Shares of General Motors Corp. climbed more than 8% on Wednesday following
comments by House Speaker Nancy Pelosi, D-Calif., calling on Congress and the Treasury to provide emergency financial assistance to the automobile industry. The stock fell back slightly in afternoon trading after Treasury Secretary Henry Paulson
said
he did not believe it was appropriate to use the $700 billion financial
rescue program on automakers, as some have suggested. But the rise does
reflect a growing feeling among auto insiders
and some analysts that GM and its Detroit rivals are likely to receive enough government help to avoid Chapter 11 filings, at least for now.
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Of course it ain't over 'til it's over, and opposition is preparing a challenge to any further government assistance. One source who asked not to be named, for example, was pointing reporters to a 2006 ConsumerAffairs.com report stating that GM is the world's largest private purchaser of Viagra, spending $17 million annually on it and other lifestyle drugs. The group is seeking union concessions, including a scaling back of the retiree healthcare plan responsible for the drug purchases, as part of any bailout.
Hedge fund manager and noted turnaround expert Bill Ackman of Pershing Square Capital meanwhile is making the media rounds saying GM should be required to use the courts to reorganize before receiving any further government help. Ackman in separate interviews with Reuters and Charlie Rose said GM should not receive any new government cash without a prepackaged bankruptcy in which creditors erase large amounts of debts in exchange for equity.
Skeptics of a reorganization worry that Ackman and those who agree with him are underestimating the difficulty of a prepackaged filing, particularly in getting both debtholders and unions to agree to concessions. They fear that what some would hope could be a quick, prepackaged reorganization could instead get bogged down into a long and costly filing, an event that would likely only intensify the steady stream of grim news coming out about GM and could cause car buyers to avoid dealer showrooms.
But more than anything, a growing number of those against a bailout and advocating a bankruptcy seem to believe some sort of government financing is inevitable. And after weeks of watching GM shares spiral downward to historic lows, apparently that alone is enough to cause the stock to rally. - Lou Whiteman
