More Gloomy Auto News: GM Told to Prepare for “Surgical” Bankruptcy

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What is a surgical bankruptcy, and how does one prepare for it? First, it’s quick and clean (as opposed to some surgeries), or at least that’s what the NY Times suggests:

GM, which has been granted $13.4 billion in federal aid, insists that a quick restructuring is necessary so its image and sales are not damaged permanently. The preparations are aimed at assuring a GM bankruptcy filing is ready should the company be unable to reach agreement with bondholders to exchange roughly $28 billion in debt into equity in GM and with the United Automobile Workers union, which has balked at granting concessions without sacrifices from bondholders.

Second, you prepare for it by putting on one of those ridiculous hospital gowns, open but tied at the back to provide easy access to your dorsal side. (I had one on this morning, but will say no more about it.) The procedure permits the banker-doctor to cut you open without your seeing it, unless you are looking at a TV monitor.

We can expect all these wretched and embarrassing events to occur, including television coverage, should GM be placed on the operating table. Which seems more and more likely. In a few weeks time, the “good” parts of the company would be resurrected and made whole, while the “less desirable” parts would probably be liquidated, like medical waste.

A couple of other relevant news bits have emerged. An analyst for JP Morgan said that GM may never stabilize unless the government takes a hit on (or “restructures”) its own loans to the company along with those of the union and the bondholders. So the government itself may be one force driving the push to bankruptcy. And the bondholders may not want to cooperate in such a scenario.

To add insult to surgery, on Friday Standard & Poor’s bond rating service lowered its debt ratings (already in the junk category) on GM and Chrysler bonds. S&P did so, they said, because bankruptcy seemed more imminent for the firms. If that ain’t a Catch-22, I don’t know what is.

Give us a list of what you think are the “good” parts of GM—and those that are beyond repair.

—jgoods

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