57 Days to GM Bankruptcy: Stock Set for Delisting
Now that President Obama’s played a short clip of “Dr. Strangelove; or How I Learned to Stop Worrying and Love a GM Chapter 11” at his auto-related press conference, GM’s remaining stockholders have cottoned on to the inevitability of a GM Chapter 11. As TTAC’s Ken Elias predicted many moons ago, it’s only a question of time before the New York Stock Exchange de-lists GM. When Wagoner resigned and Obama opined, the zombie automaker’s share price began its final glide path. The stock plunged 25 percent on Monday and 28 percent on Tuesday. Yesterday, the price hit $1.58—before rebounding to $1.93, off 1 cent for the session. No surprise there. When the feds pull the plug, the stock will be worth precisely $0. The LA Times reveals the reason GM’s stocks are still publicly traded, by anyone. “Long-time GM shareholders may well figure there’s no point in selling now. If the stock becomes worthless, they can write it off for tax purposes at that point. Until then, it’s just a lottery ticket with extremely low odds of a payoff.”
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Turn Conrail arounnd? Here is a brief history of Conrail heavily edited from Wikipedia: The Penn Central Railroad, formed in 1968 by the merger of the New York Central and Pennsylvania Railroads, declared bankruptcy in 1970. In 1973, the Judge in the Penn Central bankruptcy threatened to end all operations if it did not receive government aid. The Regional Rail Reorganization Act of 1973 provided interim funding to the bankrupt railroads and defined the Consolidated Rail Corporation, Conrail. Conrail began operations in 1976. During its first seven years, it was highly unprofitable, despite receiving billions of dollars of assistance from Congress. Although Conrail's government-funded rebuilding of the heavily run-down infrastructure it inherited from its six bankrupt predecessors succeeded by the end of the 1970s in improving its physical condition, the fundamental economic regulatory issues remained, and Conrail continued to post losses of as much as $1 million a day. The Staggers Act of 1980 allowed railroads to set rates that would recover capital and operating cost, ended cross-subsidization of costs between routes, and allowed abandonment of fundamentally uneconomic routes. Conrail began turning a profit by 1981, the result of the Staggers Act freedoms and its own managerial improvements under Stanley Crane, who had been chief executive officer of the Southern Railway. The Northeast Rail Service Act of 1981 relieved Conrail of its requirement to provide commuter service in the Northeast and exempted it from state taxes, further improving its finances. After that, Conrail began to improve and reported taxable income between $2 million and $314 million each year from 1983 through 1986. In 1987, the Government sold Conrail in an IPO for $1.9 Billion. In the 1990's, CSX and NFS, two eastern rail competitors of Conrail, engaged in a takeover battle to control the railroad and expand their systems. In 1997, they struck a compromise, and agreed to jointly acquire Conrail and split its assets.
Dumb question (I'm good at them), as I'm not resident in N America, assuming GM survives bankruptcy, does it actually have any product that customers want without serious discounting? If all that emerges is a so-so product range, but cheaper, that could affect the other OEMs - both Ford and the transplants - so what happens to their jobs that Obama presumably wants to save?