The Death of General Motors

General Motors (NYSE: GM  ) , as we know it, is dead. It died this morning. It was Fritz Henderson, with the wrench, in the courtroom.

That's not exactly true. GM isn't all the way dead -- just reorganizing under Chapter 11. There's also no murder mystery. GM's death was brought on by natural causes, pure and simple. Not that it matters whose fault it was. GM has finally crashed, and we all lose.

Government Motors
As expected, GM filed for bankruptcy protection in a Manhattan court at 8 a.m. today. (View the filing.) Under the close eye of the Obama administration, benefits will be slashed, assets sold, dealerships cut, factories closed, and huge losses taken by bondholders and shareholders. All signs point to current shareholders being completely wiped out.

The U.S. government, which is pouring on another $30.1 billion in financing to help GM get through this period, will own 60.8% of the "New GM." The Canadian government, apparently just as eager as ours to throw good money after bad, is putting in $9.5 billion in exchange for an 11.7% stake in the "New GM." The UAW's health-care trust will own 17.5%, while creditors will own 10%.

If all goes according to plan [insert laugh track here], GM won't belong to the government for very long. The President's aides have spread the word that the administration wants to get GM back into the hands of private investors (read: sell it) as soon as reasonably possible. The tentative time horizon is something like six to 18 months. Most likely, that would involve an IPO. Will the new GM be something you want to invest in? Check back with me in six to 18 months.

So who wins here?
Save for a few attorneys and investment bankers, no one wins. Shareholders, bondholders, the UAW, dealers, taxpayers – they all lose. And the losses don't stop there. Consider auto-parts suppliers like American Axle (NYSE: AXL  ) , which counts GM as a core customer. Now consider their suppliers, and so on. The knock-on effects of GM's scaling back of capacity will be severe, lingering, and lasting.

But don't competitors win here? No, ironically. A GM bankruptcy is terrible news for crosstown rivals Chrysler and Ford (NYSE: F  ) and Japan-based automakers Toyota (NYSE: TM  ) , Honda (NYSE: HMC  ) , and Nissan (Nasdaq: NSANY  ) . Like the Six-Million-Dollar Man, GM will emerge superior in nearly every way from its near-death experience. GM's cost structure will be far leaner, which will give it much more wiggle room on competing on price. That's hardly good news for the likes of Ford and Toyota. And remember those parts suppliers? A lot of them also happen to supply GM's rivals. If any of them fail, GM's rivals could suffer right along with them.

What now?
There are plenty of questions here. Who actually controls the U.S. government's stake: President Obama, or Congress? Doesn't the government owning our largest automaker open up a rat's nest of conflicting interests? Doesn't this all just feel icky?

And what of GM's shares? I want to be crystal-clear about what GM's shares will be worth in very short order: Zero. Zilch. Nada. Zip. $0.00. Common shareholders are dead last on the totem pole of bankruptcy prioritization, which usually means they get nothing in a reorganization. If bankruptcy investing is new to you, I highly recommend this classic by fellow Fool Bill Mann: "When Companies Go Bankrupt."

If you own shares of GM, you should sell them. They're effectively worthless. Obviously, you also shouldn't be buying any shares of GM. These shares will be cancelled in short order, and you almost certainly will not receive new shares in the New GM. Again, please consult Bill's piece.

Don't be that guy who invests in the stock of a bankrupt company. It's as close to a surefire complete loss as you can find. And if you know someone who is thinking about becoming that guy, be a good friend and steer them clear.

The end
I wish I had something happy to say here, but I don't. This stinks. Who knows, maybe we'll get lucky and the government will be able to flip GM for more than it has sunk into it? Maybe the Chevy Volt will be a smashing success? Maybe GM will redeem itself?

Maybe, maybe, maybe. I guess that's the thing about investing stories: They don't all have happy endings.

For related Foolishness:

Joe Magyer has no financial position, long or short, in any of the companies mentioned in this article. He once owned a 1993 Bonneville and sold it for slightly above liquidation value. Nissan is a Motley Fool Global Gains pick. Try any of our Foolish newsletter services free for 30 days. The Motley Fool has a disclosure policy.


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  • Report this Comment On June 01, 2009, at 11:31 AM, pondee619 wrote:

    "And what of GM's shares? I want to be crystal-clear about what GM's shares will be worth in very short order: Zero. Zilch. Nada. Zip. $0.00"

    I am confused. How can GM be up at 11:29 June 1, 2009?

    CAPS Rating 1/5 Stars

    $0.88

    +0.13 (+17.85%)

    Please, anyone?

  • Report this Comment On June 01, 2009, at 11:56 AM, ChaosLegion wrote:

    This is a sad day...

    Although I am not American, I am Syrian.

    I worked in the past as Chief Accountant at a GM dealership in Syria for 6 years, received few training courses from GM, and an award also from GM for my "remarkable efforts" as they called it back then...

    This is truly a sad day.

    Goodbye GM.

    Han.

  • Report this Comment On June 01, 2009, at 12:28 PM, FinancialFellow wrote:

    Pondee619 -

    I suspect the stock price was already lessened in anticipation of the bankruptcy filing. The only thing that is causing the stock price to jump up is probably day traders speculating on the stock price and wanting to create volatility to make a few bucks.

    I believe the old stock ticker (GM) will be delisted once the bankruptcy is finalized.

  • Report this Comment On June 01, 2009, at 12:39 PM, Melaschasm wrote:

    I wonder if part of the price of current GM stock is the result of ETF's having to own some of it?

  • Report this Comment On June 01, 2009, at 3:13 PM, CAPTAINWACK wrote:

    This is only the tip of the iceberg. The fallout from this is going to be huge, like all the suppliers and dealerships that will soon be laying off employees or filing Chapter 11.

    So who's going to bailout the government?

    I am so glad the younger voters came out and supported this moron president... now they can't blame somebody else when there taxes hit the insanity level.

  • Report this Comment On June 01, 2009, at 3:58 PM, McCrikey wrote:

    Oh well. It's only the most prized possession of the U.S. economy. The government may as well take it over. Capitalism tried and failed. We may as well go fascist.

  • Report this Comment On June 01, 2009, at 5:06 PM, chitownjester wrote:

    McCrikey- care to clarify what you mean by "most prized possession"? This company has been worthless for years based on an analysis of its debt relative to future cash flow prospects, huge legacy costs associated with pension and healthcare of retirees, not to mention an unsustainable labor cost that is approx 80% higher than other car manufacturers operating in this country.

