 |
Hope is the key word as GM has met a cool reception in Germany. quote: It was little more involved than that. | ||
Professorscott Member Username: Professorscott Post Number: 1874 Registered: 12-2006 |
That GM stock is worth anything at all surprises me. It appears the day traders are playing musical chairs with the stock. It appears to me completely unfathomable that existing GM shares will have any value at all once this sorry business plays out, even if GM does emerge as a smaller and stronger company. For instance, there are still KMart stores, but if you owned KMart stock before the "merger" with Sears, your stock was wiped out. Anyone have any insight into this? What makes a share of GM worth the buck-fifty it's trading at right now, or even fifteen cents? | ||
Sstashmoo Member Username: Sstashmoo Post Number: 3408 Registered: 02-2007 |
Quote: "What makes a share of GM worth the buck-fifty" Guts and a little bit of crazy. | ||
Lowell Moderator Username: Lowell Post Number: 2240 Registered: 09-2003 |
Wow. Just saw the GM went down 57 cents to $1.29. Coming up a bit now but penny stock status next? "Oh how the mighty have fallen." Sad. | ||
Thejesus Member Username: Thejesus Post Number: 3757 Registered: 06-2008 |
"What about legacy and liability issues with a successor parent? How could someone else pick up Chevrolet perhaps and make it profitable while GM cannot with Government help/taxpayer loans? " If a brand were to be sold off and survive, it could possibly be done through an asset sale rather than an equity sale, in which case the new owner would not incur the liabilities associated with the brand, and the debt holders would just be out their investment. However, the viability of an asset sale depends on a number of factors, most important of which is the manner in which GM's lenders secured the loans they made to the company, or whether they secured them at all. There are probably other posters here could get into the details of and issues that arise in an asset sale much better than I could. 3WC, care to chime in? | ||
Thejesus Member Username: Thejesus Post Number: 3758 Registered: 06-2008 |
"It appears to me completely unfathomable that existing GM shares will have any value at all once this sorry business plays out, even if GM does emerge as a smaller and stronger company. For instance, there are still KMart stores, but if you owned KMart stock before the "merger" with Sears, your stock was wiped out." Not true. As in any merger or acquisition, the surviving company must pay the shareholders of the merged company for their shares. They also need to get the approval of the shareholders of the merged company. So, if you were a K-Mart shareholder in 2004, you received 1 share of Sears stock for each K Mart share you owned, since the two were trading at a similar value at the time. While it's true that K Mart shareholders no longer held K Mart shares after the merger, it's incorrect to say that the value of their shares was just wiped out. "Anyone have any insight into this? What makes a share of GM worth the buck-fifty it's trading at right now, or even fifteen cents?" If I understand your question, the reason the shares are still worth anything is because a bankruptcy filing is not guaranteed at this point. Some traders are betting that a bankruptcy will not happen, in which case the stockholders' equity won't get wiped out. | ||
Professorscott Member Username: Professorscott Post Number: 1875 Registered: 12-2006 |
I'm sorry, it wasn't the merger that wiped out the KMart stock, it was the 2002 bankruptcy. In any case KMart shareholders were wiped out. I have personally lost a fortune in an "acquisition" where I owned stock in company X, which was teetering on the edge of bankruptcy but never filed. Company Y came in and offered to buy the company for $0, taking over all of our debt but wiping out all of our equity. Since that was the only feasible scenario where the people we owed money to got paid, we agreed to it. Regarding the 2002 KMart bankruptcy, here is a little snippet from a 2005 Detroit News story: "Rita Morris started working at a Kmart in Saginaw at age 20, and in August she will mark 35 years with the company. When Kmart Corp. stock was canceled following the company's bankruptcy, Morris' 401(k) balance shrank by $18,000. 'A lot of people lost even more than I did. It's hard. You work for a long time, and nobody ever told us that the company was going to go bankrupt,' said Morris, who used to be an assistant manager in receiving but now stocks shelves on the third shift." | ||
Thejesus Member Username: Thejesus Post Number: 3759 Registered: 06-2008 |
^regading the DetNews snippet, that's the risk one takes when they purchase ownership in a company. there are no guarantees that the company will succeed or that any investment will produce a return. people who lose out always seemed surprised to learn that there was any possibility their investment would not pay off. | ||
Mikem Member Username: Mikem Post Number: 1915 Registered: 10-2003 |
quote:Unfortunately that's not always a voluntary decision. Lot's of us have had company stock forced on us in return for pay or pay cuts, with the usual b.s. that it will motivate the employees to look out for the best interest of the company, etc. | ||
Purpleheart Member Username: Purpleheart Post Number: 71 Registered: 01-2009 |
The News of My Demise Has Been Greatly Exaggerated With apologies to Mark Twain. | ||
Thejesus Member Username: Thejesus Post Number: 3760 Registered: 06-2008 |
"Unfortunately that's not always a voluntary decision. Lot's of us have had company stock forced on us in return for pay or pay cuts, with the usual b.s. that it will motivate the employees to look out for the best interest of the company, etc." Well, the other side of that argument is that choosing to continue working for that company was also a voluntary decision. If another company was to pay you more for your labor, you were free to pursue that opportunity. But if the pay cut in exchange for stock was the best deal anyone was willing to give you, then you can hardly complain about being paid too little. |
