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May 23, 2009

GM Likely To File Bankruptcy Next Week

Multiple outlets are reporting GM may file for bankruptcy next week (CNN for example). Speculation is that the "bad" assets will be cut out and the "good" assets packaged into a new company which would emerge. Automotive News (subscription required) reports GM's bankruptcy plan calls for another $30 billion in Federal loans, bringing the total close to $45 billion.

This begs the question (sort of tongue-in-cheek), why couldn't they just go bankrupt with the debt they already had? Isn't this just trading one mountain of debt for another, with added strings and loss of control?

A lot of people (bondholders, shareholders, dealers, employees and the American public taxpayers to name a few) are getting a raw deal. Is it necessary? No one knows but it IS going to get uglier before it gets better, if it ever does.

It's also interesting that the Chrysler filing was likely a test case (see my earlier post), it's not yet out of bankruptcy, and GM is getting ready to file already. The urgency of the government deadlines is rushing decisions which should be made at a more prudent pace.

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