Bankruptcy !!

[rmyers]

Yep....its time take the medicine.

[diddiyo]

I'll let you out without resistance.
Parting this way is not
The way we ever thought.
In fact I always thought we'd go the distance.
But we went nowhere quick,
So sad it makes me sick.
Just one more thing o.k.
It's all so sad to say...

[Mr. Wyndham]

Originally Posted by Design1stCode2nd

GM posts a net 9bil loss in Q4 and burns through their "worst case scenario" loans in less than 3 months. It's time to end this. They have not posted a profit in 4 years.

They would have if the economy hadn't tanked. They were well on their way.

I'm curious to know why you're so quick to write them off? Is it simply because you think Chapter 11 is the magic cure?

[rmyers]

Originally Posted by Dragoneye

They would have if the economy hadn't tanked. They were well on their way.

I'm curious to know why you're so quick to write them off? Is it simply because you think Chapter 11 is the magic cure?

I don't think any of us that are suggesting bankruptcy as an option wants to right GM off. What we want to see is a healthy and sustainable auto industry and would love to see GM as part of that industry. And honestly I don't care how they do it, but they should not be borrowing money from our government. Doesn't everyone realize that our goverment does not have the money to lend. China holds hundreds of billions of dollars in treasury notes. So I guess you can say GM is really a global company, because every dollar they get from the US goverment will need to be borrowed from some other country, or printed...thus causing inflation.

At some point we all have face reality. The key is sustainability. While you say they were well on their way to profitability, the problem is that it was all based on a bubble. Too many people consuming at unsustainable levels. What does it say about our economy when it can be so drastically affected by a lack of credit? Perhaps it says we are consuming more than we can afford and by definition it is therefore unsustainable. Make no mistake, I am guilty of the same behavior.

You know GM says one of the reasons they don't want to file bankruptcy is because of public opinion and they believe that people won't buy cars from a company that is going through bankruptcy. While that may be the case, I wonder how public opinion of a company seeking billions of dollars in loans that may NEVER be paid back now, will affect their decision to consider something other than a GM vehicle.

[Mr. Wyndham]

Originally Posted by rmyers

I don't think any of us that are suggesting bankruptcy as an option wants to right GM off. What we want to see is a healthy and sustainable auto industry and would love to see GM as part of that industry. And honestly I don't care how they do it, but they should not be borrowing money from our government. Doesn't everyone realize that our goverment does not have the money to lend.

And here we have the #1 reason why Bankruptcy won't work (forget consumer perception):

If GM files for Chapter 11...they must get DIP financing to insure their existance, otherwise it's straight to Chapter 7 and the collapse of the Industry. That money will come, in some fasion, from the government!!!! Couple that to the sheer volume of money we're talking here...in the neighborhood of one HUNDRED billion....and those won't be loans.

Chapter 11 is not a free-ride. No company as large as GM has ever filed for bankruptcy. No company with as negative a balance-sheet......

EDIT: Why do you say they'll never pay back their loans? That's false.

[UCF w00t]

DIP financing is a loan. In fact, if GM did end up in Ch 7, whoever offered DIP financing (in this case it would be the fed) is first in line to get their piece of the asset pie.

[Mr. Wyndham]

Sorry...I botched that one up...but the point remains, I think. We're talking huge money...

[UCF w00t]

Yup. The amount of federal money it would take to get GM through Ch. 11 would be MUCH greater than the amount it would take without it. Either way, Obama seemed committed to keeping GM afloat in his speech (even though the US didn't invent the automobile as he said) so I'm really not too worried about GM going Ch 7.

[Hylton]

Originally Posted by UCF w00t

Yup. The amount of federal money it would take to get GM through Ch. 11 would be MUCH greater than the amount it would take without it. Either way, Obama seemed committed to keeping GM afloat in his speech (even though the US didn't invent the automobile as he said) so I'm really not too worried about GM going Ch 7.

Not sure how you figure that. Chapter 11 does not mean that the government pays off a business' debt. It means the government decides who gets how much and what after negotiations have taken place between all parties affected.

Right now, GM spends more money then it makes. It cannot even afford current finance payments. It cannot continue down this road - something has got to give because sooner rather than later, it's going to have no money in the bank. When that happens and a supplier/bond holder does not get paid, they can force GM into bankruptcy by petitioning the courts. In other words, Chapter 11 may be something GM may not be able to avoid.

[UCF w00t]

Originally Posted by Hylton

Not sure how you figure that. Chapter 11 does not mean that the government pays off a business' debt. It means the government decides who gets how much and what after negotiations have taken place between all parties affected.

Right now, GM spends more money then it makes. It cannot even afford current finance payments. It cannot continue down this road - something has got to give because sooner rather than later, it's going to have no money in the bank. When that happens and a supplier/bond holder does not get paid, they can force GM into bankruptcy by petitioning the courts. In other words, Chapter 11 may be something GM may not be able to avoid.

GM would require DIP financing to make it through Ch. 11. They forecast a need for around $100bil will be needed to emerge from Ch. 11. Part of this is because their sales forecasts show (and I wholeheartedly agree) that sales will tank even more if they were to enter bankruptcy. The average consumer has a stigma when it comes to "bankruptcy" that GM will not be able to avoid. Why would they buy a car if they believe their warranty will be meaningless? In order to combat this, GM and/or the fed will have to take some sort of measure to guarantee the warranty of vehicles purchased while GM is under Ch 11. This alone is an expensive proposition.

[Hylton]

Originally Posted by UCF w00t

GM would require DIP financing to make it through Ch. 11. They forecast a need for around $100bil will be needed to emerge from Ch. 11. Part of this is because their sales forecasts show (and I wholeheartedly agree) that sales will tank even more if they were to enter bankruptcy. The average consumer has a stigma when it comes to "bankruptcy" that GM will not be able to avoid. Why would they buy a car if they believe their warranty will be meaningless? In order to combat this, GM and/or the fed will have to take some sort of measure to guarantee the warranty of vehicles purchased while GM is under Ch 11. This alone is an expensive proposition.

That ship has already sailed. People who are worried about warranties are already staying away from GM cars because of the companies financial state. With proper marketing, GM could instill confidence to the general public during a CH11 re-org.

[diddiyo]

http://www.autoblog.com/2009/02/27/o...-retain-stake/

Opel needs approximately 3.3 billion euros or $4.2 billion USD to stay solvent and GM is in talks with governments in Spain, the UK and Germany about receiving government aid. Opel is also submitting a business plan by the end of next week to four German states in which it operates plants, and the German federal government headed by Chancellor Angela Merkel will receive a similar plan by this Monday, March 2.

So Dragoneye, do you want other countries to help out GM? Wouldn't that be like if the US would give bailout money to Honda?

It's a two-sided sword.

[rmyers]

Originally Posted by Dragoneye

EDIT: Why do you say they'll never pay back their loans? That's false.

Dragoneye, read my post again...I said may NEVER get paid back.

[Mr. Wyndham]

Originally Posted by Hylton

That ship has already sailed. People who are worried about warranties are already staying away from GM cars because of the companies financial state.

Anything to back that one up? I'm sceptical...

Of course there's bound to be some wariness...but not on the scale of the bankruptcy stigma....

Originally Posted by diddiyo

http://www.autoblog.com/2009/02/27/o...-retain-stake/

So Dragoneye, do you want other countries to help out GM? Wouldn't that be like if the US would give bailout money to Honda?

It's a two-sided sword.

What?? I never said I wanted other countrys to help GM, and I certainly don't approve of the US gov't loaning money to any automaker but the Big 3....what are you talking about?