GM announces they will not be paying up on time
At the end of March Obama’s selected CEO of GM, Fritz Henderson, made a statement indicating that even after all the taxpayer cash GM had absorbed they were still likely looking at bankruptcy. According to the Wall Street Journal today, GM’s CFO is confirming that assessment. It looks like they’re going to default on their obligation to pay off the debt:
General Motors Corp. Chief Financial Officer Ray Young said the company doesn’t plan on making a $1 billion debt payment due June 1 and is relying on either a successful debt-for-equity exchange or court protection to dramatically lower its outstanding debt.
Mr. Young, speaking to reporters on the sidelines of a Chinese auto industry summit near Detroit, said the company will launch a debt-for-equity exchange in coming days aimed at greatly reducing its $28 billion unsecured debt load. He said GM needs to move quickly to commence the offer in time to wrap it up by June 1, the federal government deadline it faces for revamping the company.
Mr. Young said GM is determined to restructure and get back on its feet soon, and will right the ship “in court or out of court.” He said a trip to bankruptcy court is “probable,” but indicated the company has the full backing of the U.S. government.
And anyone who’s seen the trip to bankruptcy court that WorldComm and KMart went through knows precisely what happens to the people who invested money in those firms: they lost every dime. Guess what happens to us, now that we got walked into an investment into a company no lending institution or investment firm would touch with a 10-foot pole? What exactly did we get for our $14 billion investment?
Better question, as Glenn Reynolds put it, would be what did the people who approved this investment get?
