The Day Comes

Too late to short GM. GM filed for bankrupcty protection today citing assets of around $82 billion and debts of $172 billion. Automotive News reports the company employs 92,000 people and supports about 500,000 retirees. Ouch.

The US Government will provide an additional $30 billion in financing to keep GM going and will take a 60% stake in the reorganized company, while the United Auto Workers (UAW) will receive 17.5%, the Canadian and Ontario governments 12%, and existing bondholders 10% (60 + 17.5 + 12 + 10 = 99.5%). No mention of that last 0.5%.

Federal Government To Invest $30b In GM

In an effort to get bondholders to agree to terms, the Federal Government is willing to invest a further $30b in GM, on top of the nearly $20b it's already funded.

So far it seems the Government is going to own 72.5% of GM, the United Auto Workers (UAW) union's trust fund will own 17.5% (with a possible 2.5% increase in its stake later), and the bondholders (who hold $27b in GM debt) are expected to receive the remaining 10%, with warrants to buy an additional 15% share at a later date.

Current stockholders would essentially see their investments rendered worthless as GM is nationalized. They would also likely get nothing should the company file for
bankruptcy protection.

No word yet on whether GM will file bankruptcy.

Chrysler To File For Bankruptcy Protection

Automotive News reports that Chrysler will file for bankruptcy tomorrow (Thursday April 30th) in preparation for its agreement with Fiat. Even if this is all part of a plan it does not look good for the American auto industry. Next in line is GM.