The Wall Street Journal reports that the usual unnamed “top executives” are saying GM is warming to the idea of bankruptcy after all. “The change in thinking, combined with the disclosure Thursday that GM’s auditor has raised ‘substantial doubt’ about the car maker’s ability to keep going, appears to move GM closer to the possibility it will file for reorganization.” Something about staring at the hangman’s noose brings a new clarity of thought to the fore. The journal’s new owner seems to have brought a bit of dry British humor to the biz: “The increased threat of bankruptcy could prod bondholders into making concessions, since these investors are said to believe a bankruptcy reorganization could harm their holdings, according to a person familiar with their thinking.” Wow, those bond manipulating masters of the universe sure are smart!
GM’s new fantasy is that a relatively low-pain, pre-packaged bankruptcy could be done inside a 90 day window without hurting sales, or losing the top dogs their food bowls. What about all those times the company has declared bankruptcy off-the-table because it would send customers packing? No worries—expensive consultants are on the job: “GM’s bankruptcy advisers, meanwhile, have been working on a plan to mitigate the impact a bankruptcy filing would have on GM’s public image.” Meanwhile GM spokesflak, Julie Gibson, spins at tornado velocities when saying the auditors’ going-concern warning “is not fundamentally a big deal.” Apparently not everyone has gotten to the acceptance phase yet.
Meanwhile, politicians and bureaucrats in Washington continue to ponder, pontificate and punt. “Administration officials are still weeks away from making a decision on how to assist the struggling auto makers. The negotiations with GM and Chrysler LLC are supposed to conclude by March 31, but with so many issues unresolved, people involved with the talks say the effort could slip into April. Administration officials who are dissecting GM’s 117-page viability plan said they weren’t surprised by the starkness of the auditors’ assessment.” But tell me this, why is it a negotiation? Beggars don’t negotiate, they beg.
I think everything that can be said is summed up by the Yahoo finance right there on the right. GM $1.42
It’s time to move on….. What will a post Bankruptcy GM look like.
Who knows? If the current management team is still actually angling to be around and ends up still in place afterwords this will most likely be the first of several bankruptcies.
I think that we’ve been kidding ourselves that a bankruptcy is going to change the culture at GM – and that’s whats got to change.
Y’know, when the auditors fudged and danced around the truth at Enron, not only were they and their industry skewered, but it led to the SOX (Sarbannes Oxley) legislation which, in part, has contributed to the current economic disaster. I.E., Many public companies withdrew from US markets to avoid this stupid act and in doing so lessened real wealth creation in the US economy.
Now, when the truth is told by this group, no one wants to hear or deal with it. I think there should be a reverse SOX introduced which can put government officials in jail if they fail to act properly when the economics of a situation are clear.
If SOX is a concern to GM’s auditors, why did they sugar-coat and outright lie in the previous several reports? Could it be that Gov. involvement has change something?
I agree with seanx37, the spin is not convincing anyone.
I read this in the context of yesterday’s Blazing Saddles picture. Remember, GM already outlined the over $100M cost to the government of CH11 vs the mere $30B restructuring cost. Also remember, there are potentially hundreds of billions of our tax dollars AIG will need to pay hedge funds to cover their CDS’s when GM declares CH11 (if this process has not already started due to the going concern opinion).
I’m with McDoughnut.
I think what’s happening here is that GM execs are co-opting the bankruptcy thing as THEIR idea! Bankruptcy is the new reorganization plan, brought to you by the brilliant, insightful people who are running GM.
It’s perfect, actually. They wipe out debt, get rid of dealers, dump the UAW, but they get to KEEP THEIR JOBS because, after all, the great plan was THEIR IDEA!
I bet that part of the “plan to mitigate the impact a bankruptcy filing would have on GM’s public image” sounds a hell of a lot like “keeping our management in place so there is continuity at the top and consumers have the confidence there is a steady hand at the helm.”
