May 27th, 2009
06:58 PM GMT
NEW YORK - General Motors announced Wednesday that investors who had lent the company money over the years, through purchases of bonds, overwhelmingly rejected the company's offer to swap out that debt for stock.
It now seems certain the company is headed toward a bankruptcy filing.
Whatever the outcome, this event will surely be a critical turning point for the U.S. economy.
Analysts say if the bankruptcy is quick and surgical it could help give another boost to fragile confidence.
But, if the long list of creditors engage in a drawn out legal battle it raises the risk that GM may not survive at all.
It reminds me of a scene from a racing movie where there is a horrendous crash on the track and all the drivers in the back are racing for this big cloud of smoke. Most hit the brakes. But the leading man grips the wheel and hits the gas.
The driver is either going to crash into another vehicle in that smoke or avoid the crowd and come out in the lead. In Hollywood the hero comes out in the lead, having conquered both the competition and his fear.
But this is real life and things tend to be messier in real life.
The automotive industry is not as central as it once was, but its economic footprint extends to suppliers, dealers, restaurants and entire towns. Industry experts say GM only has about 3 or 4 weeks to prove it can emerge from bankruptcy quickly.
Many believe GM is too big and too complicated to achieve that.
But Chrysler’s journey through bankruptcy has defied the skeptics. The troubled company looks set to emerge from Chapter 11 next week. With the government’s heavy hand in the game, GM could also surprise.
What do you think? Will GM be able to come out stronger or is this the end of the road? Any optimists buying a GM car right now?
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