General Motors May Have No Choice When it Comes to Bankruptcy (GM)

Tom Reese/Paul


According to a Bloomberg story this morning, General Motors

(GM) mya not actually have many options when it comes to potential bankruptcy.

The company may be forced into bankruptcy by the U.S. government

to assure repayment of $17.4 billion in federal bailout loans. The U.S. government

and taxpayers are situated behind other creditors which include Citigroup Inc.,

JPMorgan Chase & Co. and Goldman Sachs Group Inc., according to loan

agreements posted on the U.S. Treasury’s Web site.

Government officials may force the companies into

bankruptcy as a condition of more bailout aid, if there is not consensual

agreement to change their position regarding repayment. The automakers have

been adamant about reorganizing under bankruptcy protection, saying a Chapter

11 restructuring would scare away buyers and lead to liquidation.

General Motors and Chrysler LLC. are both approaching a

Feb. 17 deadline to show progress on a plan put in place as part of the U.S. loans

received in December from the Troubled Asset Relief Program.

The Bottom Line

We are still avoiding the speculative shares of GM at this point. We are not

sure a pre-packaged bankruptcy is out of the question, which makes buying

shares very risky. The government would not be hiring a law firm and waste more

taxpayer dollars if they didn't think bankruptcy was a viable alternative.

General Motors (GM) does not pay a dividend at this current


Be sure to visit our complete recommended list of the Best Dividend Stocks, as well

as a detailed explanation of our ratings

system here.


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