What seemed impossible nearly a generation ago -- General Motors Corp. (NYSE:GM) going bankrupt -- will likely become a reality on Monday. Markets have known for months that if GM doesn't submit a restructuring plan to the government by June 1 that it must file for bankruptcy. GM's bankruptcy could set off a wave of auto-related bankruptcies. Ahead of GM, Visteon Corp. filed this week. Shares of GM slumped below a dollar, but the overall market shrugged, focusing on late-day buying. The Dow finished up 96.77, or 1.15%, to 8,500.57 while the Nasdaq increased 22.54, or 1.29%, to 1,774.33.
Shares of GM were off 37 cents, or 33%, to 75 cents as investors saw the United Auto Workers approve a cost-cutting deal that would help smooth the automaker's path through bankruptcy. Meanwhile, GM bondholders have a 5 p.m. Saturday deadline to take a sweetened deal that exchanges their bonds for a 10%
stake in the restructured company and the potential to later buy an
additional 15%. The New York Times reports that "the approval of both deals will probably not be enough to stop GM
from filing for bankruptcy, mostly likely on Monday, the restructuring
deadline set by the Obama administration, but they eliminate obstacles
that could slow the reorganization process."
An offshoot of GM's bankruptcy is divestitures of parts of the Detroit giant's huge business to other players in the industry. Magna International Corp. (NYSE:MGA), for example, is close to acquiring GM's German-based Adam Opel GmbH unit, according to The Wall Street Journal. Shares of Magna closed down 11 cents, or 0.34%, to $32.43.
Magna would be competing against Italian automaker Fiat SpA, whose intention is to join with Opel and Chrysler LLC to create a company large enough to compete against global auto giants Volkswagen AG (OTC:VLKAY) and Toyota Motor Corp. (NYSE:TM). - Gerald Magpily
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