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Bondholders Agree to New Terms, Setting Stage For Quick Orderly GM Bankruptcy

May 31st, 2009 | Posted in: Financial

Saturday at 5PM was the deadline by which the majority of GM’s debtholders had to either agree or disagree with a new “sweetened” deal.

Originally, the plan had called for GM’s bondholders, who are collectively owed $27 billion by the automaker, to receive a 10% stake in the new company. Less than 10% agreed to accept those terms, increasing the likelihood of a protracted bankruptcy process.

The new deal offered the bondholders warrants to purchase an additional 15% stake, making it possible for them to own 25% of the new company. The UAW through its retiree health fund has been offered 17.5% with warrants to purchase an additional 2.5% stake. The US Treasury would own the rest, up to 70% of the new company.

According to the New York Times, inside sources have said that “slightly more” than 50% of the bondholders, including a committee of large investors who posses 20% of GM’s outstanding debt, have agreed to the new offering.

This then sets the stage for GM to be able to pass through an orderly bankruptcy process and prevent drawn-out and difficult litigation. A chapter 11 bankruptcy filing appears appear all but certain.

GM’s CEO Fritz Henderson is scheduled to have a midday conference tomorrow from the GM building in New York City where the filing is expected to take place. Barack Obama will also be holding a press conference in Washington.

Sources have advised me none of this will impact the Volt development or delivery, more on that soon.

Source (New York Times)

Posted by: Lyle

92 Responses to “Bondholders Agree to New Terms, Setting Stage For Quick Orderly GM Bankruptcy”

Red HHR Says:
May 31st, 2009 at 8:14 am

Anybody from Greenwich CT care to comment?

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osprey Says:
May 31st, 2009 at 8:15 am

We shall have to wait and see how it all turns out. Hopefully it runs as smoothly as they hope.

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Jason M. Hendler Says:
May 31st, 2009 at 8:18 am

What input do dealerships and suppliers get?

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an_outsider Says:
May 31st, 2009 at 8:20 am

So, overall US Treasury stake will be less than 70% (more likes 55%) if Bonholder 25% + UAW 20% (17.5+2.5) = 45% ?
Are my math wrong?

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charlie h Says:
May 31st, 2009 at 8:30 am

The lawyers involved should clear a $billion or so.

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froggy Says:
May 31st, 2009 at 8:41 am

This should have occured back in November and saved the taxpayers several billion dollars.

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Tim Says:
May 31st, 2009 at 8:44 am

Why didn’t they just do this in the first place?

Oh, right… corrupt members of congress ignoring their oath of office and the 9th and 10th Amendments to the Constitution.

Who shall we bail out next… newspapers perhaps?

This is what happens when the currency is fiat and the central bank’s printing presses have no “off” button. Unlimited public (you and me) debt forced upon us by corrupt politicians pandering for votes from the non-productive.

Support HR 1207 so we can finally AUDIT THE FED. We MUST discover WHO is benefiting from the $Trillions in fiat money (our debt) that was created under both the Democrat-Socialist and NeoCon-Fascist administrations over the last 25 years.

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MarkinWI Says:
May 31st, 2009 at 9:05 am

outsider @ #4 – Don’t count the warrants before they are purchased.

The faster this goes, the better for all involved. Having 50% of bondholders on board is a very important milestone. There is some optimisim that Chrysler may actually clear bankruptcy in 60 days. The Chrysler bankruptcy seems to have been a good learning tool.

As to why they did this, the time bought (with a lot of taxpayer money, granted) allowed GM and Chrysler to avoid liquidation. No say for anyone then (not dealerships, not employees of all stripes, or employees of suppliers). Although Tim, I have to say, at least the slurs in the last line of post #7 are fair in their distribution.

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carcus1 Says:
May 31st, 2009 at 9:18 am

Support HR 1207!

Contact your Congressman online:
https://writerep.house.gov/writerep/welcome.shtml

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statik Says:
May 31st, 2009 at 9:23 am

Sources have advised me none of this will impact the Volt development or delivery, more on that soon.

…those darn ’sources’ again.

Have you got some actual new ‘news’ Lyle?
Your little post script, “more on ‘that’ soon” sounds like a teaser…are you trying to get us to stay tuned and watch the late night news

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Van Says:
May 31st, 2009 at 9:23 am

One of the reasons GM seems to be going into bankruptcy is that on average it sells its cars 20% lower than it costs GM to make them. So will the “New GM” after having better work rules, less legacy costs, less overhead, etc, be able to make the Volt for less than $40,000? That is the $64 dollar question.

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Brewster Says:
May 31st, 2009 at 9:25 am

Jason #3:
“What input do dealerships and suppliers get?”
____________________________________________

Survival (most of them).

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Gary Says:
May 31st, 2009 at 9:59 am

7 Tim: This is what happens when the currency is fiat and the central bank’s printing presses have no “off” button.

Well, a nice side effect of devaluing a currency is that importing products becomes more expensive, encouraging manufacturing in one’s own country, thus increasing employment.

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Scottie Says:
May 31st, 2009 at 9:59 am

Often “quick and orderly” turns in to long, drawn out and messy in the world of structured bankruptcies…

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CorvetteGuy Says:
May 31st, 2009 at 10:06 am

I met a girl who sang the blues
and I asked her for some happy news.
But she just smiled and turned away.
I went down to the sacred store
where I’d heard the music years before,
but the man there said the music wouldn’t play.
And in the streets, the children screamed,
the lovers cried and the poets dreamed.
But not a word was spoken.
The church bells all were broken.
And the three men I admire most,
the father, the son and the holy ghost,
they caught the last train for the coast
the day the music died.

And they were singing, “Bye Bye Miss American Pie”.
Drove my Chevy to the levy, but the levy was dry.
Them good old boys were drinking whiskey and rye singing,
“This will be the day that I die.
This will be the day that I die.”

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SrevePA Says:
May 31st, 2009 at 10:22 am

Complicated stuff, to say the least. What does all this do for confidence of potential buyers…

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StevePA Says:
May 31st, 2009 at 10:24 am

#16 (mine)
It is a tough morning after when one is unable to spell one’s own name. But then, the evening before was worth it!

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LauraM Says:
May 31st, 2009 at 10:24 am

#4 an_outsider

I think the plan is for the government to own 72.5% at the beginning. Then, if the value of the new GM rises to 15 billion, the bondholders stake will increase by 7.5%. If it rises to $30 billion, the bondholder’s stake will increase by another 7.5%. So, they will have a total of 25%, which is more than the UAW.

