Investors betting against GM

The bailout may be too little, too late:

General Motors Corp. Chief Executive Officer Rick Wagoner said the biggest U.S. automaker got “what we asked for” with $9.4 billion in U.S. loans over the next 24 days. Investors bet that it’s not enough.

GM slid 6.8 percent today in early New York trading to extend yesterday’s 22 percent plunge. Credit-default swaps on the company’s bonds jumped 2 percentage points in a sign of increasing concern that the Bush administration’s bailout may end in a default.

The stock-price slide erased the 23 percent gain on Dec. 19, when Detroit-based GM received a federal aid package to help the automaker stay in business until March 31 while it crafts a plan to shut plants, shed brands and reduce debt.

“It’s almost impossible for a management that invested in the assets, that hired the people, that put forth the strategy, to change so dramatically in such a short period of time,” Edward Altman, a New York University finance professor who created the Z-score formula to measure bankruptcy risk, said in a Bloomberg Television interview.

There is a “high” likelihood of a GM bankruptcy, Standard & Poor’s said yesterday in reducing the rating on the company’s unsecured debt to C, or 11 grades below investment quality. Robert Schulz, an S&P analyst in New York, said creditors can expect “negligible recovery” should the automaker default.

GM has slashed output and won union concessions since saying Nov. 7 it may run out of operating cash by year’s end. The automaker said it would need as much as $18 billion in aid or face a possible bankruptcy.

From Bloomberg. No information about Chrysler, but then it's no longer publicly traded so they don't have to disclose as much information. Ford is apparently doing considerably better; they could well end up being the last survivor of the American automakers. But all of the automakers are hurting; even Toyota is facing its first operating loss in 70 years. The brutal truth is, cars simply can't continue to occupy the central place that they occupy in today's economy. The energy, environmental, and infrastructure demands are too great. They won't go away, of course (many people still live in areas where public transit is unfeasible) but they're going to have to be much more of a niche item than they are now. Which means a lot fewer people making their living building them.