    Before you make such an emotional statement as above, consider that the very act of allowing GM to fail is a good thing and a sign that capitalism and free market in this country are alive and well. And giving unions a large stake in form of stock will bind them to make wiser long term decisions in the future.

    I only wish the government would revoke its guarantees to Citi and AIG, then perhaps there would be something to really cheer about. They could go further and require all executives to take all comp in form of long term stock positions, not options, and with a lockout of at least 5 years. Then perhaps some wise decisions would be made for shareholders.

  • Report this Comment On June 01, 2009, at 5:12 PM, chitownjester wrote:

    CAPTAINWACK- if the suppliers are dependent on a dead company then they too should die. It happens like this in other industries like aircraft all the time. If you truly are for a free market then don't cry over the fallout- it was inevitable and so let's get on with it. Besides, I believe the "fallout" as you say is quite overstated. The aftermarket will remain strong, and GM is just one of many car mfgs that parts suppliers supply. Those whose sole or most significant customer was GM need to shift gears fast or die. Regardless, concentrating sales to one or a few customers is a calculated business risk- anyone who did this with GM as customer deserves what they get. This is called free market.

  • Report this Comment On June 01, 2009, at 5:15 PM, chitownjester wrote:

    ChaosLegion- with all due respect, if you are looking for something to get emotional about try a chick flick. What just happened has nothing to do with GM the brand or cars going away, and everything to do with the government refusing any longer to artificially keep the company (in its current state) afloat financially. The company will slim down and emerge stronger- how much so is unknown. People will be driving GM brand for another 50 years. Those who thought GM to be a smart common stock investment- not so lucky.

  • Report this Comment On June 01, 2009, at 5:28 PM, Ducks102 wrote:

    For those of us old enough to remember and having seen the Broadway play ,,Solid Gold Cadilac..this was forcast many, many years ago by a line in this play....look it up..see that it is correct.

  • Report this Comment On June 01, 2009, at 5:28 PM, vasplieon wrote:

    Now that GM will get its balance sheets wiped clean and be far leaner what of Ford? This great company is now at a great disadvantage because they chose to go an honorable route. In true capitalism this would have paid dividends because the competition would be gone, but not in our system. Even though I love Ford I do not see how they can compete with the other two when they owe 30 billion and the competition no longer does. Our system has been screwed by governmental tampering.

  • Report this Comment On June 01, 2009, at 5:32 PM, pauljuno wrote:

    Pondee619 -

    The reason the stock was up today was most likely brought on by short-sellers who are now covering there positions. The game is over, and they are moving on.

  • Report this Comment On June 01, 2009, at 5:34 PM, khern3 wrote:

    I am waiting for the price to go to $0. Hopefully, the puts I sold will also go there soon. Too bad I didn't do this sooner.

  • Report this Comment On June 01, 2009, at 5:34 PM, CAPTAINWACK wrote:

    chitownjester- look up Dworkin Chevrolet in Derby, CT. A local Chevy dealership that has already tanked and closed up last month after 70 years in business laying off 75 plus employees. This is just one of many that will fall including vender's that owe other suppliers money throughout the chain.

    As a business owner, I can't tell you how tough it is to recover when a business owes you money and they file Chapter 11. You wait for months to get paid pennies on the dollar. Try to recover a loss like $100,000.00 when your forced to settle for $5,000.00.

    Now take this pinhead president who can't stop saying more money more money more money. He's taking this country into a fatal tailspin.

    Has anyone even questioned where the first 20 billion went?

  • Report this Comment On June 01, 2009, at 5:36 PM, mtracy9 wrote:

    Look at the bright side. The amount that the government has invested in GM -- $30 billion -- is a pittance compared to how much American taxpayers have blown off over the last few years in Iraq -- and continue to blow off -- at the rate of about $10 billion per month.

  • Report this Comment On June 01, 2009, at 5:38 PM, dividendnut wrote:

    GM suppliers have had to bow down and kiss keesters to get the business, have had to take extended terms to get paid, and have had to cut prices to get the business. The poorly ran GM then took the savings and fulfilled union concessions and promises made in the past. Now the union, the govt.

    (meaning the tax payers--you and I) own Obama motors--You figure it out.

  • Report this Comment On June 01, 2009, at 5:38 PM, MAcDScientist wrote:

    I have been anxiously awaiting the Chevy Volt. It would be very wise for GMs competitors to come out with their own version of plug-in hybrid now. I am more likely to consider buying a plug-in hybrid from someone else (especially if it looks better) instead of the Volt. I am afraid GM will be distracted from all the bankruptcy mess and will screw up delivery of a top quality, error free, automobile that I want to buy.

  • Report this Comment On June 01, 2009, at 5:46 PM, doug4nev wrote:

    Just a minor point, while it is sad that the common shareholders of GM will most likely loose everything, just think where they would be if they were not protected by the fact that GM is a corporation, If in fact, they owned part of GM as a regular company, then all of those bond holders and others who GM owes money to could come after them to make the debts good!

    I was told as a kid that the reason corporation profits were taxed at the corporation and as a dividend was the protection it allowed the owners of the stock.

  • Report this Comment On June 01, 2009, at 5:55 PM, clarkkent57 wrote:

    KEEPING THE FOCUS on GM as a company, it becomes obvious that the fault lies in gross mismanagement over a period that spans decades. They refused to properly reinvest their dividends into research, development, and restructuring, opting instead for bloated salaries and bonuses, even during non-performance and the resulting losses.

    If it were only a corporation, then I'd say, "let it die," but it's not just a corporation.

    I'm for saving GM for the "little people" who were the ones who made it work, and received far less than their management over the years. Absolutely nobody associated with past management should be allowed anywhere near the new GM, because "if you do the same old thing the same old way, you get the same old results."

    As well, on the workers' side, the UAW shouldn't be allowed anywhere near it either. "A fair wage for an honest day's work" should be commensurate with what other non-union automakers are receiving. If you subtract what union members were paying in dues from their paychecks (to a union that also helped run GM into the groound as well), then you get approximately the same amount that the non-union workers are receiving, workers who, conversely, are treated very well under a different team-oriented corporate philosophy by companies that are profiting and expanding.

    We need to end the polarization of management and workers, and integrate the two into a cohesive and efficient working unit. Sometimes you just have to wipe the slate clean and start over in order to do it.

