On Monday, Dealscape highlighted the uphill battle that General Motors Corp. is fighting to achieve a positive net present value -- a key component to the government's bailout of the industry. The numbers don't look good at all, begging the question of whether the incoming Obama administration will renegotiate the deal or steer the behemoth into bankruptcy. Even GM executives may see the writing on the wall based on comments in the media at the the Detroit Auto Show.
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Tuesday's Wall Street Journal reported that "General Motors Corp. appears to be off to a slow start to meet the mandates of a federal bailout, and its top executive said Monday the company hasn't ruled out a bankruptcy filing."
Maybe the executives are beginning to warm to the reality of bankruptcy. Last month The Deal news magazine asserted:
Here's the reality: Bailout or not, GM will file for bankruptcy. There's no escaping it. To drastically reinvent the 101-year-old company to keep it alive and return it to prosperity will require tools only available in a bankruptcy process. All the talk about no one buying cars from a bankrupt company will evaporate as everyone realizes consumers aren't buying GM vehicles, anyway. There will be a car czar, but it won't matter. Congress will fulminate, but it won't matter. GM will have to file, Wagoner will be fired, a new CEO hired.
In all likelihood, the U.S. government would still be involved, since Treasury would likely be the lead debtor-in-possession lender, according to The Deal article. But that would be the extent of the government's involvement, suggests the article as the rule of law, not politics, takes over.
Already there are signs that politics is clouding GM's future. Some in Washington want to mandate that the industry go green, even though that may not be what the marketplace for vehicles demains. Meanwhile, there is a push to appoint a car czar, who may in fact just be a political patronage gig for a big Democratic donor, and not necessarily the best person for the job. Filing a Chapter 11 bankruptcy protection petition would eliminate all the political machinations and leave the game of restructuring in the hands of the specialists, who might be the only people to help GM achieve a positive net present value.
For more speculation on what that bankruptcy might look like, see The Deal news magazine story "GM in bankruptcy." - Matthew Wurtzel
