GM

[Guest]

Can someone out there explain what is going on in the bankruptcy hearings in New York. My eyes glaze over when I read updated but my pulse rises when I read (as I read on my home page today)... "urgency", "need to act fast", "need more money from the taxpayer"....

[Guest]

No one except the pricipals know for sure what's going on in the courtroom, but here's my guess.

GM is a far larger and more complicated company than Chrysler. The nature of the pre-packaged bankruptcy is different, as well. In Chrysler's case, the government applied the pressure on the major creditors to reach an agreement on how much of a haircut they would take. At the same time, the feds were negotiating the terms under which Fiat would buy the company and how much additional financing the government would provide as the lender of last resort serving as the debtor-in-possession lender. As I understand it, the "minor" Chrysler creditors would either be paid in full or would be negotiated with after Chrysler came out of bankruptcy--which has now happened.

Chrysler's situation is pretty simple to understand now. Their sales rate and profitability will either increase enough for them to stabilize themselves before they run out of the additional government money committed to them, or they won't. If they run out of government money before they return to at least break even, there are only two choices--get more money from the government or go out of business and liquidate.

GM on the other hand is a far larger and more complex situation. The terms negotiated by the government were more extensive and while they included many of the major creditors (bondholders and the UAW), there were still lots and lots of creditors whose claims need to be negotiated and adjudicated within the Creditor's Committee and under the jurisdiction of the bankruptcy judge. Again, if the don't get it done--either before or after the come out of bankruptcy--before they begin to break even, the same two choices will prevail. Either more money from the feds (us taxpayers!) or liquidation.

The only good news is that this week's car sales reports are telling us that car buyers are beginning to return to the showrooms. That's at least a glint of light at the end of the automotive tunnel, I think.

[Guest]

The only good news is that this week's car sales reports are telling us that car buyers are beginning to return to the showrooms. That's at least a glint of light at the end of the automotive tunnel, I think.

Well, I sure hope so. But you usually have to be emplyed to buy a car. I know the 467,000 people who got laid off last month won't be in the showrooms.:o