GM Is Likely to File for Bankruptcy, Report Says

Source: Washington Post

General Motors is likely to file for bankruptcy protection with government backing, giving bondholders a recovery of more than 25 cents on the dollar, according to Moody's Investors Service.

There is a 70 percent probability that the restructuring plan for U.S. automakers will consist of a prepackaged bankruptcy financed by government loans to get GM and Chrysler through to 2009, Moody's said in a report dated Dec. 15. Under that scenario, bondholders would be likely to lose less than 75 percent of their investment, Moody's said.

The Moody's assessment comes as the White House weighs a bailout of the automakers. GM and Chrysler are seeking $14 billion in federal funds to keep operating through the first quarter of next year. GM debt traded yesterday for as little as 7.7 cents on the dollar, so if Moody's recovery prediction is right, bondholders stand to gain.

"We believe the potential loss for creditors under this scenario would exceed the loss that would occur in a scenario where the restructuring did not involve a bankruptcy filing, but will probably be less than the 75-100 percent range associated with a freefall bankruptcy scenario," Moody's analysts Mike Mulvaney and Bruce Clark wrote in the report.

Moody's assigned a 25 percent probability that the United States will bail out the automakers with no bankruptcy, and a 5 percent chance the automakers will go bankrupt without government assistance.

Read more: http://www.washingtonpost.com/wp-dyn/content/article/2008/12/16/AR2008121602675.html

put bumper stickers on our toyotas that says 'shame on us'?

I've bought new cars when the old ones are due for the junk yard, the one that lasted the fewest years was the 81 Honda Accord I had to junk in 89, the the 72 Plymouth lasted till 82 the 89 Olds lasted till 2005

Or at least quit serially badmouthing US carmakers and spreading the meme that nothing good comes out of Detroit? Because, you know, hundreds of thousands of UAW workers and who knows how many hundreds of thousands of others depend on their existence for a job.

Or would that be asking too much?

instead a bunch of shitty ones...


I have a 99' S-10 with the 4.3L Vortec V6- A great engine-great transmission- interior fell apart- door hinges junk-etc.,

Was looking forward to getting a new GMC Canyon - They no longer make the 4.3L- STUPID MISTAKE- So, test drove the 3.7L 5-cylinder. Decent power, but you can't get it with a manual...Same with the Chevy version...and interior is SHIT

Why again do we need the GMC Canyon AND the Chevy Colorado??????? Can't they just make one good truck...OH NO....

So, I wanted to upgrade my S-10 to the next generation- and buy "American" - but I won't.....


I'll go with the tried and True Toyota Tacoma- which will probably last at least 300,000 miles....But in your mind- I should buy an inferior vehicle... :puke:


http://image.motortrend.com/f/auto-news/prices-raised-across-the-board-for-2009-toyota-tacoma/10027215+cr1+re0+ar1/2008-toyota-tacoma.jpg

and some that aren't as good. Like other car makers. For example, what brand of car has the highest safety recall rate over the past four years? Toyota.

My Saturn has 220K miles on it and looks and runs awesome. 36 mpg. Fiber composite body that will never rust.

I agree with you that it's time to consolidate the lines, and I don't recommend buying a car that doesn't meet your needs.

But I take strong issue with those who pretend to be for preservation of UAW jobs, but whose actions show exactly the opposite.

It's just got two nameplates on it. Well, THREE, if you count the Isuzu I-280.

In Fayettenam, one of the two Chevy dealers and the GMC dealer are on the same road. If you want a GM pickup, you go between them trying to see how much you can talk out of them. GMC used to make all sizes of trucks right up to 18-wheelers; now that the 18-wheeler business belongs to Volvo, they might want to rename GMC to "Chevy Truck" and not have a GMC nameplate any more.

"click"

If the big 3 would come out with a vehicle in the same price/mileage/performance/ground clearance catagory of my Subaru Outback. I don't want an SUV but I need AWD with good ground clearance.

Failing that, a bumper sticker with "I'm an un-American jackass who helped kill the union" will do nicely.

15 of them in the 35 years I have been driving.

means the auto workers working for Honda, Toyota, BMW, Hyundai in the South, will get hosed. The ONLY reason their employers treat them with a modicum of respect is because they're afraid of the UAW. They don't want their employees organizing. Without the threat of the UAW looking over the shoulder of plant management, those auto workers will become the equivalent of Wal-Mart employees within 10 years.

Are those southern non-union autoworkers really that stupid that they don't understand why these are "good" well-paying jobs?
And welcome to DU!

:hi:

A first post that doesn't suck is a rarity around here these days! :thumbsup:

....even when we win, we lose....

Buschco saw the inevitable (the collapse of ponzinomics), positioned the BFEE faitful for one last feast at taxpayer expense (the TARP and Fed loans), and are using shock doctrine tactics to bust the UAW for future profit.

