Wednesday, November 16, 2005
Do U have $12 billion to spare?
Excerpts from today's WSJ...
November 16, 2005 -- 5:44 p.m. EST
GM in the Breakdown Lane
By MARK GONGLOFFTHE WALL STREET JOURNAL ONLINE
General Motors watched its shares post yet another huge decline, dragged down by labor strife at GM's top parts supplier and chatter of an imminent bankruptcy filing, causing Wall Street to ask: What would Kirk Kerkorian do?
....Not long ago, the very idea of the iconic GM, the world's biggest auto maker, filing for bankruptcy sounded far-fetched. It has some $19 billion in cash, after all. But its stumbling auto operations also have some $31 billion in debt that is rated "junk" by credit agencies. And GM is gushing money, having lost $4 billion in the first three quarters of the year. Foreign competitors continue to devour its market share. It recently announced an earnings restatement. And in the credit default swaps market, investors wishing to hedge against the likelihood of GM defaulting on its debts have to pay cash up front, a dubious distinction recently afforded to Delphi and Delta Air Lines, both of which ended up in bankruptcy.
....Meanwhile, the executive office chair under CEO Rick Wagoner is getting less comfy by the day, and investors are increasingly turning their lonely eyes to Kirk Kerkorian, hoping the corporate gadfly who fixed Chrysler will take control of GM and work his magic again. At 88 years old, Mr. Kerkorian, who paid $31 a share for a big stake in GM in May, may not feel up to the task of turning around another struggling behemoth. But he could grab a board seat and play a role in picking Mr. Wagoner's replacement. And if anybody has $12 billion -- GM's current market cap, the smallest of all Dow Jones industrial average components -- and the appetite for a whole lot of debt, they could just buy the whole thing.
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November 16, 2005 -- 5:44 p.m. EST
GM in the Breakdown Lane
By MARK GONGLOFFTHE WALL STREET JOURNAL ONLINE
General Motors watched its shares post yet another huge decline, dragged down by labor strife at GM's top parts supplier and chatter of an imminent bankruptcy filing, causing Wall Street to ask: What would Kirk Kerkorian do?
....Not long ago, the very idea of the iconic GM, the world's biggest auto maker, filing for bankruptcy sounded far-fetched. It has some $19 billion in cash, after all. But its stumbling auto operations also have some $31 billion in debt that is rated "junk" by credit agencies. And GM is gushing money, having lost $4 billion in the first three quarters of the year. Foreign competitors continue to devour its market share. It recently announced an earnings restatement. And in the credit default swaps market, investors wishing to hedge against the likelihood of GM defaulting on its debts have to pay cash up front, a dubious distinction recently afforded to Delphi and Delta Air Lines, both of which ended up in bankruptcy.
....Meanwhile, the executive office chair under CEO Rick Wagoner is getting less comfy by the day, and investors are increasingly turning their lonely eyes to Kirk Kerkorian, hoping the corporate gadfly who fixed Chrysler will take control of GM and work his magic again. At 88 years old, Mr. Kerkorian, who paid $31 a share for a big stake in GM in May, may not feel up to the task of turning around another struggling behemoth. But he could grab a board seat and play a role in picking Mr. Wagoner's replacement. And if anybody has $12 billion -- GM's current market cap, the smallest of all Dow Jones industrial average components -- and the appetite for a whole lot of debt, they could just buy the whole thing.
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