China to Pick GM's Bones?

Bertel Schmitt
by Bertel Schmitt
china to pick gms bones

Seeking Alpha prides itself “the premier financial website for actionable stock market opinion and analysis.” When it comes to what should happen with GM, they are on our side: “Buyout better than bailout,” writes Seeking Alpha. Roger that. We have been picking-up indications that Chinese automakers SAIC and Dongfeng may have plans to buy assets of GM (and while they are at it, maybe even of Chrysler). China would get what it badly needs for its thriving domestic car industry to become an even more thriving international car industry: accepted brands, a worldwide distribution network and know-how necessary to comply with US and worldwide standards. Apparently, private equity firms are keen to aid this “transfer.” Behind all of this (of course) stands the Chinese government. The People’s Republic owns most of automakers SAIC and Dongfeng, along with a good chunk of the private equity firm Blackstone, a good chunk of Morgan, and a good chunk of T-bills (to the tune of $585b).

Seeking Alpha agrees that the government should buy out GM. However, they have another government in mind: the American government. Basically, they propose the U.S. government should pay $6 per share of GM instead of the going rate of currently $3, as it would be “more than fair to existing shareholders.” The U.S. Treasury should also cough-up $25-$50b for emergency low-cost loans. Where the minds meet again: Seeking Alpha also recommends that the government retain the help of private equity firms to make it work.

Now, which government will end up with GM? Maybe we’ll even have a nice bidding war. Existing shareholders of GM would find that extremely fair. This week is Thanksgiving. Time to talk turkey.

Join the conversation
  • Mpc220 Mpc220 on Nov 22, 2008

    Shareholders of a failed enterprise shouldn't get one red cent.

  • Wave54 Wave54 on Nov 22, 2008

    @ mpc220 Absolutely right -- buying/trading stocks is a risk. Some traders have to fail for others to thrive. If the automakers have to be bailed out by the taxpayers (like we really have the money... not), shareholders essentially lost that bet. Sorry -- too damn bad. Bad enough the government is buying businesses, but compensating shareholders and adding trillions to the national debt is TOO MUCH!

  • JeremyR JeremyR on Nov 22, 2008

    And which "private equity firm" could help the government "make it work"? Cerberus has already done a bang-up job with Chrysler...