The UAW gets similar warrants. They originally get 17.5%. But if the new GM becomes worth $75 billion, they have warrants to increase their stake to 20%. And that that point, the government’s share drops to 55%.

Toyota is currently worth about $122 billion down from $200 billion in 2006. So $75 billion market cap is conceivable.

http://www.nytimes.com/2009/05/29/business/29auto.html?ref=automobiles

Basically, there are three possible scenarios under which I could see this happen. A)the US government kicks the foreign companies out of the US marketplace (doubtful), b) puts a meaningful tariff on small cars (a possibility), or c) the dollar collapses (will probably happen eventually, but it could easily take another ten-twenty years at which point it would be too late for GM).

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kdawg Says:
May 31st, 2009 at 10:33 am

I knew they could find a middle ground

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GeorgeB Says:
May 31st, 2009 at 10:52 am

It seems to me that the warrants should be pretty valuable, depending on what price they set for the share value. With GM at less than $1.00, the bond holders stand to make a killing if the shares start going up after the bankruptcy. Remember, whether anyone likes it or not, GM is special (there….I said it!) When we needed tanks, amphibious assault vehicles and the like, GM stepped up to the task. GM is the USA’s automobile manufacturing arm, like it or not., and they will stay that way.

When the shares get to $15.00 or so the bondholers will make out like bandits.

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nataraj Says:
May 31st, 2009 at 10:58 am

Poetic justice ?

http://www.electrifyingtimes.com/ev1_crushed.html

Wonder what the new company will be called … Voltec Inc. ?

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Tagamet Says:
May 31st, 2009 at 11:01 am

Statik, help me out!
How is any private company in the US going to be able to compete with a Govt run GM. I can’t believe that the Govt WON”T dictate or “run” the company in which they have such a wagon full of “skin”.
Help me out here.
Thanks,
Be well,
Tagamet

LJGTVWOTR NPNS

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Brian Says:
May 31st, 2009 at 11:11 am

“How is any private company in the US going to be able to compete with a Govt run GM”

How they can compete is that most people avoid goverment baliout/run companies like the plague. It’s now a huge market advantage for Ford and others who aren’t involved in this mess.

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Tagamet Says:
May 31st, 2009 at 11:14 am

Thanks Brian. I’m not sure that it’l be that as much as not likeing the ecoboxes that may be “pushed”.
Be well,
Tagamet
LJGTVWOTR!! NPNS

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Timaaayyy!!! Says:
May 31st, 2009 at 11:23 am

A couple decades late, but finally Phoenix Motors begins. The world electric car race just got more interesting. My money is still on the Chinese, specifically BYD, however, as they are the low cost leaders in a biz where the battery price is everything.

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Obama Motors Says:
May 31st, 2009 at 11:26 am

GM has been run into the ground by prior management. And they get to just walk away with a platinum parachute. Totally outrageous. They should all be behind bars. Its call Fraud and its against the law. I will never buy another GM vehicle again and will make sure to discourage any future buyers to stay away from this government-owned and government-run corporation. Just disgusting. Looks like Japanese or European built cars are the only way to go these days. To all you American CEOs out there: YOU SUCK !

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an_outsider Says:
May 31st, 2009 at 11:28 am

@ LauraM #18
Thanks for the NYT link, it makes more sense to me now.

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Dave G Says:
May 31st, 2009 at 11:30 am

#25 Timaaayyy!!! Says: My money is still on the Chinese, specifically BYD, however, as they are the low cost leaders in a biz where the battery price is everything.
————————————————————————————–
It’s not just price, but battery quality that matters – specifically, how long the battery will last.

Also, South Korea seems to compete pretty well on battery price, and thay are making the Volt battery cells.

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Dave B Says:
May 31st, 2009 at 11:37 am

Tim @ 7….I agree with you completely. But what do we do. We need an Electric Vehicle to kick the oil habbit. Do you agree? I would normally say, to any government-owned corporation like this to all potential customers to simply take your busiess elsewhere (assuming we have a CHOICE in the matter which we may not in the very near future). But what do we do, seriously, to end the oil addiction? Is there a choice? I see NOTHING on the market even close to the volt. If it’s there, I’M all over it. Certainly I’m voting ever member of I can out of office. I suggest everyone else do the same.

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koz Says:
May 31st, 2009 at 11:45 am

Haaaalleluja, halleluja…

Not that this is good news for anybody right now but the black cloud of potential bankruptcy has been hovering for too long. Uncertainty is worse than bankruptcy, in a sense. Having a known, albeit a painfull one, will have it’s benefits. If Chrysler does emerge from BK soon, it will be another small shot in the arm for GM too.

For all of those kvetching about BK now and not last year, you can lay most of that blame at the feet of Wagoner, the Board, UAW and bondholders. If GM had been forthright with the government sooner and had originally embraced the idea of a pre-packaged BK as a legitimate option B, then these concessions could have reached a lot sooner. The UAW and bondholders could have negotiated in better faith, too. This day was inevitable and, other than the secured bondholders (and perhaps them too because of asset devaluation), they were realistically looking at a lot less in a standard BK. In all likelihood the NAM auto industry would have imploded with suppliers not getting paid, litigation, etc. Best case, a similar pre-packaged couldn’t have occured until Jan 1, so the actual wasted expense in the 5 months delay is the extra cost of operating without the concessions in place 5 months earlier (~$5-8B). GM would still be losing $, just less and would reach a conclusion that much sooner. Given the hand the Obama admin was dealt, they may have been able to bumb the process up a month but they have done pretty well IMO. Of course, if you believe in blind laissez-faire free market governance then this has been a horrid tragedy. Personally, I feel the free market transgressions are justified since the alternative was a likely or near certain economic disaster.

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RB Says:
May 31st, 2009 at 12:11 pm

#15 Corvette Guy on The Day the Music Died
————————————–

Haunting poetry, originally sung with haunting music.
Thank you for bringing it back — very appropriate

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Timaaayyy!!! Says:
May 31st, 2009 at 12:21 pm

28 Dave G

I simplified my post to keep it short. Yes, other factors are important, but I think by far the most important is price. A couple of ways to get price lower is better technology and economies of scale. BYD’s advantages, current and potential, in economies of scale are compelling: BYD already has economies of scale in batteries (world’s #2 in rechargables), although not yet with car ones. But they are moving very rapidly to fix that–world’s first mass-production available plug-in hybrid, big expectations for electric utility generation storage (a big factor in Buffet’s investment), a native car mkt that’s healthier that the US’ and recently, bigger in new car sales, quicker and tighter government coordination and help, Tibet’s lithium deposits, inexpensive engineers, a possible relationship w/ VW, and rumored w/ Ford, and a written, publicly announced goal to be the biggest Chinese auto company by 2015 and world’s biggest by 2025 (long, long way to go, but an expected 100% car sales growth rate in 2009).