  • Report this Comment On June 01, 2009, at 5:57 PM, 19414hqueen wrote:

    Just what this recovering market needed?!!! How many other company's prices are going to go south immdiately and take my whole portfolio with them? Sure makes me feel like cashing and putting everything under the mattress THIS MOMENT. Would that be wise? for a little while? Until we all survive this Blow to the Economy on top of everything else?

  • Report this Comment On June 01, 2009, at 5:57 PM, rightpriority1 wrote:

    Let's be clear, although GM has not been managed well is recent years, the larger party at fault is the collective I will simply call "Wall Street".

    First the oil speculators moved oil prices up over 200% in the first half of 2008. OK, maybe demand worldwide had moved up 5%, but why did oil go to over $140/Barrel? Pure speculators manipulating financial derivatives. This just crushed the most profitable segment of the car market, pickup trucks and SUV's (which up until then was what much of America was buying).

    Second, as we all know, the very greedy and irresponible financial sector imploded the credit markets, which killed auto sales. US auto sales, before this credit mess, averaged 17 million vehicles/year. We are currently tracking at 7.9 million annualized vehicles for 2009. If you know anything about corporate finance, and the fixed costs associated with designing and manufacturing your own products (not outsourcing to some plant in China to make cars for the US), you would understand the enormous fixed costs associated with this activity. GM and Chyrsler's worst case scenario was a 12 million/year vehicle car market. At a 7.9 million/year market, no mfg company mainly dependent on the US market can survive for long.

    Ok, Japan OEM's - why are they not bankrupt? It's not like they all have ninja's in their accounting departments. They have a very protective government.

    1st Advantage-Gov't Health care - This alone causes something like a $1200 disadvantage to the US manufacturers who have to pay health care, while Japan's gov't pays this for their workers.

    2nd Advantage-Protected Japanese market - imports into Japan are HEAVILY taxed, so that their home team companies always has the big advantage. What does Toyota, Honda, etc do with this advantage? Charge on average $10k more per vehicle in Japan than they sell them for in the US. This figure is actually conservative. Do the math. They have a normative market of 8 million vehicles/year times $10k/veh = $80 Billion/year extra in revenues for the Japanes OEM's to help buffer their balance sheets, and do extra R&D, etc.

    I do not want a socialist gov't like Japan, (ok, maybe we suddenly do have one), but these differences need to be recognized.

    On top of that, Toyota still had to go to the Japenese gov't to get $2 or 3 Billion USD. The Gov't of course said yes, without hesitation, with no strings attached.

    We all lose with GM's failure because GM is a large part of the US manufacturing base, and making things is how a country becomes economically strong (see China). We all lose because GM pays billions in taxes to Federal, State, and local governments to support our roads, armies, medicare, and social security. We all lose because GM pays billions (over $10 billion) to US workers in salaries...

    We ALL lose!!

    Let's not just hope the New GM and Chrysler is successful, let's help support them, by at least considering the Detriot 3 vehicles, in your next auto purchase.

  • Report this Comment On June 01, 2009, at 6:02 PM, mtracy9 wrote:

    Bankruptcy is a big win. It is the best way to par GM down to size. For far to many years the arrogant CEO's of GM were more interested in empire building (as evidenced by the Hummer and Saturn brands) than they were in a achieving a lean mean company, with quality brands that Americans would want to buy. Hooray for the bankruptcy. GM will be forced to eat some humble pie.

  • Report this Comment On June 01, 2009, at 6:10 PM, StopLaughing wrote:

    There are some winners. The Rep Party just won big. The Dems just shot thier right foot off. The US was buying 16 mill vehicles. Now they are buying 9 mill and that can continue for a couple of years. Much of that lost market share and excess capacity will come out of UAW which will not be able to help the Dems.

    In the long run the competitors will win because they have better products and do not have the government medling. Chyrsler is dead. Why would Fiat be successful where Mercedes failed? GM will lose more than 1/2 of it's market share and then offer a bunch of models nobody wants.

    In the long run the country wins because the better managed companies with better products will dominate by producing in the US. In the mean time the Dems will have wasted a lot of tax money trying to save one of thier sacred cows.

  • Report this Comment On June 01, 2009, at 6:14 PM, olwreckdiver wrote:

    Hey Folks - GM just went Chapter 11, not "Sell off the tools at auction ,close the doors, stop building cars" bankrupt!

    Maybe GM can pull it off - other companies have come out of Chapter 11.

  • Report this Comment On June 01, 2009, at 6:16 PM, mtracy9 wrote:

    At least with the $30 billion the government has invested in GM, American taxpayers have some chance of getting their money back. Compare this to the more that $550 billion American taxpayers have blown off in the rat-hole Iraq -- a war started by our previous idiot President (he claimed to have protected us, after he failed to protect us on 9-11, and then choose to attack a country that never attacked us).

  • Report this Comment On June 01, 2009, at 6:37 PM, kellogg9 wrote:

    R.I.P. GM. I may have lost a nice chunk of change recently on yuor shares but the bigger loss is an American icon.

    Kelly

    http://www.stockcoupons.com/

  • Report this Comment On June 01, 2009, at 6:37 PM, titanicdwn wrote:

    In response to "On June 01, 2009, at 5:06 PM, chitownjester," who wrote, " This company has been worthless for years...", I would like to ask, what IS still worth anything in this country? Does anyone notice a trend here? I said it before, and I will keep saying it. Once I get my college deploma, it is one way out of the ole' USA.

  • Report this Comment On June 01, 2009, at 6:41 PM, mayhem4masses wrote:

    CAPTAINWACK- apparently according to your comment, the entire world and global economy revolve around GM, and that this marks doomsday for us. Thank you for giving us the heebie jeebies. Your comments are so insightful (insert sarcasm) and informative. Oh, by the way, it was the Bush administration that began the bailout proceedings of GM, not Obama… read a book.

  • Report this Comment On June 01, 2009, at 6:55 PM, gazbot wrote:

    I don't want to see 250K employees out of work, but on the other hand I say, good riddance. WIKI "GM" and you'll see how they got tax breaks and compensation from the US gov't after WW2. See, they were operating munitions factories building for the NAZIs and when the allied forces - for you with MBAs and under 30, they were America, France and who else? who were fighting on OUR side as the willing - the allied forces bombed their factories in NAZI Germany where they were manufacturing arms to use against AMERICA. No. Really. I know they don't teach history any more because it's like, not important, like you know, punctuation, and like grammer? but, check it out. I say, Good. Riddance. Finally.

