After the judges decision yesterday to allow the sale of its “good” assets to the new government controlled entity I have to wonder as an unsecured bondholder do I have any hope of recouping any of my investment?
There are still several things in the way of GM making a comeback as a viable entity. Lear filed for bankruptcy last week, and other suppliers are feeling the pain from the reduction of cars being built. They are still burning cash and needed the courts approval to get access to Debtor in Possession financing from the government. If you are a Michigan tax payer I am sorry, but you will end up paying more as GM and Chrysler are requesting property tax reassessments and refunds.
Here are some things to keep in mind about whether or not this company survives:
- The cash for clunkers bill doesn’t help GM since they do not produce a lot of the cars that are eligible for the credit.
- The cars that GM did make that had the best gas mileage are not their most profitable units.
- There is a backlash against GM and Chrysler for being bailed out by the government. This is best shown by the sales numbers for June where Ford had the smallest year over year sales reductions.
- The current car sales run rate is averaging 9.6 – 9.9 million, and don’t show any signs of picking up.
- If the government can make these rules now they can rewrite them in the future as elections can change control of congress. (i.e. wage controls or immediate repayment required)
I am holding my bonds and will await my new shares upon the recapitalization and then we will see how the company is doing and if all my fellow bondholders make a run for the exit at that time.