BYD claims their lithium technology is superior to the other ones currently available, but IMO BYD’s approach is manufacturing superiority, so whatever technology wins, they expect to dominate the production of it.

Tons of competitors, though, so the new battery mkt is up for grabs, but on balance, things look very good for BYD.

Disclosure: I am long BYDDY. Please note that although they have significant real revenues and profits, there is above-average risk w/ the stock, especially since its recent run-up, IMO.

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LauraM Says:
May 31st, 2009 at 12:24 pm

#22 Tagamet

If the government wants to use its power to help GM, then the other companies are in trouble. Ford, not so much, because they’d have to treat them like the other two. But Toyota and Honda? All the government has to do is either slap a 25% tariff on all cars (not just trucks) and associated parts while maintaining cafe requirements, and/or devalue the dollar.

Japan would probably complain to the WTO. At which point, (once they stopped laughing), the US could file complaints about First solar and Microsoft. They could then follow up with the Ipod and Tylenol and go on from there.

However, I really don’t see the US government doing any of that. Japan and Korea are allies. They are both already having major economic problems. And we might be fighting a war together pretty soon….

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Vincent Says:
May 31st, 2009 at 12:38 pm

I stopped in a Chevy dealership yesterday…they commented they can’t wait to go bankrupt and come out lean and strong.

If any of you have ever been self employed….(these people will understand this in a different and perhaps better way)
The ability to do a surgical bankruptcy..provided you have great product and management is a gift from God. Whatever the reasons and who gets the blame (plenty of that to go around) …GM will emerge New, Powerful and poised to kick some serious ass.
Watch and see. The negative people need not post their doom and gloom comments…it’s all been said before.
Let’s Rock. This is a Good Thing!
And if need be restrict imports so WE the USA can get back on our feet and Not Support the freaking world.
Have a fantastic day people.

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ccombs Says:
May 31st, 2009 at 12:40 pm

Remember that we are saving Toyota’s butt here as well since if GM went down they would be in deep trouble. Maybe we should have let the japanese govt bail them out too and help own GM

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LauraM Says:
May 31st, 2009 at 12:47 pm

#30 koz

Actually, given the timing, I don’t think this could have happened much faster no matter what GM did. Bush couldn’t commit to something like this when he only had another couple months in office. And Obama needed time to a) get set up as president , b)find people to form his “auto task force,” c)let them do research and d)have all the parties come to some sort of agreement before filing bankruptcy.

Congress might have been able to come up with something. But that’s a whole other post. However, in GM and Chrysler’s defense, they had no way of knowing how far the US auto market would contract. And I’m sure they told Congress and the president a lot more details than they’ve told us. Remember, at the time, they had a vested interest in the public thinking bankruptcy was more unlikely than it actually was.

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Adrian Says:
May 31st, 2009 at 12:49 pm

#6, 7, 9… Thumbs up.

#13, of course the horrible side effect on the dollar is inflation and for the USA, probably hyper inflation. The more the government grows from this point forward the worse it will become. Not quite as bad as the 70’s but inflation and trillions pf $ of debt will make the 70’s look like the good ol’ days.

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Adrian Says:
May 31st, 2009 at 12:51 pm

The nasty bit GM or government doesn’t want the taxpayers to know is, this could have been done w/o the government owning a cent of GM.

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Tagamet Says:
May 31st, 2009 at 1:01 pm

LauraM@33
Isn’t Protectionism is a great way to trip off a Depression. I doubt that slapping tarrifs on anything that’s a big ticket would go without retribution, and that has a pretty negative track record.
Thanks for the input.
Be well,
Tagamet
LJGTVWOTR!! NPNS

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LauraM Says:
May 31st, 2009 at 1:17 pm

#39 Tagamet

Actually, that’s controversial, so it depends on who you ask. Personally, I feel that since we import much more than we export, a trade war would actually help us in the long run. In the 1930s, we suffered much more than the European countries since we were a net exporter. But, now I think that it’s the only way to fix the trade deficit. (We have a long term imbalance that’s going to be painful at some point, and I think the longer we wait, the harder it will be to fix.)

But anyway, I think that Japan relies too much on our market to risk a trade war over one specific industry. And it wouldn’t affect Toyota or Honda’s US factories…

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statik Says:
May 31st, 2009 at 1:22 pm

#22 Tagamet said:

Statik, help me out!
How is any private company in the US going to be able to compete with a Govt run GM. I can’t believe that the Govt WON”T dictate or “run” the company in which they have such a wagon full of “skin”.
Help me out here.
Thanks,
Be well,
Tagamet

LJGTVWOTR NPNS
========================

I don’t think it is a question of how can they compete. I think the question is how can they finish GM off? Which they won’t be able to as long as their is the government and political will behind them.

I’m pretty sure competition won’t be a problem. It would be tough for the government to start subsidizing GM products so much that they become saleable over their peers and GM increased its market share back a level it was before the wheels feel off. (remember GM was around 28% when Wags took over, and we are probably looking at 12-13% once this GSB is over).

I really don’t see it getting so bad that the government would start placing a 25% tariff on imports, the world would freak. Any move to discourage/handicap foreign imports would be a nightmare, especially when soon all of Detroit auto will be on the public’s dime…if America wasn’t in such bad shape right now, they could not even have attempted to do what they have done here already.

Besides, it is likely the USD itself will be a ‘25% tariff’ on anything coming into the country in another year or so…provided the world doesn’t collapse and they go back to the ’safe-haven’ trade we saw in the fall/early 2009.

That is why you see so many foreign automakers in the mid & southern US, they are building in hedges against the dollar. The USD Index likely levels back out around 70 by year’s end, off of the highs close to 90 in mid-march (imo).

My gut says the government stays behind them as long as things are bad…once the ‘fear’ is out of the market, their will and public opinion will have them scaling back or discontinuing their support. I still believe, Chrysler will fold and pieces of its carcus will get absorbed into GM/Ford and maybe Fiat (depending on how they play their cards) sometime in 2010.

I think in the long run what we will see coming out of this — or rather how history will view this, is a period of time where the government spend a obscene amount of money to stop the immediate collapse of the Detroit auto industry during some very tough times,and to avoid having America sucked down into the black hole with them. But then over the next few years we see a slow, and structured unwinding of the industry to the same eventual conclusion.