  • Report this Comment On June 01, 2009, at 6:58 PM, gazbot wrote:

    They were war profiteers going back to WW2. Get it? And they were the drummers for "buying Amurikan." Get it? They were manufacturing for the Nazis to build you-know-what to be used against us. Then, the US Gov't PAID THEM IN TAX BREAKS and other monies because their factories in NAZI Germany were bombed. What? Huh? No. We don't teach this; No. We don't care. I care about Brad Pitt and Angelina. And whether I can download a new ratzazzz hip hop song on my $200/month cell phone while I twitter with my friends checking out ebay on the amazon. That's what I care about.

  • Report this Comment On June 01, 2009, at 7:09 PM, matthunt97 wrote:

    To all the above……Why did two administrations dump money into GM when the murky water readers were pronouncing several months ago that GM would declare bankruptcy? Buy time? Delay the inevitable until after the new administration was in place? Well at least my children and grandchildren can look forward to higher taxes, but I am just not sure if they will be able to use an education here in the US…..might have to move to China or India

    As far the current electric vehicles…..taint no darn good in the middle of 100 miles of dirt roads and wild country ….…..plus the one Ford SUV hybrid is a whimp of a back country rig…they might be useful if I lived in town and never went any where…

    I’ll keep my truck and Jeep and personally have no need for a Chevy Volt…Toyota Prius…the Honda whatever’s…..and any similar vehicles (hauling hay-livestock, doing field work, and running an environmental company doesn’t fit)….. Obama thinks one government solution fits all (glad he doesn’t select my boots). Let’s move beyond this technology and develop something that is useful in all types of vehicles…and do it ASAP…isn’t that worth 30 billion in government research funding???

    Now some of this was said a bit tongue in cheek……so take as food for thought.

    Matt

  • Report this Comment On June 01, 2009, at 7:11 PM, matthunt97 wrote:

    To all the above……Why did two administrations dump money into GM when the murky water readers were pronouncing several months ago that GM would declare bankruptcy? Buy time? Delay the inevitable until after the new administration was in place? Well at least my children and grandchildren can look forward to higher taxes, but I am just not sure if they will be able to use an education here in the US…..might have to move to China or India

    As far the current electric vehicles…..taint no darn good in the middle of 100 miles of dirt roads and wild country ….…..plus the one Ford SUV hybrid is a whimp of a back country rig…they might be useful if I lived in town and never went any where…

    I’ll keep my truck and Jeep and personally have no need for a Chevy Volt…Toyota Prius…the Honda whatever’s…..and any similar vehicles (hauling hay-livestock, doing field work, and running an environmental company doesn’t fit)….. Obama thinks one government solution fits all (glad he doesn’t select my boots). Let’s move beyond this technology and develop something that is useful in all types of vehicles…and do it ASAP…isn’t that worth 30 billion in government research funding???

    Now some of this was said a bit tongue in cheek……so take as food for thought.

  • Report this Comment On June 01, 2009, at 7:13 PM, renewable01 wrote:

    rightpriority1 thank you for your resounding voice of reason. I was getting concerned reading the majority of the posts here. I think it is safe to say we all enjoy capitalism here at the Fool but when your capitalist reasoning is deprived of real world consequence we get our current economic client. Pure capitalism is every bit as destructive and unproductive in the long term as communism. We must find balance.

  • Report this Comment On June 01, 2009, at 7:17 PM, theHedgehog wrote:

    Where do so many people get the idea that "if GM only didn't file Chapter 11 things would be so much better"? The company is bankrupt. They can't pay their bills. They can't pay their suppliers. Why? Because no-one is buying their cars. With no sales there are no employees. End of story.

    OK, yeah, sure, there are a few sales happening, but nothing like what was needed to keep the whole supply chain going at even last year's levels. The best thing about this bankruptcy is that it IS a Ch 11, and not a Ch 7 liquidation.

    So, stop your whining. GM made their choices and screwed up royally. They are very lucky that at least some portion of the company will survive through the help of Bush and Obama - hopefully not to be trashed once again (and forever through liquidation) by incompetent management.

  • Report this Comment On June 01, 2009, at 7:20 PM, hydrah wrote:

    My understanding is that the stock still exists and continues to have value...admittedly a much reduced value. But we are now shareholders along with former bondholders and the government which is now obviously the major shareholder. Theoretically the options still exist, but they have to be linked to the adjusted value of the new shares. not much value there either, but they continue to exist and they may, in theory, still pay off if for some reason GM actually produces a car they people start buying... like crazy.

  • Report this Comment On June 01, 2009, at 7:26 PM, cjbr549 wrote:

    I think if a guy really wanted to make some money on GM stock, they could buy a few thousand shares and have them delivered (read, the actual paper shares, not a line on some accounting ledger at etrade). Then you could put them in some cheap frames and sell them as novelty items, maybe with a nifty catchphrase about failure.

  • Report this Comment On June 01, 2009, at 7:33 PM, theHedgehog wrote:

    hydrah wroted: "My understanding is that the stock still exists and continues to have value."

    Hydrah, did you not read ANY part of the article? The shares still exist because the bankruptcy judgment hasn't been filed by the court. However, THEY HAVE NO EFFECTIVE VALUE. There IS NOT going to be a White Knight who comes in and saves the day. As a result, the ruling WILL eliminate the current GM (and all its equity) and create a New GM. The shares in the new GM Will Not be the shares in the Old GM.

    The current value of the shares of GM is the value set by people, like you, who buy them, and perhaps by short sellers being forced to purchase to cover their shorts as the owners of loaner shares finally realize how badly they've screwed up by hanging on. Up until this morning, before the bankruptcy filing, GM was a part of some major indexes, and so many institutional investors (and index funds) were required to own them. Now that GM has been replaced on the indexes, there is no reason for the shares to have any value.

    Let me repeat that: "there is no reason for the shares to have any value". You have been warned.

  • Report this Comment On June 01, 2009, at 7:33 PM, theHedgehog wrote:

    hydrah wroted: "My understanding is that the stock still exists and continues to have value."

    Hydrah, did you not read ANY part of the article? The shares still exist because the bankruptcy judgment hasn't been filed by the court. However, THEY HAVE NO EFFECTIVE VALUE. There IS NOT going to be a White Knight who comes in and saves the day. As a result, the ruling WILL eliminate the current GM (and all its equity) and create a New GM. The shares in the new GM Will Not be the shares in the Old GM.

