GM Bankruptcy

The n00b has finally figured out that GM may require bankruptcy, but some super-special different kind of bankruptcy rather than the normal, stodgy, old-fashioned kind.

Let's quickly review some pertinent numbers and basic accounting, shall we? GM's most recent balance sheet is here. GM has negative equity, a fairly impressive achievement in and of itself for a company with $91 Billion in assets. However, this pales in comparison to GM's liabilities of $177 Billion.

So, in simple terms, GM owes $177 Billion on $91 Billion worth of stuff. You would have to have a 200% loan-to-value ratio on your house to be this far upside down. That's okay, though. You can have a balance sheet this fundmentally lopsided, even in your personal life, if you've got enough income to cover the notes and maybe pay off some principal.

So, what's GM's income look like? GM had a gross profit last year of -$332 Million. Plus, they're bring in 35% less money now than they were last year. GM doesn't have the income to do anything about the catastrophe that is their balance sheet. The numbers may have varied slightly in the details over the past several months while everybody dithered about what to do.

Short answer: GM is losing money every minute, and owes twice what the company is worth. There is no restructuring plan on earth that can save them that does not involve bankruptcy court. Pouring more tax money into GM cannot fix the numbers above, unless you just want the feds to write a check for $177 Billion so GM can be debt-free.

It's taken this long for the chattering imbeciles in DC to figure this out. Smart people we have serving in Congress and the Executive.

This sucks, too, because I really did want a new car this year.

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