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AUTOMOTIVE NEWS

Analyst: GM equity may vanish in bailout

DETROIT (Reuters) -- General Motors' equity may be largely if not entirely wiped out as it complies with the restructuring targets laid out in the U.S. auto bailout, an analyst at Credit Suisse said.

"Over the next two months ... it will become increasingly clear that the enormous sacrifice of value on the part of the union and bondholders will require the complete or near-complete elimination of the existing GM equity," analyst Christopher Ceraso wrote in a note titled "Game Over for Existing Equity."

Ceraso cut his price target on GM shares to $1 and his rating to "underperform." GM shares today fell 21 percent to close at $3.53 in New York trading.

The U.S. government on Friday came to the rescue of GM and Chrysler with $17.4 billion in emergency loans, some $13.4 billion of which will be made available in December and January, taken from a $700 billion Wall Street bailout fund originally designed to rescue struggling financial institutions.

The government attached a string of conditions to the three-year loans and set a deadline of March 31 for the automakers to prove they can restructure enough to ensure their survival or have the loans called back.

As part of the rescue, GM is required to reduce debt by two-thirds via debt-for-equity swaps, pay half of the contributions to a retiree healthcare trust using stock, make union workers' wages competitive with foreign automakers and eliminate the union jobs bank, which pays laid-off workers. It is scheduled to get $13.4 billion of the $17.4 billion package.

"If GM and its stakeholders can navigate through a tricky set of negotiations, and all parties can agree to sacrifice value in a manner consistent with the targets laid out by the government, we still arrive at a discounted cash flow-derived equity value of less than $1 per share," Ceraso said.

If the bondholders and unions cannot come to an agreement over the amount of value to be sacrificed, GM may still end up in bankruptcy court, Ceraso said.

Ceraso previously rated the stock "neutral" with a price target of $2.

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I really don't see how GM is going to survive. Maybe Chevy could become a stand alone car company and I can really see how they could thrive without having to carry the rest of the corporation on its back.

Cadillac could be sold to Ford, it was Henry Ford who founded it in 1902 anyway.

The rest I don't really see it surviving.
 

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I really don't see how GM is going to survive. Maybe Chevy could become a stand alone car company and I can really see how they could thrive without having to carry the rest of the corporation on its back.

Cadillac could be sold to Ford, it was Henry Ford who founded it in 1902 anyway.

The rest I don't really see it surviving.
GM will probably survive as Chevy Buick and Cadillac
 

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Discussion Starter #6
China is a big place for Buick. They sell more cars there as Buicks.
Also, Opel Saab and Holden could live on.
Yeah, I think they will eventually sell Buick to their chinese partners.

Saab? How could Saab live on if it is already dead?
 

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1.5 billion from the swedish govn't?
That cash is just to cover a cash flow hole but where will they get the money to develop new Saabs.

I mean, Saab is for sale, GM has acknowledge it. The only reason they haven't sold it is because no body in his right mind would buy it. The sooner GM gets rid of that dead weight, the better for them.
 

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I think after all of this mess is over and the smoke clears and Rick Wagoner is fired GM will emerge with just three brands and those three will be Chevrolet, Buick, Cadillac.

What I think is gonna happen is..

Saturn - Is going to go the way of Oldsmobile.

Pontiac - Will simply & sadly ride off into the sunset.

GMC - Will be discontinued & Chevy trucks will receive the Denali Line.

Hummer - Will either be sold or go the way of the Dodo.

Saab - Will be sold.

But, that's just my take and opinion on the situation.
 
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