What Could Possibly Go Wrong Now?

Edward Niedermeyer
by Edward Niedermeyer
what could possibly go wrong now

With $17.4b pledged to GM and Chrysler, and the Canadian “plus one” on the way (er, “plus several billion,” actually), the dark days of Carpocamageddon are all but over, right? Of course not. As several of the B&B point out in comments on the bailout announcement, GMAC is a giant question mark hanging over the entire situation. The former GM captive lender is headed for a massive GDIF (God Damn, It’s Friday) moment today unless about $5b of healthy capital lands on its lap… within hours. The AP reports that GMAC admits that it has no way of extending or sweetening the deal, implying that bankruptcy is an inevitability. And here’s the kicker: according to Brian Johnson of Barclays Capital, if GMAC were to fail, GM could need an additional $9 billion to $13 billion in funding to supply financing to its dealers. And GM only gets $9.4b from the bailout until February. One step forward and two steps back? Actually, the real bad news which the bailout does nothing to stop comes from GM bondholders. And their newly hired legal help.

According to Debtwire (via The Financial Times), 12-20 large GM bond holders, including asset management giant PIMCO heard pitches from potential advisors at a meeting this week. Several sources report that this committee has hired Paul Weiss as legal counsel and is leaning toward Houlihan Lokey as a financial advisor. And they’re gearing up for a fight, thanks to what bondholders see as unrealistic aspects of GMs recovery plan. To whit: “The baseline scenario in the restructuring strategy GM submitted to Congress on 2 December, forecasts a pro forma EBITDA in 2012 to be USD 15.3bn, with a downside scenario of USD 12.1bn, according to a public version of the plan. But that figure should be closer to USD 10bn of EBITDA while the reworked capital structure should be based around USD 8bn of EBITDA to provide for a cushion should conditions worsen, said one of the sources. Bond holders have nothing to gain from swapping for equity in an unsustainable capital structure, he said.”

So if the initial $9.4 swirls into the abyss left by a GMAC bankruptcy, and bondholders resist a quick-and-dirty cramdown (now that it’s not a condition of federal aid) you’ve got trouble in River City. Again. Still. Etcetera. And then there’s always the possibility of more bad news from Delphi. By the way, does anyone have a subscription to Delphi Bankruptcy News, now celebrating 153 depressing issues? Ultimately, this bridge loan does nothing to address the underlying problems, and provides no real incentive for reform. And what we’re learning about a possible bondholder revolt proves that everyone is already treating GM as if its bankrupt. What a time to put taxpayers on the hook.

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  • Ihatetrees Ihatetrees on Dec 20, 2008
    bluecon: There is also the matter of a secret ballot vote on whether one should join a union. That will have to end. The debate over Card-Check will be epic. I have no idea what way it'll go - but there's hope. Never underestimate the Senate's Darth Vader, Mitch McConnell. Or the potential disfunction of Democrats in power when confronted with tough choices...

  • Pch101 Pch101 on Dec 20, 2008
    Can anyone translate what on earth is going on here? Short version -- GMAC is trying to put the squeeze on the ResCap investors, using the threat of being able to crush the value of their positions in order to get them to play ball. If those investors take the deal, then there should be enough money to put GMAC Bank into the federal funds system, in which case GMAC won't need the GMAC bondholders like PIMCO to agree to anything. GM obviously has some smart guys in the finance department. It's a shame that they don't have that kind of talent for building cars.

  • ToolGuy CXXVIII comments?!?
  • ToolGuy I did truck things with my truck this past week, twenty-odd miles from home (farther than usual). Recall that the interior bed space of my (modified) truck is 98" x 74". On the ride home yesterday the bed carried a 20 foot extension ladder (10 feet long, flagged 14 inches past the rear bumper), two other ladders, a smallish air compressor, a largish shop vac, three large bins, some materials, some scrap, and a slew of tool cases/bags. It was pretty full, is what I'm saying.The range of the Cybertruck would have been just fine. Nothing I carried had any substantial weight to it, in truck terms. The frunk would have been extremely useful (lock the tool cases there, out of the way of the Bed Stuff, away from prying eyes and grasping fingers -- you say I can charge my cordless tools there? bonus). Stainless steel plus no paint is a plus.Apparently the Cybertruck bed will be 78" long (but over 96" with the tailgate folded down) and 60-65" wide. And then Tesla promises "100 cubic feet of exterior, lockable storage — including the under-bed, frunk and sail pillars." Underbed storage requires the bed to be clear of other stuff, but bottom line everything would have fit, especially when we consider the second row of seats (tools and some materials out of the weather).Some days I was hauling mostly air on one leg of the trip. There were several store runs involved, some for 8-foot stock. One day I bummed a ride in a Roush Mustang. Three separate times other drivers tried to run into my truck (stainless steel panels, yes please). The fuel savings would be large enough for me to notice and to care.TL;DR: This truck would work for me, as a truck. Sample size = 1.
  • Art Vandelay Dodge should bring this back. They could sell it as the classic classic classic model
  • Surferjoe Still have a 2013 RDX, naturally aspirated V6, just can't get behind a 4 banger turbo.Also gloriously absent, ESS, lane departure warnings, etc.
  • ToolGuy Is it a genuine Top Hand? Oh, I forgot, I don't care. 🙂