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Tagamet Says:
May 31st, 2009 at 1:40 pm

Statik@41 said in part:
“…I think in the long run what we will see coming out of this — or rather how history will view this, is a period of time where the government spend a obscene amount of money to stop the immediate collapse of the Detroit auto industry during some very tough times,and to avoid having America sucked down into the black hole with them. But then over the next few years we see a slow, and structured unwinding of the industry to the same eventual conclusion.”

Holy CROW. Does Canada “fall” with us?
The ecconomy is such a tapestry that I can’t fathom how the USA could fall wothout a global effect. It certainly looks to be the case with the current “situation”.
As with most things, I thinK I’ll still bet on a recovery in the last quarter with a soft landing. Oh yeah, with an on schedule release of the Volt.
(Hey, I can hope).
Be well,
Tagamet
LJGTVWOTR!!

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Tagamet Says:
May 31st, 2009 at 1:44 pm

I can’t edit the last post.
Witthout is misspelled.
Tag

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koz Says:
May 31st, 2009 at 1:52 pm

Going off topic since the fanancials have been done to…

Debate keeps resurfacing in the threads about ER (or RE as I prefer) mode MPG, Cd, etc. I think we have enough information to calculate these within a reasonable amount of certainty if we take the latest comments from the engineers (not Lutz or some obscure reference) as accurate:

-Per Nick Zeilinksi, GM’s Director of Advanced Technology Vehicle Engineering, the Volt is achieving 40 miles AER on city and highway EPA schedules. http://gm-volt.com/2009/04/24/the-chevy-volts-electric-range-is-40-miles-in-both-highway-and-city-driving/

-ICE should be at least 35% efficient if Atkinson cycle is assumed and in Volt use should average more than 30%, assume 33% (Prius THS II max BSFC 37%). I know, I know Carcus1.. you don’t accept this but it would be monumentally foolish for GM not to use Atkinson.
http://en.wikipedia.org/wiki/Brake_specific_fuel_consumption

-Automotive gasoline has a potential 36.6KWh/gal.
http://en.wikipedia.org/wiki/Gasoline

-The generator is 95% efficient
http://www.teslamotors.com/efficiency/how_it_works.php

-Most of the generator power will go directly to the working load but we will assume 15% goes into the battery

-The battery AER discharge cycle is 8KWh as has been consistantly conveyed by GM.

Using the above information and assumptions the expect KWh/gal out of the generator is:
36.6 * .33 * .95 = 11.47KWh/gal

15% goes in/out of the battery (90% each way):
11.47 – (11.47 * .15) + (11.47 *.15 * .9 * .9) = 11.14KWh/gal

So, based on Nick Zeilinksi’s affirmation that the Volt will achieve at least 40 miles AER on one EPA schedule and slightly better on the other:
AER: 40miles/8KWh = 5 miles/KWh energy consumption
AND
ER: 11.14KWh/gal * 5 miles/KWh = 55.7 miles/gal

Based on above assumptions for Atkinson ICE energy efficiency and Volt’s stated energy use, EPA CIty schedule and highway schedule should return 55.7MPG on one and slightly better on the other.

This seems pretty straightforward. Am I missing something? Maybe Dan Petite or a motorhead can speak to the assumed 33% efficiency for the ICE, but otherwise it is pretty clear what we can expect.

So what is the Cd? Do we really care if it is lower or higher than the Prius’ if the Volt achieves 5miles/KWh? If you are really interested, you can look at the highway schedule and use 5miles/KWh to back into a reasonable assumption of what the CdA is.

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Bo Seephus Says:
May 31st, 2009 at 2:02 pm

The Volt will be made by Government Motors. Why would anyone want a government vehicle. I’ll pass. By 2011, hopefully we will have more and better choices.

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EDS'er 17 years Says:
May 31st, 2009 at 2:12 pm

#45

Last time I checked the Government was elected by the American People. So I’m ok with buying a car from a company that’s partly owned by the American People. Maybe you feel better buying from foreign countries, personally I feel beter buying American. Oh by the way, I’m Canadian.

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koz Says:
May 31st, 2009 at 2:12 pm

LauraM #36

dragging and screaming back to the topic of doom…

I agree with what you say about the timing of what the Obama admin has done and it would have been difficult for the Bush admin to do anything differently, but GM certainly could and should have planned more proactively and that didn’t need to include informing the public of a potential bankruptcy. If you look back to Statik’s posts from 2007, you’ll see plenty of warning signs were visible even from the outside. Sales were going downhill from 4th qtr ‘07 on and they should have started running a scenario along these lines then. Even if that was too pessimistic at that point, by the end of 2nd qtr ‘08 they knew enough. That would have been plenty of time to approach the government after they tried the banks (LOL), which they did. It is here that the Bush admin could shoulder some blame, because they were not very approachable on this subject.

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RB Says:
May 31st, 2009 at 2:16 pm

#35 ccombs

Remember that we are saving Toyota’s butt here as well since if GM went down they would be in deep trouble. Maybe we should have let the japanese govt bail them out too and help own GM
————————————

Let’s hope so. Toyota brings us better cars at better prices. For all the rest of us who are not UAW members, they are our only way to tilt the table back to something like flat. It is to our advantage as individuals that they continue to do so, and Honda likewise. In fact, Honda is in many respects more American than is GM, and more deserving.

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DonC Says:
May 31st, 2009 at 2:18 pm

The national self absorption here is terminal. This is not a US or Detroit problem, and anyone who thinks it is, isn’t looking out the window.

Every major car company in the world has gotten or will get a bailout. Or else they will die. Japan, Korea, the EU — it doesn’t matter. There is so much capacity and so little demand for vehicles that there is little hope for even the strongest company to survive.

Take Toyota for example. All its plants in Toyota City are shuttered, with the exception of the plant making the new Prius. It started 2009 with about $18B in cash reserves. Even with a “loan” aka bailout from the Japanese government for several billion dollars it lost almost $8B in the last quarter. Do the math. At that rate it will be out of cash in another quarter or so. Do you think the Japanese government will let it go under? I doubt it. And how about Ford? It mortgaged everything to raise cash, and started the year with about $20B. That puts it in a very strong position. But can it continue for another year or two at current sales volume without a bailout? At a burn rate of $4B a quarter it seems unlikely, which is why it’s asked for a $9B line of credit from the government.

