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Will General Motors Declare Bankruptcy?

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posted on Mar, 23 2005 @ 04:48 PM

At the above link, you can see a chart describing GM's stock price and its plummet since this time last year (45 per shr to 28 per shr). Notice the massive drop in the last 30 days. I am curious to know what others think of this? What would a default on its bonds by GM mean for the American economy?

At you'll find an analysis by a guy who is predicting bankruptcy for GM. He says the following:

GM has $300 billion in debt

...and has a market cap, now, of $16 billion. See the problem there? The bondholders could buy the company nearly 20 times over if they used their money to buy stock instead of loan it to the company. The implication is clear--that GM is headed towards bankruptcy, and will default on the bondholders, who will then own a company worth less than $16 billion dollars!

For every one point that interest rates rise, refinancing GM's debt will cost an additional $3 billion in annual interest payments -- money that they clearly do not have! Where is GM going to get another $3 to $6 to $9 billion as interest rates rise by 1%, 2%, and 3% more? Selling cars? Nope. Selling stock? Unlikely in this market! Borrowing more? From who? The U.S. government itself is propping up this bond market, and there are no buyers even for U.S. bonds, and there haven't been for months now!

So, therefore, GM will soon be a $300 billion dollar blow-up!

Is this analysis correct or is it paranoia? I am also wondering if this selloff of GM is related to an increasing awareness of Peak Oil. I'm no expert, but I'd be curious to read other's opinions on this issue.

posted on Mar, 23 2005 @ 04:54 PM
Well I would not be surprised if the big trucks and oversize vehicles will take a hit due to the oil prices.

Perhaps if they start to concentrate in economy size cars they will do better I can not even imagine General Motors going Bankrupt.

posted on Mar, 23 2005 @ 04:55 PM
GM will go down in flames here in the next quarter. Toyota will be #1 in the world instead of #2 all because their management isn't so greedy and they use American Workers to produce superior cars along with their long term outlook.

posted on Mar, 23 2005 @ 08:01 PM

Looks like GM is going to kill off Buick or Pontiac.

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