Analysts Say It Is Already Too Late: GM Needs Government Sponsored Bankruptcy To Survive

General Motors Corp., seeking U.S. aid to survive, must significantly cut debt and labor costs and may still need a government-backed bankruptcy to remain viable, Merrill Lynch & Co. and JPMorgan Chase & Co. analysts said.

A bridge loan from Congress this month would allow the biggest U.S. automaker to keep operating until a restructuring plan is devised after President-elect Barack Obama takes office, according to the New York-based analysts.

“It is increasingly apparent that GM’s only hope for survival, which we define broadly as avoidance of Chapter 7 liquidation, is a bailout from the U.S. government,” Merrill Lynch’s James Leda and Steven Landgraber wrote yesterday.

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veyron1001 - 11/25/2008 4:33:49 PM

-2 Boost

It should be bought out by China. We can all laugh at GM owned by commies.

neutral - 11/25/2008 5:12:32 PM

+3 Boost

once again, another stupid comment from veyron1001.

You seriously want all of GM's technology, R&D, industrial prowess, etc to be owned by China....just because you have a distorted perception of humor?!?

I shouldn't even waste my words on you. Probably just some rich guy's kid who is waiting for daddy to buy him a new Acura so he can pretend how important he is.

EnnNorak - 11/26/2008 9:17:14 AM

+1 Boost

veyron1001, if the Chinese buy it, chances are they will produce junk that breaks down or use materials that give off toxic fumes. I recently bought a Chinese-made paper shredder and it lasted less than half a day with occasional use. The cheap power switch they used operated intermittently from the start and soon stopped operating altogether.

GM and the other ailing members of the industry need to merge together under a new entity e.g. American Motor Vehicle Group (AMVG). Note that I use the word "Group" in my example instead of "Consortium" because the last two letters VG make people think of "very good" while VC would make people think of "Viet Cong" (as subtle but important consideration).

Anyway, the distribution of new AMVG shares to existing shareholders of the AMVG predecessor companies would consist of common shares according to some formula based on recent market performance and, in addition, convertible preferred shares on the basis of how much cash or cash equivalent each predecessor company brings to the new entity. Remember that cash is king in this instance.

AMVG would then shed all unprofitable models and operate as a "lean and mean" enterprise.

I am opposed to government bailouts to industry but would support repayable government financial aid for purposes of facilitating the merger described above. The government would have to receive equity in AMVG as a quid pro quo for the risk taxpayers would undertake.

09CTSVforMe - 11/25/2008 5:06:17 PM

+3 Boost

I'd be interested as to why they think Chapter 11 is unavoidable without Gov't help, but the link does not link to the story indicated...

veyron, the USA & China are so economically "in bed" already that them owning GM wouldn't be a big stretch anymore. Also, China is much more capitalist than "commie" these days.

holmstar - 11/26/2008 10:22:30 AM

+1 Boost

No, they believe chapter 7 is unavoidable without a bailout. They would be damn lucky to manage chapter 11.

neutral - 11/25/2008 5:13:37 PM

-1 Boost

At least Merrill Lynch isnt completely blinded by the financial mess we're all in

delan - 11/26/2008 12:11:22 AM

+2 Boost

I thought I was the only one who caught that. Merill Lynch already got their lunch money so that gives them the right to spit acid at other failing companies. Oi!