    The current value of the shares of GM is the value set by people, like you, who buy them, and perhaps by short sellers being forced to purchase to cover their shorts as the owners of loaner shares finally realize how badly they've screwed up by hanging on. Up until this morning, before the bankruptcy filing, GM was a part of some major indexes, and so many institutional investors (and index funds) were required to own them. Now that GM has been replaced on the indexes, there is no reason for the shares to have any value.

    Let me repeat that: "there is no reason for the shares to have any value". You have been warned.

  • Report this Comment On June 01, 2009, at 7:35 PM, theHedgehog wrote:

    cjbr549 wrote: "I think if a guy really wanted to make some money on GM stock, they could buy a few thousand shares and have them delivered"

    Good idea, but the printing fees are now so high on stock certificates that it's doubtful you'd even recover your costs.

  • Report this Comment On June 01, 2009, at 7:36 PM, Macpherson02 wrote:

    Wow. Lots of emotional investors out there.

    GM had it coming. They were too egotistic to drop brands, they waited to cut production, they didn't understand the market and the trends, they were swimming in debt.

    The only thing the government did was string it out with cash infusions. Even at that point, GM wasn't making an effort to restructure. They weren't making a serious effort to streamline the company.

    This will go down in the annals with Enron. An amazing story of a giant collapsing.

  • Report this Comment On June 01, 2009, at 8:16 PM, mtracy9 wrote:

    At least with the $30 billion the government has invested in GM, American taxpayers have some chance of getting their money back. Compare this to the more that $550 billion American taxpayers have blown off in the rat-hole Iraq -- a war started by our previous idiot President (he claimed to have protected us, after he failed to protect us on 9-11, and then choose to attack a country that never attacked us).

  • Report this Comment On June 01, 2009, at 8:30 PM, xetn wrote:

    Only one word describes this action: FASCISM!

    This is no investment. An investment implies savings (private savings). The government's $30 billion is theft of the citizens and represents a giant transfer from them to GM. And now, who is really on the hook? The Citizens. Talk about Fools.

  • Report this Comment On June 01, 2009, at 8:31 PM, bigcat1969 wrote:

    A big worry to me is the lack of new models coming out of Chrysler or GM anytime soon. Chrysler's models are already very dated and the Fiats won't hit the market for at least a year. GM's new models will be delayed and like only have cosmetic changes. If Ford, Toyota, et all come out with more interesting models, who but the government will buy Chrysler and GM cars?

    It seems likely that Obama and company will be pumping billions a month into these companies for at least the next twelve months.

  • Report this Comment On June 01, 2009, at 9:25 PM, amos27705 wrote:

    GM's bankruptcy amounts to the death of a dinosauer, long overdue. Painful to all who were involved, especially employees, and not much (if any) joy attending. But just as in the remote past, little furry mammals may now have a chance to evolve. Maybe we can now put more energy into developing less toxic forms of transportation than automobiles ?

  • Report this Comment On June 01, 2009, at 11:37 PM, owlafaye wrote:

    Obama didn't "string out" anything. In an attempt to protect the economy, he created a window of time to try and save GM from a bankruptcy that would have occurred months ago. It takes a lot of time to gather all the information and interests of a company that huge and come to a proper decision..

    Bankruptcy was that decision and Obama ram-rodded that decision through in record time.

    GM was being run by a pack of fools.

    Eventually the American public will get back ALL the money loaned to GM.

    Anyone who thinks Obama is stupid has his head in the sand. This will be a long remembered, crowning achievement in his administration and there is a lot more good to come. You probably do not recognize a class act simply because you have no class (or education).

  • Report this Comment On June 01, 2009, at 11:47 PM, owlafaye wrote:

    mtracy9 wrote: At least with the $30 billion the government has invested in GM, American taxpayers have some chance of getting their money back. Compare this to the more that $550 billion American taxpayers have blown off in the rat-hole Iraq -- a war started by our previous idiot President (he claimed to have protected us, after he failed to protect us on 9-11, and then chose to attack a country that never attacked us).

    Thank you...an astute perspective and not a very difficult one to come to if you have a little education. The 8th graders here voted for Bush obviously.

    Saudi Arabia was the culprit but vested interests steered him from that, make no mistake. The Iraq war was created simply to pacify the gullible American right. The correct course was to occupy and completely control Saudi Arabia's oil resources. Unfortunately we had a coward running the country.

  • Report this Comment On June 02, 2009, at 12:54 AM, jomueller1 wrote:

    It never fails to amuse me that governments allow themselves to be blackmailed with the loss of jobs. They act like Pavlov's dog.

    GM was going downhill since 30 years and did not change their way of doing business. What makes one think that the old management could do better now? All they want is to keep the party going as long as possible because they would not find a job anywhere else. And those failures should not find a job and not receive severence payments.

    GM management should be in prison for ruining so many people's lives.

    An amusing tidbit I saw on Bloomberg TV today: There was a sign posted at a GM factory that non-GM cars should be parked away from the factory. GM management should have asked the employees why they opted for another brand. Management could have learned something.

  • Report this Comment On June 02, 2009, at 1:00 AM, snapperreef wrote:

    <<GM will emerge superior in nearly every way from its near-death experience. GM's cost structure will be far leaner,>>

    One way it won't be superior to the foreign makers is that it will still be under the gun of the UAW and the Democrats will not let them be broken up.

    I also wonder why the govt isn't worried about the loss of all those jobs in the closed (why?) dealerships.

  • Report this Comment On June 02, 2009, at 1:13 AM, Brownfox11 wrote:

    Is it a good idea to short a Company seeking Chapter 11 protection? What happens to the short sellers when the hammer goes down? If the share value goes down to almost nothing you have a great return when you buy back no? But why does it seem as if shorts are covering their positions now - judging by the increase in share price yesterday?

  • Report this Comment On June 02, 2009, at 9:29 AM, wealthy007 wrote:

    I hear so many people bashing the Gov't intervention of GM and every other company so far. I'm not saying I agree, nor do I know the consequences, I am honestly newer to investing so my question is: WHAT SHOULD WE HAVE DONE, LET EVERY COMPANY FAIL, AND EVERYONE UN-EMPLOYED?

    Please answer cause it's very easy to critisize, but no one ever gives another option....

