Nearly everyone who could keep GM (GM) and Chrysler out of Chapter 11 has gone along with supporting painful restructuring plans. The UAW and managements at the two companies have given up a great deal. The federal government is willing to risk tens of billions of dollars in taxpayer money to keep the firms from being run aground.
The creditors of the two companies, however, appear to be willing to see the No.1 and No.3 US car companies go into bankruptcy. Is it any wonder?
The deal that GM and the Treasury offered bondholders was a swap of their debt for equity in GM. Since the fortunes of the car company will remain questionable as long as domestic cars sales are anemic, holding shares in in the car company is hardly attractive. According to The Wall Street Journal, “The Treasury boosted its most recent offer to lenders on Wednesday by $250 million to $2.25 billion in cash for the banks and hedge funds to forgive $6.9 billion in Chrysler debt.” There is no reason to believe that a bankruptcy judge would not give them a slightly better deal.
While it may be hard for the public to believe that creditors would force the two companies into bankruptcy over a matter as trivial at money, the government has misjudged the stomach that the bondholders have for risk. In the process, Chrysler and GM may enter a bankruptcy process that could last for months and may compromise any chance that the two firms will emerge strengthened.
Creditors have decided that cash is more important than the future of the American car industry because they can. And, a court may well make them look smart.
Douglas A. McIntyre
The Average American Has No Idea How Much Money You Can Make Today (Sponsor)
The last few years made people forget how much banks and CD’s can pay. Meanwhile, interest rates have spiked and many can afford to pay you much more, but most are keeping yields low and hoping you won’t notice.
But there is good news. To win qualified customers, some accounts are paying almost 10x the national average! That’s an incredible way to keep your money safe and earn more at the same time. Our top pick for high yield savings accounts includes other benefits as well. You can earn up to 3.80% with a Checking & Savings Account today Sign up and get up to $300 with direct deposit. No account fees. FDIC Insured.
Click here to see how much more you could be earning on your savings today. It takes just a few minutes to open an account to make your money work for you.
Our top pick for high yield savings accounts includes other benefits as well. You can earn up to 4.00% with a Checking & Savings Account from Sofi. Sign up and get up to $300 with direct deposit. No account fees. FDIC Insured.
Thank you for reading! Have some feedback for us?
Contact the 24/7 Wall St. editorial team.
Latest from 24/7
Our expert who first called NVIDIA in 2009 is predicting 2025 will see a historic AI breakthrough.
You can follow him investing $500,000 of his own money on our top AI stocks for free.