Wll GM file for Chapter 11?

silverharp

It seems inevitable that either GM or Ford or both will be gone in their current structure by 2010, there is even some speculation out there that GM might have some big announcements next week as they have to report 10Q's by Monday and will have to state if they are solvent or not so who knows?
So will they be bailed out or will these doggies be put to sleep ?

Idu

dont know about Ford but from what i've heard GM should have enough cash reserves to survive. There was big talk on friday that GM's postponement of earnings was gonna be a chapter 11 filing but nothing came of that. If it comes to it though they should be allowed to go. These companies are not Freddie, Fannie, or AIG. Their survival is not critical to the system

Raskolnikov

janets_on_clubs wrote: »

These companies are not Freddie, Fannie, or AIG. Their survival is not critical to the system

To the financial system, no, but GM are one of the biggest employers in America, particularly in Michigan. There is no way that Obama is going to leave an already deprived area lose the states biggest employer.

Idu

mmmm interesting reading - maybe they should be part of the bailout. From Bloomberg:

Pelosi, Reid Urge Paulson to Use Rescue Fund to Aid Automakers

By Dawn Kopecki

Nov. 9 (Bloomberg) -- Democratic congressional leaders urged Treasury Secretary Henry Paulson to use the $700 billion financial-rescue package approved last month to lend to U.S. automakers.

House Speaker Nancy Pelosi and Senate Majority Leader Harry Reid sent a letter to Paulson yesterday saying the rescue bill gives him ``broad discretion to purchase, or make commitments to purchase, financial instruments you determine necessary to restore financial-market stability.''

Pelosi was among the lawmakers who met last week with the chief executives of General Motors Corp., Ford Motor Co. and Chrysler LLC. The three companies are seeking $50 billion in federal loans to help them weather the worst auto market in 25 years, according to a person familiar with the matter.

The letter increases pressure on the administration of George W. Bush to take action as he prepares to hand power to President-elect Barack Obama on Jan. 20. Obama said last week that policy options to help the industry will be a ``high priority'' for his transition team.

``A healthy automobile manufacturing sector is essential to the restoration of financial-market stability, the overall health of our economy, and the livelihood of the automobile sector's workforce,'' Pelosi and Reid said in their letter.

They argued that the industry may qualify for federal financing under the $700 billion Troubled Asset Relief Program, originally intended to buy bad loans from lenders and broadened to include purchases of equity stakes. Paulson has set aside $250 billion to buy stakes in U.S. financial companies.

``We continue to work on a strategy that most effectively deploys the remaining TARP funds to strengthen the financial system and get lending going again,'' Treasury spokeswoman Brookly McLaughlin said yesterday in response to the lawmakers' letter.

`Significantly Short'

Time for a solution may be running out. General Motors last week said it may not have enough cash to keep operating this year and will fall ``significantly short'' of the amount needed by the end of June unless the auto market improves or it raises more capital.

The largest U.S. automaker reported a $4.2 billion third- quarter operating loss and said its available cash fell to $16.2 billion on Sept. 30 from $21 billion at the end of June. Merger talks with Chrysler LLC were suspended.

GM's cash forecast was the bleakest yet from the company, which has lost almost $73 billion since the end of 2004. Using $6.9 billion in cash last quarter pushed GM closer to the $11 billion minimum it says is needed to pay bills.

The top three automakers suffered a combined $28.6 billion in first-half losses. New vehicles sold at a seasonally adjusted annual rate of 10.6 million in October, the lowest since 1983.

Car Sales Plunge

Car sales plunged 18 percent last quarter and 32 percent last month while manufacturing contracted the most in 26 years. Consumer confidence fell to a record low and the unemployment rate surged to 6.5 percent, its highest in 14 years.

General Motors Chief Executive Officer Rick Wagoner, Ford's Alan Mulally and Chrysler's Robert Nardelli met with U.S. House and Senate leaders in Washington on Nov. 6. Wagoner said GM also has been in contact with Obama's staff.

Should GM file for bankruptcy protection, the result would be 2.5 million jobs lost in the first year among automakers, suppliers and related businesses, according to a Nov. 4 report by the Center for Automotive Research, based in Ann Arbor, Michigan.

If Paulson extends financing to the industry, Reid, of Nevada, and California's Pelosi asked him to take equity stakes in the companies and limit executive compensation.

`Strong Conditions'

``We would urge you to impose strong conditions on such assistance in order to protect taxpayers and maximize the potential for the industry's recovery,'' they said.

Of the $50 billion in loans automakers are seeking, half would be for health-care spending, and the rest for general liquidity that could be delivered in different ways, including short-term borrowing from the Federal Reserve, said a person familiar with the matter who asked not to be identified because the plan isn't public. In return, the companies would be willing to take steps such as granting stock warrants, the person said.

silverharp

I cant see a future for the 2 companies in their present from, the next 2 years will be worse then 08 from the consumers point of view and after 2010 you start getting a US demographic slowdown so on average people will be trading down and driving less.
but will be interesting to see if they are bailed out which I am guessing they will be given that Obama if left of centre in economic terms and GM going belly up in his first 100 days will give him an opportunity to wave his magic wand

silverharp

Deutsche Bank downgrades GM to sell, price target 0!

justfortherecor

silverharp wrote: »

Deutsche Bank downgrades GM to sell, price target 0!

That analyst report also said GM wouldn't survive past December without a govt bailout due to the amount of cash they're going through at the moment! Somewhere in the region of $2billion a month is effectively going down the drain to keep the company's day-to-day operations going.