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Originally Posted by Hylton
Not sure how you figure that.  Chapter 11 does not mean that the government pays off a business' debt. It means the government decides who gets how much and what after negotiations have taken place between all parties affected.
Right now, GM spends more money then it makes. It cannot even afford current finance payments. It cannot continue down this road - something has got to give because sooner rather than later, it's going to have no money in the bank. When that happens and a supplier/bond holder does not get paid, they can force GM into bankruptcy by petitioning the courts. In other words, Chapter 11 may be something GM may not be able to avoid. |
GM would require DIP financing to make it through Ch. 11. They forecast a need for around $100bil will be needed to emerge from Ch. 11. Part of this is because their sales forecasts show (and I wholeheartedly agree) that sales will tank even more if they were to enter bankruptcy. The average consumer has a stigma when it comes to "bankruptcy" that GM will not be able to avoid. Why would they buy a car if they believe their warranty will be meaningless? In order to combat this, GM and/or the fed will have to take some sort of measure to guarantee the warranty of vehicles purchased while GM is under Ch 11. This alone is an expensive proposition.