Start Saving Now...You'll Need It To Pay For the Next GM Bailout

[Dave70968]

http://www.forbes.com/sites/louiswoodhill/2012/08/15/general-motors-is-headed-for-bankruptcy-again/

President Obama is proud of his bailout of General Motors. That’s good, because, if he wins a second term, he is probably going to have to bail GM out again. The company is once again losing market share, and it seems unable to develop products that are truly competitive in the U.S. market.

Right now, the federal government owns 500,000,000 shares of GM, or about 26% of the company. It would need to get about $53.00/share for these to break even on the bailout, but the stock closed at only $20.21/share on Tuesday. This left the government holding $10.1 billion worth of stock, and sitting on an unrealized loss of $16.4 billion.

Right now, the government’s GM stock is worth about 39% less than it was on November 17, 2010, when the company went public at $33.00/share. However, during the intervening time, the Dow Jones Industrial Average has risen by almost 20%, so GM shares have lost 49% of their value relative to the Dow.

It’s doubtful that the Obama administration would attempt to sell off the government’s massive position in GM while the stock price is falling. It would be too embarrassing politically. Accordingly, if GM shares continue to decline, it is likely that Obama would ride the stock down to zero.

GM is unlikely to hit the wall before the election, but, given current trends, the company could easily do so again before the end of a second Obama term.

(Read more at the link.)

 

[Werewolf]

Excellent read and I believe the author's prediction of GM going bankrupt yet again is right on.

He hit the nail on the head and summarizes the gist of why he believes GM is heading into bankruptcy with this comment:

Uh-oh. While Dan Akerson is busy rearranging the deck chairs on GM’s Titanic, Martin Winterkorn is leading VW to world domination via technical excellence.

That said: GM is not an insignificant piece of the US economy. The short term repercussions of it going belly up would be too severe for any politician, be they dem, rep or libertarian to allow. In the long run the repercussions might become strategic as the loss of GM would severly impact our heavy manufacturing capacity and our ability to respond to scenarios where the ability to rapidly manufacture heavy equipment could be critical to the survival of the USA as a nation.

Tough problem: but then isn't that why the Prez gets the big bucks?

 

[flatwins]

So you can't solve a problem just by throwing money at it? Imagine that...

Reminds me of the current situation with the USPS.