Monday, April 13, 2009

Government Tells GM to Prepare for Bankruptcy

GM has until June 1 to have its ducks in a row or face the wrath of the PTFOA. The President's Task Force on Automobiles ) has directed GM to prepare detailed bankruptcy plans before that date.. AsI mentioned last week, the expected plan would have GM's performing assets, (mainly) Chevrolet, Cadillac and GM China split off in a new corporation - call it "New GM" or "Good GM". Everything else would be kept in the current shell. Call it "Old GM" or "Bad GM". This general framework for a bankruptcy hasn't changed since last week. What has changed is the prospects for workout outside of bankruptcy. These prospects are looking weaker and weaker as bondholders haven't shown any indication that they are willing to make enough concessions to cut a deal.

If there is a bankruptcy, the New GM could emerge from the bankruptcy in as little as two weeks after the filing. The old GM would be liquidated over several years. I assume (yeah, I know) that the new GM will have a collective bargaining agreement with the UAW to avoid unrest and political blowback. I have know idea what the terms of that agreement will be.

Now, here's the marginally relevant Youtube video of the day. A clip on the subject of preparation by singer, songwriter and math professor Tom Lehrer, a man who is not only brilliant enough to have earned his B.A. in Mathematics at age 18, he also is credited as the inventor of the jello shot. Happy belated 81st birthday Tom (April 9). Now, everyone go buy one of his albums so he doesn't get mad at me for embedding the clip.

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