  • Report this Comment On June 02, 2009, at 9:35 AM, robertf36009 wrote:

    GM (Government Motors) and the new Government Sponsored Enterprise (GSE) Fiat/Chrysler will be forced to build clown cars that will not sell unless gasoline hits $4 per gallon. Therefore unless team Obama forces prices up these bold new companies will be back in bankruptcy court in three or four years for liquidation under chapter 7. If gasoline prices soar under team Obama Ford Motors (F) will be going the rout of of the other two.

  • Report this Comment On June 02, 2009, at 9:38 AM, katheter wrote:

    Please, read the thoughtful comment by rightpriority1 again. Then maybe the rest of you will keep your ignorant comments to yourself. Most of you know so little about autos, it's laughable. I've had family members working in it from my Grandfather at Ford to my daughter as an engineer at Toyota and in marketing and managing race teams at GM. I also have a deep love of automobiles and have owned many cars, foreign and domestic. There is no way we can't build exciting cars in this country that are more fuel efficient. I'm not sure when was the last time some of you drove an American car, but your perceptions of the quality of American cars is way off base. I have a AWD Cadillac CTS4 and it's a dream to drive. My neighbor's Toyota truck frame rusted out and they had to buy it back to get it off the road for safety. I don't know why you wouldn't want to support the company that you now own...talk about shooting yourselves in the foot.

  • Report this Comment On June 02, 2009, at 9:54 AM, robertf36009 wrote:

    wealthy007: Greetings. Make no mistake repealing Glass/Steagul was a serious blunder. Those entities which were forced on the banks through government backed sweet heart deals should have been allowed to fail. The profitable pieces would have been purchased by healthy firms leaving only toxic unpriceable garbage behind for speculators to buy at auction. These deals weren't pushed by the FED to protect the economy they were designed to protect rich politically connected investors and busines men. Our economy is designed to expand on creative destruction not the creation of zomby financial institutions that are allowed to cook thier books at will to apear healthier than they are. Once the destruction part is gone the creative part goes away too. Our situation at best was not improved by government meddeling and at worst was made much worse. Healthy compettitors which should have profitted from the demise of the insolvent are now worse off because they are now competing with uncle sugar. What will become of Ford Motors (F) now that they are competing with the FED? Team Obama has also abrogated over one hundred years of bankruptcy law which will now have to be priced into the bond market. Money just became more expensive and the much touted PPIP is dead on arrival.

  • Report this Comment On June 02, 2009, at 9:59 AM, jackspratnofat wrote:

    The "New GM? How about the NEW NAME OF Goverment Made???? Within just afew year's there car's will look like the YOGO from the "OLD, USSR!

    GM, at one time had a Turbo motor that would run on Piss, after a good night out. What happened to that? Then there's the Hydro powered motor's that GM and Ford have been running for the last few year's on "both" coast? Not going to build them, are they?? Oh no, could not do that could they? For all of the we need to get out of useing "OIL" for fuel, were going to keep right on useing it, arnt we? This BAIL OUT and all of the rest of the CRAP that the NEW GOVERMENT is doing is KILLING AMERICA! Goverment ran everything! Give me the New USSR! There more American than america! What a bunch of LOSERS that have VOTED for the NEW WORLD ORDER!

  • Report this Comment On June 02, 2009, at 10:25 AM, Forrest47 wrote:

    Lets see??? $43 billion (so far) to save how many jobs? ummmm gee that works out too -- $450,000 per job saved ! oh that makes a lot of sense. I guess when you are a former community organizer it doesn't matter were the funds comes from! we will just keep printing it. Borrowing money to get out of dept? where do these idiots come up with this stuff?

  • Report this Comment On June 02, 2009, at 11:46 AM, wallywade wrote:

    The american companies did it to themselves!

    45 years ago I bought a used Chevy for my wife. I took it back for service and was sent out to a shack behind the dealership. I noticed a table loaded with mileage meter that had been removed for "repair".

    I later realized that they had the mileage removed!

    20 years ago I wanted to trade my car that I bought when new now had 50,000 miles and was told that "it was worn out"! I did it again and was told the same thing. I have not purchased a new car since.

    I know the American car is a good car.

    The American dealer convinced the American public that the American car was/is lesser quality than any other mfg.

    They did it to themselvews! Running the miles off made the American car seem like a piece of "JUNK"!

  • Report this Comment On June 02, 2009, at 12:12 PM, funkyduane wrote:

    Being relatively new to Motley Fool and investing, I'm not very impressed with the commentary here. Reminds me of the kind of thing we did in grade school.

    "It's your fault!" "No, it's your fault!" "No, it's not," "Yes it is!" "nanner nanner nanner!"

    Kind of amusing at times, but mostly falls way short of what I'd like to get out of my membership with Motley.

    What would you all be saying if you stopped the "Blame Game?"

    In fact, what would you be saying if you came from the perspective of:

    "What so is so. Now, what can we learn from the past to inform our future. And, what can we as the people who are the government create that we've never created before that will produce results we've never produced before?"

    Last night I saw the interviews on PBS of some of the top executives of GM who will be staying on. They made some speeches and answered questions from the moderators. Do you know how sometimes you just know a person is saying something prepared to "sound good to the people" and is filled with empty slogans and cliches (i.e. we're empowered, we're going to be new and transformed) that the speaker really doesn't believe themselves?

    The moderator said it well when she asked, "What's new about you and the other executives who have been running this company for the last thirty years."

    His reply was something like "We'll have less debt, lower costs, etc."

    What was completely missing for me was a sense that these guys were confident and inspired to create something new and extraordinary from the rubble. The impression they left me with was GM will me be a slightly improved version of what it's always been.

    And, what it's been for me since the Chevy Vega I got just out of High School, is a company that builds shoddy products that it doesn't stand behind, sold by dealers that have a little regard for their customers after the sale.

    My experience with them was so awful I told them I'd never buy another Chevy again and I would be sure everyone I know knows about how they dealt with me and the problems of that car.

    One of the things I like about what I've learned from MF is choosing companies to invest in that have strong leaders with values that reflect my own. I'm betting GM will make a feeble recovery then fail again. With the current management nothing really new is possible.

  • Report this Comment On June 02, 2009, at 12:21 PM, BSHumphreyII wrote:

    "Like the Six-Million-Dollar Man, GM will emerge superior in nearly every way from its near-death experience."

