Wednesday, April 01, 2009

Somewhat Less General Motors?

No more General Motors? Just "Motors"? According to The New York Times, that's what might lie in store for the now insolvent GM.

The best brands - Cadillac and Chevy - go to the new company, NewCo. The rest - Hummer and the like - stay in the old GM, OldCo, for liquidation. GM's creditors are stuck with the plundered OldCo's assets when it's put out of its misery in a bankruptcy.

NewCo pays OldCo and its creditors with NewCo shares. Creditors are transformed into shareholders. Then NewCo with all the best assets, including the best brands, and shed of OldCo's deadwood and debt, forges ahead and lives (we hope) happily ever after.

Creditors are always reluctant to have their strict legal rights washed away but, when it's all over, they may actually come out ahead as shareholders of the new, improved, laundered and pressed, Somewhat Less General Motors.

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