General Motors (NYSE: GM) announced this morning that not enough of its bondholders agreed to swap its debt for company stock, pushing the automaker even closer to bankruptcy. GM was offering to exchange $27 billion in unsecured debt for 10% of the company's stock. The struggling Detroit damsel has until Monday to finish its restructuring or it will file for Chapter 11 bankruptcy protection. This deadline was set by the government and includes requirements regarding debt reduction, labor cost cuts and plant closures.
On Tuesday, the United Auto Workers (UAW) hinted that it would take a 20% stake in GM, offering a glint of hope for the automaker. Nevertheless, the UAW's proposed stake was a far cry from the originally planned 39% stake, which would have allowed GM to "sweeten the pot" for the rest of its bondholders. It certainly appears that there isn't enough sugar to dump on the automaker to make its bondholders change their minds.
Reportedly, GM needs as much as $50 billion in further funding from the government in order to pay off its lenders and keep the company operating throughout a restructuring. According to The Wall Street Journal, the government will up its stake in GM to 70% from 50%. Further aid may come from the Canadian government as well. GM may not stand for General Motors any more; it will be Government Motors.
It certainly appears that bankruptcy will be the ultimate outcome for GM, and today's news could be the final nail in the company's coffin.
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Reader Comments (Page 1 of 1)
5-28-2009 @ 8:42AM
Duke said...
I wouldn't want GM stock either. GM is history. Thanks for the memories GM. There is so little faith in GM getting market share back that it is a foregone conclusion GM is toast. They were so big and arrogant they forgot the consumer rules not GM. Consumer demand has changed and they want import cars for many reasons. Like better economy in mileage, they are in the garage less, they have better looks, and resale value. The Gen X and Gen Y kids love thier tuner cars too. The domestic car companies have nothing to compete with the tuner car crowd's love affair with imports.