I love it. Meet the new GM, same as the old GM. They know the ship is sinking fast, and Wagonner, Fritz et al are going to make damn sure they are on the last lifeboat.
They probably won’t even have a choice shortly.
The guilt I am feeling over the purchase of my 2008 honda is becoming unbearable!
After an iceberg tore a 90-foot gash into the hull, Titanic Capt. Edward Smith reportedly remarked that he was “more open” to the ship coming into contact with the Atlantic seabed.
“Many public companies withdrew from US markets to avoid this stupid act.”
Name names please.
““Many public companies withdrew from US markets to avoid this stupid act.””
Where did they go? Europe?
Aren’t you guys always the ones railing about how Europe is some uber-regulated SOCIALIST hell hole?
Cicero,
A tip of my hat to you, good sir! That was brilliant!
Tex
Withdrawing from the US market does not mean they took their toys home and started hunting for other suckers to invest in them.
I’m sure this was reference to some companies going back to being private companies, i.e. not listed at all, anywhere. You can run the company any way you want when you aren’t beholden to shareholders to keep adding value every three seconds, and aren’t subject to market whims and bubbles, at least as far as your own company’s valuation is concerned.
“I’m sure this was reference to some companies going back to being private companies, i.e. not listed at all, anywhere.”
Yeah, look how well the private buyout companies like Cerberus have been doing their job. The sales pitch was that as private companies they could do what needed doing without the pesky public watching over their shoulders. Guess what sparky, those buyout/hedge fund geniuses have made a mess of things too.
…but what if the Titanic had ONSTAR?
I guess GM is the last to know. They remind me of a defendant who sees the wisdom of a plea bargain at the last minute.
Many public companies withdrew from US markets to avoid this stupid act.””
Many of them are not going public anymore. The two years before SOX (99&00) there were 825 IPO’s filed in the US. In the two years post SOX (02&03) there were 147. The highest number of IPO’s post SOX was 188 in 04. Not to mention the fact that it is estimated that SOX on average costs a company $3.2M/year in compliance. For a very good study of the impact of SOX go here:
http://www.capco.com/files/pdf/62/02_PART%202/09_Regulatory%20risk%20including%20unintended%20outcomes%20examining%20the%20effects%20of%20SOX%20and%20the%20trans-Atlantic%20IPO%20markets.pdf
So yes, I would say SOX has been very effective in stifling growth and wealth. However as a CPA I appreciate the extra business.
John Horner :
“Many public companies withdrew from US markets to avoid this stupid act.”
Name names please.
John,
I don’t have any names, but the stats speak for themselves. Look at the US based IPO’s since SOX. Nex, compare the IPO’s in London over the same time period. There is your answer.
Many of the companies that would have floated in the US markets went over to London instead. The last 8 years have been busy for the London exchanges.
“Many of the companies that would have floated in the US markets went over to London instead. The last 8 years have been busy for the London exchanges.”
That is one of the points highlighted in the article I reference.
While no specific companies are listed per the FT:
“The value of companies taken private reached record levels in 2006, with New York and London’s stock markets taking the brunt of the $150bn of de-equitisation, according to figures from Thomson Financial…..The value of companies taken private has almost trebled since 2004. The New York Stock Exchange saw a net withdrawal of listed capital of $38.8bn after public-to-private transactions are taken into account. Nasdaq suffered a net withdrawal of $11bn – almost twice its loss through de-equitisation in 2005.”
GM is more open to bankruptcy the way a drunk is more open to stop drinking once he runs his family down with the family truckster.
GM mouthpieces and “leaders” will say whatever they need to say with no intent on making any substantive change to harm their personal interests.
You see, that’s the problem. If only the Titanic had OnStar, it would be have been “backed by GM.”
SecCpotatoes and Arminius are correct – I didn’t mean the companies folded up their tents, they just left the (stock) markets – by going private. How else can you leave the market? Ch. 11 or 7, I guess, Nice effect,though, don’t you think?