People who are saying they won’t buy a vehicle from a company that survived with a government bailout are only saying that they will never buy a vehicle. It will eventually be that bad. (In this regard the admiration for BYD on the one hand and the scorn heaped on US companies on the other is priceless. Apparently some people don’t get that BYD had depended on government support — on a scale unthinkable here — for its growth.)

The only variable here is how the various governments try to deal with the problem. In the EU they are using bailouts to keep factories open. The Asian countries will do the same. In the US the Obama Administration is using bailouts to close factories and dealerships in an attempt to right size the industry. Time will tell which approach is superior. Economics 101 says the US approach is the correct approach, but sometimes Economics 101 doesn’t prove out if not everyone is playing by the same rules.

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RB Says:
May 31st, 2009 at 2:21 pm

#46 EDS says
So I’m ok with buying a car from a company that’s partly owned by the American People.
——————————————————-
For me it is an issue of price and quality. If a UAW company can produce cars that are superior in those respects, they will be my choice. But if Toyota or Honda are superior, I will choose them. We are not playing a game by country, but rather making product decisions as individuals.

Or, we are doing that until the government intervenes to tilt toward favored groups at the expense of the public as a whole, so I hope that does not happen too much.

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No Nadal Says:
May 31st, 2009 at 2:48 pm

Looks like Ford, Honda, Nissan, Toyota, Mercedes are more American than GM. GM you are so done.

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F Castro Says:
May 31st, 2009 at 2:54 pm

Unless GM changes it business practices (i.e. dump all their management), its gonna be the same-old-same-old. The snake will shed its skin, but underneath its the same snake !
It would have been much better to let a foreign (smarter) company takeover GM.

GM – The Sequel (heading for the dump as fast as they can, and taking your hard earned dollars with them)

You Americans are so darn stupid.

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RB Says:
May 31st, 2009 at 3:20 pm

Post is titled “Bondholders Agree to New Terms, Setting Stage For Quick Orderly GM Bankruptcy”
——————————————————–

One smiles to see the words “quick”, “orderly”, and “bankruptcy” grouped together. Maybe

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Joe Says:
May 31st, 2009 at 3:33 pm

Hey Castro, I’m a proud American and I don’t like a foreigner on this web site to call us stupid. For your information, It would have been real dumb to allow a foreign company take over GM.

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GeorgeB Says:
May 31st, 2009 at 3:37 pm

Laura M #33

Government Motors has a place in our nation’s strategy, as do other companiesbut Ford, Toyota and all others have a great chance to compete with GM based on product. Ford makes the best trucks around (check most auto trade rags) and the Fusion (hybrid and non-hybrid) is selling like gangbusters.

Government sponsored corporations almost always lose the will to take chances and, as they say, no guts, no glory. The sad thing is that it took bankruptcy to drive GM to the point where they would take a chance on the Volt. It is a gamble after all and I’m sure if they weren’t in dire straits they wouldn’t be pursuing the Volt. They are just too indebted. Once they have Federal watchdogs, I’m afraid they will become even more risk-averse.

So the opportunity for other companies is there, if they have the sand to go for it.

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Timaaayyy!!! Says:
May 31st, 2009 at 3:39 pm

49 Don C

The auto industry is increasingly one of government competition. Which country wants it more? There will be more than one winner, but my investment money is on BYD as one of the big winners. One of the company’s biggest strengths is government backing of one kind or another–e.g., the big reason for the jump in sales and Chinese auto co.’s mkt share this year is China gov. stimulus to buy small cars, and it’s well known that China sees the increasingly likely shift to electric cars as their chance to become a world leader in autos. Of course, China’s gov. actions can change in a heartbeat, but unless it does, I am more impressed with the Chinese gov.’s coordination and speed than the US’ and how that will help some of their auto co.’s like BYD. They got relatively low costs, possibly top tech, a lead in product to mkt., big backing by a healthier gov., profits (at least on a consolidated basis w/ their other biz’s, some of which also have extremely intriguing prospects) etc., etc. etc. Very interesting story and I highly encourage the other posters here to read about the story, for whatever motivates them–Volt competition, business case study, investment opportunity, whatever.

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Vincent Says:
May 31st, 2009 at 3:43 pm

Statik,
Good point on the value of the Dollar being like a tariff. I didn’t think of that. I think that works in our favor just fine…
As far as buyers saying they will not buy from “Government Motors” just be quiet. Ford is next in line for loans. Remember I said it.
They have borrowed billions…just not from the Government.

And Cuba…go roll a Cigar pal. That’s your Domestic Product at best. LOL.

(Quote)
Lurker Says:
May 31st, 2009 at 3:58 pm

To see GM write off the multi billion dollars that we the people via the US government gave them in good faith, I will now never purchase a GM car. I will sell my current ones as well. This is all a big stupid joke and never should have happened. I hope GM continues to fail and drops off the face of the earth. To continue to to support this seems really stupid.

GO TO ANY COMPANY THAT IS NOT GM!!!!

(Quote)
statik Says:
May 31st, 2009 at 4:05 pm

#57 vincent said:

Statik,
Good point on the value of the Dollar being like a tariff. I didn’t think of that. I think that works in our favor just fine…
As far as buyers saying they will not buy from “Government Motors” just be quiet. Ford is next in line for loans. Remember I said it.
They have borrowed billions…just not from the Government.
=======================

I think maybe you are talking about someone else about the second part of your comment, I didn’t say buyers wouldn’t buy from ‘government motors’…I don’t think the government’s involvement at this point really changes the customer decision to buy or not.

(Quote)
Lurker Says:
May 31st, 2009 at 4:09 pm

statik

I don’t think the government’s involvement at this point realluy changes the customer decision to buy ot not.

It has mine. I am so done with this fiasco. My word of mouth will henceforth be do not by GM products. Those that are not in the US and will buy will benefit but we the poor tax payers of the USSA get screwed with the bill as well as our kids and grand kids. Who’s really paying for this? My protest is to not buy GM and to spread the word.

(Quote)
Van Says:
May 31st, 2009 at 4:13 pm

I still think the question posed in post 11 is a good question. Strange no one has chosen to pontificate.

