GM Held Hostage

Money Talks - Employees and Stock Holders Walk
By Bill Glynn

I cannot believe that the GM bondholders are strangling GM. They have a choice to allow the business to operate and convert at least some of their bonds into stock although no guarantees that will work. This is the dilemma. Wouldn't it make sense that they are teed up to lose big money in a bankruptcy? Since they are bondholders they have a secured interest in the assets of GM. I believe their strategy is that no one is buying cars anyway, so regardless, GM is going bankrupt. Even if GM gets bailed out further, the bondholders at least will be in the driver's seat of a bankruptcy. This way they can make sure they are in the first position to get any money from a restructuring or sale of assets. In other words, they get their money out first up to the total face value of the bonds. Well guess what - mom and pop and mainstream will get virtually wiped out!

If GM declares bankruptcy because they are forced to because of the inflexibility of the bondholders those bondholders will be partially responsible for bringing down another American icon brand. There seems to be no way around bankruptcy and this is also largely because people aren't buying cars and that GM is backed into a corner. Strapped with unions, debt and lack of sales, I do not believe there is any way around it and I do not believe that the auto industry in its current form will be a surviving industry here in America anyway. As appalling as it sounds, these are the tea leaves. This industry is a dinosaur and just cannot compete globally.

The bondholders are strictly focused now on their ability to control GM assets in a bankruptcy. It is really the only thing they can do to protect their capital. It is not about people, shareholders or employees - it is all about the money. Money talks and people walk in this case. When you see several of America's top automakers forced into bankruptcy and are cratering before our eyes, we can't even fathom and measure the massive unemployment skyrocketing and huge loss of more money in the stock market. This is really bad - I mean REALLY bad - and watch for the other markets I have been ranting about because there are many more of these in other sectors to come. [more...]