    I don't know about that. I know companies have emerged from Chapter 11 successfully before, but I have serious doubts about this one. It has become clear by listening to everyone in the Administration, from the President down, that the government's goal in all this isn't simply to make GM viable again. When the words "fuel efficient" and "green technology" are used in every single speech, you know that's part of the government's vision for GM.

    There is only one group of people who should be determining what kind of cars GM will build - the customers. If they come back designing cars to please the Obama Administration rather than the market, we're going to be back here again in a few years. Unfortunately, I don't see the Administration resisting the temptation to use GM as a vehicle to further their pet issues.

  • Report this Comment On June 02, 2009, at 12:54 PM, sseigel wrote:

    My Fellow Readers,

    What a thoughtful and diverse group! I want to thank you jointly and severally for providing the substance of a wonderful paper I will shortly be submitting for my MBA! (Tounge-In-Cheek) I believe you have provided sufficient opposing positions, identified each one's faults and given enough historical context in order to largely construct a thesis or a dissertation.

    Depending on your point-of-view, it can be argued that GMs bankruptcy is a very good thing, a very bad thing, or a mixture of the two. My personal issue is that the government has more-or-less ignored the constitution as of late. Both this President and the last are actually pretty intelligent guys; but is intelligence sufficient to the running of a nation? My counter position is that courage and integrity are far more valuable traits, and that intelligence has become the world's false Holy Grail. Now I won't go so far as to say it's unimportant, but just as we can each over think a problem and paralyze ourselves, sometimes the best course of action is to stick with a hard decision. At other times when everyone else is screaming and panicking, people with successful characters remain calm, do little or nothing, and trust in proven principles.

    GM was a mess and needs Ch. 11. Chrysler too. Is this unfair to Ford? Certainly. Whoever said business was fair? Toyota and VW have competed unfairly in the U.S. marketplace for years. At the same time, shortsightedness on the part of consumers, unions and executives here in America have sucked the value out of the U.S. economy in general and the manufacturing base in particular. Our demublican government has proven itself been impotent or too gutless to prevent it because it ultimately works for those profiting.

    I wish I could suggest real solutions--I'd run for President myself. As it stands, powerful nations appear to always follow this path: great struggles lead to fabulous personal and societal sacrifices which result in strong institutions that ultimately generate fabulous profits leading to generalized wealth and progressively devolving into decadence, selfishness and social decay. The trick for each of us is to find places with strong institutions but small economies poised to become the next big thing. China may be it--but I doubt it. Russia? Africa? The Middle East? No way. In fact, pervasive media has so focused our planet's youth on themselves that I doubt we will even recognize it (or even know its name).

    Instead, we may be at the verge of something of a global socio-economic collapse which will push many nations back into the beginning "great struggles" stage. Though that may be good as it was good in colonial America. It could also be the beginnings of the next Middle Ages. Such places are not only ripe for creative and hard-working spirits, but also for incomparable abuses.

    Our nation was founded by wise people in a political, social and economic crisis willing to take risks for the common good. Nazi Germany and revolutionary France were both founded in severe economic and social crises by societies unwilling to take universal ownership of their problems, looking for scapegoats, and more than willing to do anything to advance their cause. I wish it were otherwise, but both the current and previous administrations have much more in common with the latter models than the former.

    Only in the extreme minority of cases have the finer won over the baser motives. Modern American society--and it's plutocratic banker/media-facilitated shadow across the world--ultimately rewards mean-spiritedness, selfishness and shallowness over real virtues. Hence, I have little hope for our nation and our world as it stands (much less for our economy). Perhaps, like Malthus, I am wrong. I truly hope so--but I doubt it.

    The only salvation for our world remains the same today as it was 2000 years ago: the willingness to die for our friends and live for something greater than ourselves which flows from a deep and personal faith in a good and loving God.

  • Report this Comment On June 02, 2009, at 3:06 PM, TheOthermfa wrote:

    BSHumphreyII mentioned above: "There is only one group of people who should be determining what kind of cars GM will build - the customers."

    True enough. GM has built exactly what cars "the customers" have demanded over the years -- big, bloated gas-hogs that can be traded in for a bigger one with taller fins in 3 years. A few of us bought VWs, Volvos, Toyotas, etc., but there weren't enough of us to make it worth GM's while to change. I am sure that GM could have been perfectly capable of building a Prius-like vehicle in 2001 if the demand had been there, but it wasn't.

    Why not? Because gasoline was too cheap. Presidents back to Nixon recognized that we had to wean ourselves off of foreign oil, but were unable to raise the street price of gasoline high enough to affect consumer behavior. During the recent runup in oil prices, consumers suddenly wanted high-mileage vehicles, and Prii were hot. As soon as gas got down under $2 per gallon, they went back to their big trucks and Prii were sitting on dealers' lots again.

    Without some predictability in fuel pricing, which seems to be the principal driver in consumer taste these days, GM couldn't plan to build the right mix of product at the right time. Toyota took a huge gamble in bringing the Prius to market, and reportedly lost money on it, but Toyota is now being praised for its foresight.

    So who's really to blame for GM's failure? It would be easy to blame the Government for not showing the leadership to manage fuel prices to encourage conservation and innovation in automobile engineering. But every elected government official has, fundamentally, one goal -- reelection, and the odds of getting reelected after supporting a -- say $2/gallon -- fuel tax are about zero.

    It all comes down to Pogo's observation: the enemy is us.

  • Report this Comment On June 02, 2009, at 4:50 PM, TeeTimeKidd wrote:

    Is anyone else thinking of what im thinking? GM goes to .15/.20 a share buy $500 and wait 5 years and it will be back to $20 a share? $500 becomes $50K. Easy money im thinking? What is everyones thoughts on this?

  • Report this Comment On June 02, 2009, at 4:53 PM, TMFJoeInvestor wrote:

    TeeTimeKidd,

    I address that very question in the article you just commented on. Long story short, don't do it.

    Joe

  • Report this Comment On June 02, 2009, at 8:15 PM, loudaws wrote:

    DEAR KID WHAT ARE YOU THINKING. GM HASN'T MADE ANY MONEY FOR YEARS.

    THE GOVERNMET HAS NEVER MADE MONEY.

    THINK AMTRACK ,CONRAIL ,USPS .

    THERE ARE PLENTY OF STOCKS YOU CAN MAKE MONEY ON RIGHT NOW. WHY GAMBLE ON CZAR OBAMA?