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kent beuchert Says:
May 31st, 2009 at 4:15 pm

I can categorically state, without fear of contradiction, that GM’s execs from spineless Rick Wagoner, have royally screwed every single investor who has kept this corporation alive and rewarded every single scumbag who has cuased its decline (the UAW and the Feds). I sincerely hope and believe that the bums that now head General Motors find out soon that no mentally competent investor will ever trust General Motors again, and will sume that the company will continue its UAW-fostered decline as soon as they leave the bankruptcy court. There is zero reaso to assume otherwise. Some of the nonsensical claims, such as the benefits of eliminating dealerships, have already been shown preposterously false. Having fewer sales outlets for a retailer is NOT, repeat NOT, a good thing, and GM does not pay dealers to operate, so cannot save anything
if they shut down. And having a smaller selection of products is also
NOT a good sales strategy. I know several who like Pontiacs and would never buy a Chevrolet or Buick. GM’s execs are obviously
wishing and hoping – they are not realistic and haven’t the guts to stand up to the UAW or the Feds. Wagoner’s unbelievably inane
idea that bankruptcy should be avoided at all costs (he claimed sales damage, at a time when GM didn’t have any sales!) destroyed any chance GM had to actually restructure properly. What they are doing now is trying to do what everyone knows they cannot do – compete in the small car market. Anyone want to wager as to how long before GM Bankrupcty II occurs? Let’s see GM raise any money in the bond marker or issue new shares. Brainless, short sighted GM execs. They seem more concerned about saving the company until they leave than anything else.

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AnonymousProxy Says:
May 31st, 2009 at 4:16 pm

60

I agree. No longer will I even consider a GM product. I will join your tea party in the protest. I was really looking foreward to the Volt but when that guy said $40K, even my management pay can’t afford that. What are they thinking? If you want to kill another electric car then that’s how you do it. GM appears to be a pretty good grim reaper on EV’s.

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Eloh Gnub Says:
May 31st, 2009 at 4:23 pm

I’ll be shopping for a great deal as soon as they announce bk. I finished venting at GM long ago. Anyone not seeing this from a mile away is a dufus. Here’s to a healthier GM and brighter prospects for the Volt!

(Quote)
statik Says:
May 31st, 2009 at 4:24 pm

#42 Tag said:

Statik@41 said in part:
“…I think in the long run what we will see coming out of this — or rather how history will view this, is a period of time where the government spend a obscene amount of money to stop the immediate collapse of the Detroit auto industry during some very tough times,and to avoid having America sucked down into the black hole with them. But then over the next few years we see a slow, and structured unwinding of the industry to the same eventual conclusion.”

Holy CROW. Does Canada “fall” with us?
The ecconomy is such a tapestry that I can’t fathom how the USA could fall wothout a global effect. It certainly looks to be the case with the current “situation”.
As with most things, I thinK I’ll still bet on a recovery in the last quarter with a soft landing. Oh yeah, with an on schedule release of the Volt.
(Hey, I can hope).
Be well,
Tagamet
LJGTVWOTR!!
============================

I think maybe you misinterpreted what I meant. What I was saying is history will view the action of spending 100s of billions of dollars on the auto sector as not specifically beneficial for the ‘Big 3,’ but for the wider US economy.

As in, the money was spend for GM and Chrysler, but more specifically so the United States DIDN’T get sucked into the vacuum of GM and Chrysler both folding up shop last december all at once, sending 400,000 workers to the curb, but also 10,000 dealers @ 50 employees a pop (500,000 more jobless) and the tidal wave fallout from all the suppliers and related business at the local level (maybe another million). You probably were talking about close to 2 million people finding out they had lost there job (or soon were going to) when they opened the paper in the morning.

They are still mostly doomed, but not all at once, and there is a value in that…it allows for them to be digested slowly into the system:

As part of that winddown, cver the past 6-7 months we have still seen probably 200,000 manufacturing lost in the sector…but it was a orderly. This coming month we see 800 Chrysler dealers get cut…another 50Kish. Then we have 14 GM plants close in the second half of this year + dealer attrition, so another 150K. In 2010 we get 2,000 GM dealers going away…another 100K, and the closure of brands and related production…another 100K. All along suppliers and local infrastructure get pared down or go out of business…maybe another 200K. All along giving people time to distance/insolate themselves from the industry…if they are smart.

As DonC mentioned earlier, and I agree with him (reverse shocker FTW, lol), the US is doing what it should be right now to try and get out of this thing (although not always as focused as it should be).

However, whenever it (the economy recession/depression) does ‘hit bottom’ and then balances itself out (at whatever level that is), I don’t see any ‘recovery’ by the traditional sense…there is a price to pay for mistakes of the past, and there is a price to pay for the rampant spending we see today….that bill comes due as soon as the market thinks we have stabilization (again, you can see the first signs of that in the USD trade whenever things are looking ‘ok’).

Ok, that was a long post too. I could have just said, “I meant that Detroit auto is doomed…not America. That the government intervention we have now is working/has worked to contain the collateral damage, so as not to drag America down with it”

(Quote)
WarrenPeace Says:
May 31st, 2009 at 4:28 pm

Considering the Volt is not expected to be profitable for at least 5 years upon release, 4 at best, what other cars do they produce that is “High tech”, “High mileage Hybrid”, “Small Car High Mileage” that they said under oath that they will produce? Also how long will it take for any of them to be profitable? Do the math. GM is doomed to write off even more of our tax payers money in either another BK or just shut the doors and write EVERYONE off. Till then GM is on Corporate welfare and we are still feeding the leeches, UAW.
Also, remember, the majority of these “Loans” have to start getting paid back in 5 years. So any loans they get this year will have to start getting paid back 5yrs from now. The Volt is scheduled in 2 more years. That leaves it only 3yrs to be profitable which again I have to ask what do they have to sell that they said they would?. I don’t see anything more than a long term GM Welfare project. What a waste of money everyones children and grand children have to work to pay off. Supporting this is just plain not good.

(Quote)
WarrenPeace Says:
May 31st, 2009 at 4:33 pm

Eloh Gnub Says:
Anyone not seeing this from a mile away is a dufus.

Anyone who has seen this a mile away and still supports it is even a dumber dufus who believes the liars that wen under oath.

(Quote)
statik Says:
May 31st, 2009 at 4:43 pm

#60 lurker said:

“statik , said I don’t think the government’s involvement at this point realluy changes the customer decision to buy ot not.”

It has mine. I am so done with this fiasco. My word of mouth will henceforth be do not by GM products. Those that are not in the US and will buy will benefit but we the poor tax payers of the USSA get screwed with the bill as well as our kids and grand kids. Who’s really paying for this? My protest is to not buy GM and to spread the word.
============
Well, that is kinda my point. The sales GM has experienced from november to now…are likely to stay stable. Your absence, and others like you are also the reason I’m not worried about other companies being able to ‘compete’ with GM as Tag mentioned earlier…or GM regaining the share it used to have 6-7 years ago. (28%)

I don’t know for sure, but you probably haven’t bought a car in the last 7 months from GM, because if you don’t support a gov’t sponsored GM in bankruptcy…you probably didn’t support the government bailed out GM of the past 7 months.

