Talk to any machine shop that supplies a GM plant. On Thursday, Visteon and Metaldyne, which mainly supply Ford and Chrysler, sought protection in bankruptcy court. GM's filing will repeat that story many times.
GM is losing billions of dollars a month. No wonder Legg Mason's Western Asset Management and other big GM bondholders seem reluctant to accept ownership in a future GM in exchange for the cash they're owed.
Aside from its missteps, GM is victim of a global car glut. Just as Pulte Homes and Toll Brothers put up too many McMansions, the auto industry built too many cars and, more to the point, too many factories.
There are enough plants in the world to make 90 million cars each year, but R.L. Polk forecasts only 55 million will be sold in 2009, a figure many consider optimistic. Legg Mason declined to comment, but it probably doesn't want to own GM factories on behalf of its clients any more than Bank of America wants to own empty, depreciating Colonials and Cape Cods in Las Vegas.
Heck, even the United Auto Workers don't seem to see much upside. The union stands to get a big ownership chunk in the new GM in exchange for givebacks on retiree benefits, but UAW President Ron Gettelfinger has reportedly said he'll sell the stake as soon as he can.
The biggest prospective GM proprietor of all, the U.S. taxpayer, is even less enthusiastic, polls show.
Not that anybody has a choice. Partly in payback for union support during the election (40 percent?) and partly because GM is important to the economy (60 percent?), President Barack Obama has thrown $20 billion at the company so far and will probably inject $30 billion more.
On Thursday, GM disclosed that the government would own 72.5 percent of the company immediately after the bankruptcy process ends. This confirms the corollary of the famous aphorism made by Charlie Wilson, GM's boss in the 1950s: What's bad for GM is now really bad for America.
The union, whose health and pension benefits will get plastered in bankruptcy court, would receive up 17.5 percent of the new GM. Bondholders would get the other 10 percent - a deal they rejected Wednesday. On Thursday, however, GM said some of them had agreed to a sweetener that could eventually boost their stake to 25 percent. (If you're doing the math, that would dilute the government and union stakes.)
Whatever their pieces, it's in everybody's interest to have the new GM be as unencumbered as possible. That means speeding its voyage past a bankruptcy judge and $700-an-hour lawyers, a prospect that seems possible given bondholder softening and Chrysler's progress through the same gantlet.
It means ending U.S. control as soon as Washington thinks it can sell GM shares for a decent price. It means pushing the sale of GM Europe.
But the process won't be clean enough to leave value for GM's existing shareholders. Or produce a company that looks anything like the General Motors of old.
