TOP 100 RACING SITES
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| Alonso's world title fight Two-times world champion Fernando Alonso says he can start the run to a third crown with Renault in the ING Australian Grand Prix on Sunday. foxsports.com.au |
GM bondholders refuse to budge, making bankruptcy likely General Motors is on a collision course for bankruptcy. The company said this morning that it didn’t get 90% of its bondholders, who collectively hold $27.2 billion in GM debt to take stock for their bonds. Since the Treasury Department has required GM to get 90% of that debt converted to stock to merit more tax dollars and avoid bankruptcy, a court filing seems inevitable. The only thing that would stop it is if GM sweetens an offer to those creditors and gets 90% of them to take the deal in the next two days. That’s very unlikely.GM (GM) may have some leeway to do it. News broke yesterday that the United Auto Workers healthcare trust will take a smaller-than-expected stake in General Motors. The trust, called a Voluntary Employee Benefits Association, or VEBA, will get 17.5% of stock in a new GM plus warrants that would be worth another 2.5%. The union will use the assets in that trust to pay out benefits the way a pension fund does. Since GM’s original plan would have given the UAW’s trust 39% of the company, 50% to the government and 10% to bondholders, GM now has more equity to offer bondholders if the company wants to avoid bankruptcy.But there are several reasons why GM may not even want to do that. First, the company has borrowed $19.4 billion from Treasury and will no doubt borrow more until car sales rebound. Add up just current borrowings and GM would emerge from bankruptcy or an out-of-court restructuring with easily $40 billion in debt. That’s better than the $63 billion GM had when the big restructuring started last year, but still way too much to really be competitive. The only way to reduce the debt held by the new GM would be forgiveness by the government. The Obama Administration is keen to do that, but to protect taxpayers Treasury would likely take more equity, perhaps 70%. That way if the new GM succeeds they have more stock to sell and recoup the money already loaned out. It’s obviously a big gamble by Treasury. But as we have seen in the case of GM and Chrysler lenders, holding debt in troubled carmakers isn’t exactly a safe bet, either. So the government may as well reduce GM’s debt and give the company a fighting chance at survival.The other big issue is GM’s plan to sell or dump Hummer, Pontiac, Saab and Saturn. Pontiac is going away. The other three are for sale. At a minimum, GM needs to break franchise agreements with Pontiac dealers. If GM can’t find a buyer for any of the other three, GM would need to buy out those dealers or face costly lawsuits. But as we have seen in Chrysler’s bankruptcy, it’s far easier to break franchise agreements in bankruptcy court. That’s another benefit of filing for Chapter 11 protection. Once there, GM puts the four bad brands and some factories in the old GM and the new one emerges with Chevrolet, Cadillac, Buick and GMC. About 1,600 dealers go away and so does a big chunk of debt.Given those benefits, it’s hard to see why GM would want to avoid bankruptcy at this point. Giving more equity to bondholders means less for the government, which might translate to more debt to the feds on the balance sheet later on. Plus, you’d have the very thorny issue of getting rid of dealers. In short, bankruptcy gives GM a chance at a fresh start that they would have a much tougher time achieving out of court. rss.businessweek.com |
Cash For Clunkers Bringing Back Car Buyers http://The controversial and much debated “Cash For Clunkers” bill is having the desired effect of boosting car sales, according to analysts and a few auto executives.Edmunds.com, the auto buying site, predicts that sales in July will be up 10% from June despite the fact that the program was only in effect the last week of the month. J.D. Power and Associates also predicts a bump, as well, predicting sales going from an annual selling rate of 9.7 million in June to an annualized rate of 10 million.But executives at two automakers who asked not to be identified said their internal tracking shows a bigger bump from “Clunkers” putting the selling rate in July at closer to 11 million. That would still be a decline from the 12.5 million selling rate last July, but a healthy boost from the doldrums of the first half of the year, which saw the industry selling at an annualize rate of 9.6 million.Automakers got a jump on attracting consumers to the program even before the government began accepting applications for each rebate. Hyundai dealers, for example, for about two weeks had been giving customers the government rebate they qualified for—advancing the money--and then put through the transaction to the Feds starting July 24. Other automakers did likewise.J.D. Power’s Gary Dilts said that sales from “Clunkers” may under-deliver on expectations because of confusion on the part of consumers about what cars qualify for the program. “However, there is potential for increased sales in the short term as a result of select OEMs boosting incentives to match the program,” said Dilts.Congress only authorized $1 billion to fund the program which grants consumers up to $4,500 for older vehicles not worth much money if they trade them in to buy new vehicles. Legislators are expected to consider additional funding in the Fall, so the performance of the first phase of the program is being closely watched.The "Clunkers" bill has cut both ways this years on auto sales. Since it was first mentioned by President Obama last Spring, automakers believe it has kept some people out of the market to buy a new vehicle until they knew what the specifics of the bill would be. Now that it's out, some percentage of sales in July and August are bound to be vehicle buyers who would have bought a new set of wheels in the last three or four months anyway, but waited. Edmunds.com says that the $1 billion program will actually only add 50,000 new vehicle sales that might not have materialized if the Clunkers program wasn't enacted.The Recession and dramatic falloff in auto sales drove both General Motors and Chrysler into Chapter 11 Bankruptcy, and has created unprecedented operating losses at Toyota. It also helped to drive Porsche SE into the arms of Volkswagen AG this month.The success of Clunkers to boost annual sales is critical to Detroit automakers. GM and Chrysler have restructured under bankruptcy to break even when the industry is at a 10 million selling rate. So, those companies need a rebound to get into the black. Ford has been hammering away at its costs to lower its break-even point. If sales over-deliver on forecasts next year—say, going to 13 million up from the 10 million or so we expect this year on the whole—the Detroit automakers stand to make a lot of profit they haven’t seen in years. rss.businessweek.com |
Stewart: Trusting in crew chief Grubb 'the right thing to do' Whether it's quarreling with NASCAR officials, the media or his peers, Tony Stewart has staked his career reputation on being ... rssfeeds.usatoday.com |
Hamlin Tears Knee Ligament Denny Hamlin tore the anterior cruciate ligament in his left knee while playing basketball Friday, but he will not have surgery to repair it until after this season. nytimes.com |