I don’t think many people see the difference in the gov’t giving GM 30+ billion directly the past 7 months to keep the lights on (and GM giving them a IOU), and the government giving GM another 30 billion to exit bankruptcy and GM giving them shares of the company.

For whatever reason, you are likely part of the 15% of the market share that has already left GM…not the 13% they still have remaining. That 13% really doesn’t care that much, they are like me- if I want a particular car…and GM can produce it, I will buy it…I really don’t care how it got to me. Maybe that is selfish, or short-sighted in the long run…but it is what it is, I’m just being honest. I want a flippin’ EV already…4 seats, serviced locally, and I’ll take one from anybody.

(Quote)
Eloh Gnub Says:
May 31st, 2009 at 4:43 pm

67 AbsolutelyNothingSayItAgain

Support shammort. My purchase decision is based on finding a great deal on a good car. I don’t have hateful emotional baggage clouding my mind. Peace.

(Quote)
alex_md Says:
May 31st, 2009 at 4:48 pm

To continue the ICE-gen mod discussion, I think that the losses will be substantial, but not catastrophic. My extrapolations based on the modern high power diesel gensets yield the MPG number in the range of 35-45. I have hard time to believe that the volt’s genset will be 30% more efficient converting gas into electrons than the best commercially available stationary gensets, but who knows, maybe they do have some tricks. Right now this is the most interesting part of the equation and as far as I know never done before (?). Personally I would never buy Volt, I will wait for the EV1’s come back around 2015.

(Quote)
WarrenPeace Says:
May 31st, 2009 at 4:53 pm

Eloh Gnub Says:
My purchase decision is based on finding an adequate deal on a good car.

I respect that. Self gain in the short term is what we Americans are best at. Some of us look a little deeper into what we invest our money in like is it US made, was it made in a sweat shop, etc….

(Quote)
canehdian Says:
May 31st, 2009 at 4:58 pm

Not related to this topic, but that of the volt tech in general.. Raser’s made a serial hybrid hummer :p

http://www.youtube.com/watch?v=pmTAjSm2MFE

Was featured on youtube today.

(Quote)
Lurker Says:
May 31st, 2009 at 4:58 pm

statik

I don’t know for sure, but you probably haven’t bought a car in the last 7 months from GM, because if you don’t support a gov’t sponsored GM in bankruptcy…you probably didn’t support the government bailed out GM of the past 7 months.

You are absolutely correct. I bought 2 in early 07 and will be trading it in for a non GM SUV and car. Both will be traded in, in protest/disgust.

(Quote)
Big Picture Says:
May 31st, 2009 at 5:01 pm

#56 Timaaayyy!!!

Thanks for the post. I concur. LT fundamentals favor the Asians. Good to see American resources getting reallocated, over time, to more promising places, that is, the Feds could have put a LOT more $ into autos but they didn’t. Let other countries throw a never-ending bundle of money at an industry with 50% overcapacity.

(Quote)
statik Says:
May 31st, 2009 at 5:08 pm

#68 statik (me)

Just thought I would mention that I know GM’s marketshare is still about 19% right now, and that is probably what I should have used as a reference number.

I was going with the percentage of the continuing share continuing throught the GSB after you strip out the Saab, Pontiac, HUMMER, Saturn numbers and the 2,000 less dealers. (I probably should have referenced that).

/just wanted to get ahead of the, “…but Statik, GM’s share is higher than 13%’

(Quote)
Eloh Gnub Says:
May 31st, 2009 at 5:09 pm

71 WP

Your purchasing logic is excellent for me and my family–you can keep your 5% returns and I’ll keep my 15%. Thank you very, very much. I’ll invest the difference in both a better lifestyle and better businesses, eventually helping even you. You’re welcome.

(Quote)
statik Says:
May 31st, 2009 at 5:12 pm

#73 Lurker said:

statik

I don’t know for sure, but you probably haven’t bought a car in the last 7 months from GM, because if you don’t support a gov’t sponsored GM in bankruptcy…you probably didn’t support the government bailed out GM of the past 7 months.

You are absolutely correct. I bought 2 in early 07 and will be trading it in for a non GM SUV and car. Both will be traded in, in protest/disgust.
====================

I find nothing wrong with that decision at all, it is certainly yours to make. You have set a standard for someone who makes your cars to live by, and GM doesn’t hit that mark anymore. That is the price GM has no choice but to pay, and the stigma they get to live with from now until…well, probably forever.

(Quote)
WarrenPeace Says:
May 31st, 2009 at 5:29 pm

Eloh Gnub Says:
I’ll invest the difference in both a better lifestyle and better businesses

Insinuating a purchase of a GM product and “better businesses” in any sentence is an oxymoron. Or as you put it “dufus”.

“Your purchasing logic is excellent for me and my family–you can keep your 5% returns and I’ll keep my 15%.”

So mine and many others efforts in researching the ethical standards of what we invest in (a car) and purchasing only a US made product seems to be of little concern to you and you seem to think that your sweet deal of whover/however it is made is of no consequence therefore you think you’re “helping” us?

w/e

(Quote)
Lurker Says:
May 31st, 2009 at 5:34 pm

statik Says:
and the stigma they get to live with from now until…well, probably forever.

lol….

(Quote)
Eloh Gnub Says:
May 31st, 2009 at 5:41 pm

78 WP

Your logic, grammar, quotations and spelling are all in error. Please repost so you are understandable.

(Quote)
Red HHR Says:
May 31st, 2009 at 5:47 pm

I saw my first red Camaro today, nice car…

(Quote)
WarrenPeace Says:
May 31st, 2009 at 5:48 pm

Eloh Gnub

You’re not worth the effort. You’re barely worth this.

(Quote)
Eloh Gnub Says:
May 31st, 2009 at 5:59 pm

82 WP

Nice bailout. Please come prepared next time.

http://www.merriam-webster.com/dictionary/lucid

(Quote)
Eloh Gnub Says:
May 31st, 2009 at 6:16 pm

If WP’s contorted venting is any indication, there are a lot of posters with pent-up GM hatred. Hopefully tomorrow’s bk will flush them away. I hope the more unfettered GM can satisfy their new core customers with super products and serices, including the Volt. Good luck in your post-bk shopping!

(Quote)
LauraM Says:
May 31st, 2009 at 8:42 pm

#41 Statik

You’re probably right that if the US started adding those kinds of tariffs the world would freak. I just can’t see Japan successfully taking us to the WTO given their record of protecting their home market.

