Old Financial Information
G.M. filed for Chapter 11 on 2009 and the filing reported$82.29 billion in assets and $172.81 billion in debt. It can be easily saw that the old G.M.’s debt is twice of its assets. Data observed from 2009 General Motors Bankruptcy Filing.
December 12, 2008, G.M. stated that it was nearly out of cash, and may not survive past 2009. One of the major reasons lead GM to bankruptcy is its large amount of debt. Too much debt payments not only directly made G.M. fell bankrupt but also narrowed the working in capital which decreased the production volume and then the IBIT; finally caused G.M. didn’t have enough money to pay off the debt. The problem of large amount of debt can be seen as the butterfly effect. Any problem on any part of the ...view middle of the document...
Even in the middle of 2008 G.M. was still in relatively good shape, when its shares sold for about $18. But the slump that hit the car market last summer, and which accelerated in the fall, played havoc with the company’s value. But at the end of May, 2009 the price of G.M. shares had fallen under $1.00 and the symbol of the bankrupted G.M. became MTLQQ which trade in the OTC.
The bankruptcy can be seen as a strategy of G.M. to clean up the debt. Of GM’s creditors, Starcom MediaVest Group, the automaker’s largest trade creditor, is owed $121.5 million, according to the bankruptcy filing. GM said it owed former parts-unit Delphi Corp. $110.9 million. Other key parts suppliers owed money include Robert Bosch GmbH, owed $66.2 million; Lear Corp., owed $44.8 million; and Johnson Controls Inc., owed $32.8 million. (Sandler et al., 2009) The G.M.’s bankruptcy filing triggered credit-default swaps protecting about $3.1 billion of GM debt.
When G.M. filled bankruptcy, U.S. government extended $50 billion of loans to the 100-year-old automaker and plans to convert that into a 60 percent stake in the reorganized company, according to a filing in U.S. Bankruptcy Court in New York. (Sandler et al., 2009) As part of the bailout agreement from the Fed, the U.S. government owned nearly 72.5% of the new company, with the United Auto Workers owned 17.5%.
Maynard,M (2009). After 93 Years, G.M. Shares Go Out on a Low Note. [Accessed 21 April 2011]. Available from: http://dealbook.nytimes.com/2009/05/29/after-93-years-gm-shares-go-out-on-a-low-note/.
Sandler,L., Scinta,C.,Voris,B. and Green,J (2009). GM Files Bankruptcy to Spin Off More Competitive Firm. [Accessed 21 April 2011]. Available from: http://www.bloomberg.com/apps/news?pid=newsarchive