As one of the many small GM retail bondholders, I would like to applaud the larger institutional bondholders for rejecting the bond exchange proposed which would offer 10% of the company for the combined $27 billion.
This has got me thinking recently is there another option for us as bondholders. The bondholders made a request last month for 58% of the new GM, but there was no way anybody would bite on that.
So what are our options? Definitely don’t agree to debt exchange. Go to bankruptcy court and take our chances that some rule of law still applies to something.
Just to float this as an idea, but how about if the bondholders agreed to take the Saturn, Hummer, and Pontiac brands in addition to some of the closed plants in exchange for their debt? These are brands that have a value and could be revived into competitive and true American auto companies.
Toyota has a market cap of $118 billion, Ford has a market cap of $15 billion. Now I ask you if we are only getting 10% of what is considered of an approximately $60 billion new company then surely these three brands are worth $6 billion.
You purchase these assets with the existing GM bonds. This gives sole ownership to the government and the UAW of GM which is what they want anyway. I am no private equity guy, but you strip Hummer down to the H1 and H2 models and make them luxury vehicles like they used to be. You make them as a competitor to Land Rover.
Keep the Saturn line up and go back to the premise of how it was run in the 90’s as a value vehicle with high quality, and sign a sharing agreement with GM to produce the Outlook until new management decides to discontinue the model or take ownership of manufacturing it themselves. Saturn really has enough products with the hybrid Vue, Outlook, Skye, and the stable Ion sedan. They are fuel efficient vehicles and proved they could be profitable before they were folded into GM and run like the other GM divisions.
Pontiac has a rich history. This could provide some luxury sedans and also some muscle like the GTO and Trans Am.
This was just an idea I had. Leave me a comment and let me know what you think. Am I nuts? Can the US auto industry be saved? Does this idea make sense?
For full disclosure I have 100 GM retail bonds with a part value of $25 per bond.
Everyone enjoy this Memorial Day weekend and be sure to give thanks to all of the veterans who have protected this country. We all owe them not only a debt of gratitude, but the safety we feel as we go to sleep each night. Bless you veterans and your families for the sacrifices you have made.
