Saving General Motors; bidding starts at $100 Billion?
GM’s $100 Billion Blackmail (GM) 
By John Carney at ClusterStock
To be honest, when we first read that General Motors was predicting that a bankruptcy restructuring would cost $100 billion we thought: oh, well, let’s do it then. After all, GM has already asked $45 billion from the Treasury Department and the Energy Department and it is likely to be back for more. Some have estimated that saving GM might cost as much as $125 billion. If we can just put this thing down for $100 billion and be done with it…well, there’s a certain appeal to that.
Others, however, are more skeptical of the $100 billion number. The automaker says it reached that pricetag by estimating a fall in sales of between 50% and 80% following a bankruptcy, causing a catastrophic drop in revenue. But many think these dire predictions are just scare tactics.
In fact, that’s exactly the term used by Antony Currie of breakingviews.com, who calls the $100 billion figure the “mother of all scare tactics,” designed to convince politicians and the public that bankruptcy will be the death of the automaker. My personal experience working as a finance lawyer gives me some sympathy with Currie’s position. Back in my former life, I worked with bankrupt health care companies and bankrupt nursing homes that managed to emerge with thriving businesses. If patients will seek care from a bankrupt hospital, if people will put grandma in a bankrupt nursing home, won’t they buy a car from a bankrupt car company?
The shiny new Bankruptcy Beat blog at the Wall Street Journal runs through a bunch of skeptics of GM’s scare numbers:..
And over at The Atlantic Magazine’s Business Channel, Megan McArdle thinks the $100 billion may just be blackmail...
The two important questions, then, are:
1. Is GM right that the bankrupcty will actually cost as much as $100 billion?
2. Will saving GM actually cost less than the $100 billion.
Full article here.