All in a day's work for Bush the Usurper, looting the treasury of every last cent.

moody`s is speculating on the future. they are betting on failure because they see that their clients have a chance to get some money back.

no mention of the devastating effects on the economy-depression- or that the car industry might succeed with a loan and restructuring.

I thought all they did was drive alternative fuel vehicles a couple of hundred miles, double park, and ask for more money!

Fuck Moody's.

Remember it is the Stockholders who will be holding the bag, NOT the bond holders. The bond holders will only lose if it is determined that GM can NOT pay them as an ongoing business and instead the assets of GM is sold off to other companies (Including a new GM Corporation). I do NOT see GM being broke up and sold off by the Court (Unlike Schwinn Bicycles in the early 1990s when the Court determined that the debts of Schwinn would NEVER be paid off and order the company assets sold to the highest bidder, including its name).

they will likely get 25% of their investment according to the article - might be a fiar number I guess...but bondholders have already had their bonds knocked down very hard...so if a GM bond is trading for 15 cents on the dollar, a distressed debt trader could make a fortune by buying it and getting a 25 cents on the dollar recovery in the event of a bankruptcy using Moody's assumptions - a 67% return!

I just looked it up on Moody's website -- GM rates Ca.

Reference was to Moody's role in rating/merchandising subprime mortgage securities thereby dragging us into our current mess. Of course, Moody's had plenty of accomplices...

Just asking.

No more "we only have one president" bull shit. That is no longer a valid excuse for not speaking out loudly and clearly in defense of auto workers and the domestic car industry. If Obama can't lean on Bush and the Treasury Secretary to do the right thing by going public, what good is he?

He ain't helping us out.

Unless he thinks a GM bankruptcy is just what this nation and economy needs.

...bottom line... it won't be pretty....

http://www.democraticunderground.com/discuss/duboard.php?az=view_all&address=114x50988

There is a 70 percent probability that the restructuring plan for U.S. automakers will consist of a prepackaged bankruptcy financed by government loans to get GM and Chrysler through to 2009, Moody's said in a report dated Dec. 15.

Did Moody's use the rectal-extraction methodology to get that 70% figure?

How do you assign a probability value to the likelihood of the terms of a bankruptcy agreement?

GM bonds, loans, and subordinated debt, GM CDS trading in the market and an estimate of recoveries for bondholders in the event of bankruptcy. These prices are easy to get as the many issuances that GM has made trade quite actively.

Wouldn't these implied probabilities be based on the assumption that the market is accurately pricing these vehicles to reflect the risk of default? Can this really be considered a valid assumption given how erratic the market can act at times?

Sorry to be clinging to my initial skepticism, but I'm trying to honor the DU tradition of quickly jumping to a conclusion and only letting go of it until there is overwhelming evidence that I'm making an ass of myself.

barometer...which it usually is...except when forced selling and buying is occurring. The more difficult question here is what the recovery assumptions should be. Recovery guesstimating is very hard....and can create a garbage-in garbage-out estimate of the probabilities of default.

Here is a simple example.

Say that a bond maturing in a year is trading for 60 cents on the dollar with an estimate of 40 cents recovery in the event of a default. Call p the probability of default. If there is a default, you lose 20 cents and if the bond matures one year from now without default then you make 40 cents. Call what you lose if default D and what you make if the bond does not default W (for win). Then:

p = W / (W + D) = 2/3 in this example.

It is simply the probability of default based on market prices and the very rough estimate of the recovery in the event of default.

Thus you can file Bankruptcy with Bankruptcy court at any time. Thus my guess would be Next Wednesday at 6:00 pm, Christmas Eve, given that the stock market will be closed the next day and most stock brokers took Friday December 26 off also, you have four days for the news to get old (and the Stock Exchange may decide to close down on the 26th just to avoid the problems caused by the filing).

My second and third guess would be this Friday December 19 at 6:00 pm, and then Wednesday December 31 at 6:00 pm. GM wants it done by the 1st to avoid having to pay certain bills that become due at that time, Through GM may wait till the 2nd to file, so that last year bonuses for top management would have been paid more then one year before the filing and thus NOT payment to an insider subject to being claimed by the trustee as a "Fraudulent Conveyance".

Please note a "Fraudulent Conveyance" is NOT a criminal act, it is when one creditor gets paid instead of another. In Bankruptcy this is a concern for the law permit the Court to undo ALL transactions done within the previous three months of the filing AND up to one year if the transaction involved an insider. Wages are given a priority in the Bankruptcy act so I do NOT see past wages being affected. I do NOT see past salary of management being affected but I see Bonuses to those top managers being affected, so a good chance the filing will be delayed till January 2 so that Management can keep their 2007 bonuses.

On the news this morning.

And Corker will rue the day.

Everyone in middle TN has woken up and is mad at him; doctors, lawyers and small business.
We're in a recession and GM's loss would break the economy.

It will be trickle down Bankruptcy.