I agree about the dollar. It’s going to collapse. Although I’m not sure it will happen right away. Neither Japan nor China are going to want to face the instant evaporation of their trade surplus with the US. But there will be major long term consequences for us. America’s not going to be the predominant country in the world anymore. But I also think that postponing the reckoning will make it even worse when it actually happens–for Japan and the US. (Maybe not China since they’ve used the situation to copy all of our technology.)

#49 DonC

I agree that the entire auto industry is having major problems. The difference is that the US auto industry was already in a state of decline. Obama’s trying to restructure GM so that it will be a healthy company when the economy recovers. I applaud his goal, even if I disagree with how he’s planning to get there.

(Quote)
Tagamet Says:
May 31st, 2009 at 10:47 pm

re Statik’s clarification for me. Thanks. You’re skilled enough in the nuances, using, while I admittedly use a neat tenderizer and then the side of a fork. Seems like a phased in road to inevitibility (but the same destination, correct)? I can’t get my head around how failing slowly is significantly better, other than the spin/propaganda.
Sheesh, I’d still rather my rosier prediction – rebound fairly soon and a soft landing.
I’m still working through some personal medical issues which limit my participation here, so please don’t thinnk that it’s related in any manner to the topics or my rabid interest in the Volt.
Be well,
Tag
LJGTVWOTR!!**********NPNS

(Quote)
koz Says:
May 31st, 2009 at 10:47 pm

alex_md #70

I was also most suspicious of the generator, when GM announced the concept Volt. Actually it was the price of the whole vehicle which was related to the generator. From the generators I had been exposed to, 50KWh seemed like something too big and too expensive to fit into a reasonably priced small sedan. But I don’t see the efficiency as such a problem. What are your diesel MPG numbers based on? Remember the generator only needs to supply average power and can adjust slowly (feathering according to GM’s engineer) as the load varies. Most generators are supplying the power demand directly and must vary output constantly and quickly. The Volt’s generator will be running at or near peak efficiency all of the time. What other losses are there ahead of the electric output from the generator, besides the generator itself and powering the stator?

Looking at the this chart http://www.dieselserviceandsupply.com/temp/Fuel_Consumption_Chart.pdf the 60KW deisel generator run at 1/2 load show a return of 10.34KWh/gal. This isn’t far from what I calculated for the Volt’s genset and see the tables notes about various factors that can increase or decrease the value. Again, I return to the fact the Volt’s generator will run at near ideal conditions. Also, I used 95% efficiency for the generator. This was taken from the higher end of Tesla’s motor efficiency but the Volt’s generator can be optimized for high efficiency. Some generator sites state 75% efficiency. This could be where your numbers differ. I’m thinking the Volt’s genset will have a cycle design life of @5000hrs (225,000 miles at 45mph average). This allows for lighter, more efficient componentry than the much longer design life for typical gensets. Perhaps this is where the costs are lowered too.

Hopefully GM is optimizing the genset output to a typical 70mph load. The Tesla data (http://www.teslamotors.com/blog4/) shows the Roadster uses 21KW at 70MPH. Perhaps the Volt is a little better but that would be difficult with the frontal area so much larger. Tesla’s Cd isn’t that great and I don’t think they use low rolling resistance tires, so the Volt’s power draw at 70mph under similar conditions is 18-19KW. If so, and with the engine at optimal efficiency (closer to 37% or Prius) perhaps we can see up to 45mpg at 70mph under the same conditions.

(Quote)
kubel Says:
May 31st, 2009 at 11:57 pm

“Sources have advised me none of this will impact the Volt development or delivery, more on that soon.”

The Presidents Task Force already declared the Volt was not a viable money maker for GM. Would the government permit this money-pit to continue under the “good” half of GM, or will it be assigned to the “bad” half?

(Quote)
statik Says:
June 1st, 2009 at 6:25 am

#86 Tag said:

re Statik’s clarification for me. Thanks. You’re skilled enough in the nuances, using, while I admittedly use a neat tenderizer and then the side of a fork. Seems like a phased in road to inevitibility (but the same destination, correct)? I can’t get my head around how failing slowly is significantly better, other than the spin/propaganda.
Sheesh, I’d still rather my rosier prediction – rebound fairly soon and a soft landing.
I’m still working through some personal medical issues which limit my participation here, so please don’t thinnk that it’s related in any manner to the topics or my rabid interest in the Volt.
Be well,
Tag
LJGTVWOTR!!**********NPNS
==========================

Sorry to hear you are still not 100%. Take care of yourself first…not much else matters when your not healthy, especially cars, lol.

/we always have a spot warm for you here

(Quote)
AG Says:
June 1st, 2009 at 7:28 am

The only good think that government should have done

By only the volt (not GM) and later sell or give the technology to the big three companies

and let GM sell cars and be a company that can make profit.

(Quote)
noel park Says:
June 1st, 2009 at 1:30 pm

#15 CorvetteGuy:

Yeah.

#89 statik:

Amen. Same to you, while I’m at it. All of you, come to that. What a day. Reminds me of another old(er) song about a great Galveston hurricane:

“Wasn’t it a mighty day? Mighty day. Mighty day, Great God that morning, when the storm winds struck the town.”

(Quote)
Don Says:
June 1st, 2009 at 5:58 pm

Details: http://www.nytimes.com/2009/05/29/business/29auto.html?ref=global

>>Under the terms of the plan, bondholders would initially receive 10 percent. They could then exercise their warrants for an additional 7.5 percent when the new G.M. rises to about $15 billion in value. The second set of warrants for the final 7.5 percent would be exercisable when new G.M. rises to $30 billion in value.

The union would initially receive a 17.5 percent stake to finance a health care trust for its retirees. It has also received warrants to raise that holding to 20 percent — but those warrants are exercisable only if new G.M.’s value hits $75 billion.

Once the union and bondholders achieve their full stakes, the government’s share would drop to 55 percent.

The hope is to create a new G.M. by late August, people with knowledge of the matter said.

During a briefing on Thursday, administration officials said they expected that G.M. would emerge from bankruptcy in 60 to 90 days, but would probably not be a publicly traded company until sometime later, possibly after a public offering. Until then, there would not be a ready market for the equity holdings of former bondholders and others.

The administration officials said that G.M.’s balance sheet going forward could make a $15 billion market capitalization possible within a relatively short period of time, but did not offer details on how its value would rise to that level.<<

(Quote)

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Bondholders Agree to New Terms, Setting Stage For Quick Orderly GM Bankruptcy

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