  • Report this Comment On June 02, 2009, at 9:25 PM, Aphexwolf wrote:

    Yep they're gonna tax the hell out of us on this one. Only way to replace the tax dollars they spent on an investment that's gonna have negative return. But what can ya do?

  • Report this Comment On June 02, 2009, at 9:38 PM, billddrummer wrote:

    If you look at the history of the company, the union contracts forced GM to fund ever larger pension and health benefits for its retirees, while stripping cash away from the things that would promote future success--R & D. Over the past 20 years, GM has spent $44 billion on its benefit and pension plans (even though the pension fund is $20 billion underfunded). Over the same period, the company sent only $13 billion to its investors in dividends.

    What kind of vehicles could the company have produced over the past 20 years if it had spent the pension money on R & D instead?

    Add to that, one of the reasons GM signed such generous contracts was to cripple the other Detroit automakers, figuring that they wouldn't be able to match the terms and remain competitive.

    Neither GM, F, C or the UAW figured that upstart carmakers from Japan and Korea would build plants in non-union states, employ a younger workforce, and sink billions into product development instead of union benefits.

    I'm not bashing the union, because it has operated in the interests of its members since the first strike in Flint back in 1937. All I'm saying here is that the company lost its competitive edge when it decided to fulfill the union's demands before looking at the state of the industry.

    Let's see what happens to the sales rates if gas prices spike again.

  • Report this Comment On June 03, 2009, at 12:15 AM, MyDonkey wrote:

    Could someone please describe how the leftovers would have been divided up if there had been no government involvement in GM's bankruptcy? And what difference (short term and long term) would it have made to Joe Taxpayer?

  • Report this Comment On June 03, 2009, at 10:06 AM, imafoolishfool wrote:

    Great, punchy writing - I was laughing. I also sold my GM shares 5 or so months ago. Just lucky. I'm a fool really.

    The rest of the reader comments made me say "Man, We're so Fud"

  • Report this Comment On June 03, 2009, at 3:26 PM, McCrikey wrote:

    Oh my bad. I'm the one who said GM is only the most prized possession of our economy and we may as well go fascist.

    Obviously, the auto industry in general and GM, the biggest domestic auto company in particular, are of no significance to the economy.

    That's why no one is posting on this topic.

  • Report this Comment On June 03, 2009, at 8:19 PM, idiotisk wrote:

    Let me call your attention to an article by David Brooks who writes for the NYT (6/3/09-GM's Quagmire ... its corporate culture). There is little hope that the corporate culture that created this monumental failure will change under government (& union) ownership/management. GM was king when I was a boy. GM treated its customers as if they should take any old piece of junk off the assembly line and love it.

    The best thing that could happen is for them to break up. The union management and GM upper management will keep this company draining the US coffers for years to come. GM will turn out the cars that Obama and Pelosi think we should have. Not what we want.

  • Report this Comment On June 05, 2009, at 2:25 AM, joecar11 wrote:

    It is hard to have sympathy for an "American Company" when GM and pretty much all major corporations put profits before being a good citizen in the country that made all their prior sucess possible.

    Build cars in countries to provide those countries with vehicles. Dont use my tax dollar to subsidize foriegn capital investment and ship product here at the expense of people,local and the national econony.

    This and the simple fact that most upper management of all corporations continue to make millions for failure is amazing to me.

  • Report this Comment On June 05, 2009, at 1:03 PM, hillmannw wrote:

    Lets see unions own 17.5% and a union loving administration owns 60.8%. I'm going to quit my job and go try to get a job at a GM plant. Soon it will be 250K/year to insert part A into part B, until the suck the company completely dry.

  • Report this Comment On June 05, 2009, at 1:27 PM, juanrclar wrote:

    What happens to the stock GMGMQ, does it go away too?

  • Report this Comment On June 05, 2009, at 3:48 PM, theHedgehog wrote:

    Buy and hold index funds or index ETFs. Holding individual stocks for the long term isn't such a good idea unless you have enough diversity that you're essentially indexed, yourself.

  • Report this Comment On June 05, 2009, at 10:09 PM, BONDTRADER007 wrote:

    HOPE & FAITH

    Its never wise to give up hope, nor foolish to fathom the depths of true faith! Counting eggs or chickens? Count blessings instead, and the same fortune which brought you will lead you forward.

    If you dislike your path (holding GM still), make a final decision, there you will find your motive, faith, hope or greed? Faith and commitment lingers behind every sucess story. So if not now, when? MAKE A DECISION ABOUT YOUR MOTIVES. Go all the way IF YOU DARE!

    SILVER LININGS

    If you are still holding GM and it fails, sell "an up stock" to offset losses, then re-position in the new GM. Be patient. Even fools know not to listen to fair weather friends...-:)

    BONDTRADER007 - OUT

  • Report this Comment On June 08, 2009, at 6:28 PM, MikeBecker111 wrote:

    Going forward with Government Motors, I see another Amtrak. Annual appropriations to make up losses and keep it afloat. More than that, I see it meeting the new CAFE standards by having Uncle Sam buy up the high fule economy vehicles that the public won't buy. What can't be palmed off on the interagency motor pool and the DOD, will be quietly packed off to storage in the deserts of the Southwest. There they will sit until they are no longer driveable, when they will be quietly scrapped along with the obsolete military airplanes parked nearby. That will continue until a foreign competitor files a complaint with the WTO, charging an illegal subsidy. At that time, either the practice will be discontinue or the Duce will take the United States out of the WTO, touching off a 1930s-style trade war.

  • Report this Comment On June 19, 2009, at 4:55 PM, jm7700229 wrote:

    There are two impediments to GM's future success, as I see it:

    1. Despite all the promises, Congress can't not meddle. Their constituency is the news media. Joe six-pack and Jimmy Journalist (and therefore Carl Congressman) will never understand, for instance, that executive salaries are set in a competitive market, just like the salaries of basketball players and movie idols. A company that can't (or won't) meet the admittedly exorbitant price of the best managers will not get them, and, just as a basketball team that refuses to pay for the best talent will not win titles, companies run by second-string talent won't succeed. And there are 435 Representatives and 100 Senators who care more about public anger at executives than about the future of General Motors.

    2. Despite its concessions, the UAW is not going to change its spots. The workers will need to WANT GM to succeed, and be willing to work hard and carefully to help. Maybe a newer generation would be able to do that, but the older generation won't get pensioned off in time to save GM.

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