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Drum Beats To GM Bankruptcy

General Motors
CNBC.com
General Motors

You can hear them virtually everywhere. You can call them pessimists, but I prefer the term realists. They are people within GM, the Obama administration, the auto industry, and elsewhere who now see GM filing for bankruptcy as the best move for a company with few good options.

What was once a tempered discussion about what could happen at GM has increasingly become the most likely outcome to a saga that has dragged on and on.

JP Morgan put out a note Monday morning explaining why bankruptcy may be the best option. Among the key points was this one: Even if GM gets bond holders and the UAW to agree to much harsher deals, the auto maker will still have so much debt from federal loans, it will need to be de-leveraged. In other words, bankruptcy is the best shot at giving GM a balance sheet free of the liabilities weighing it down.

What about the UAW (and it's retirees) and GM bond holders? Their stand-off over who "gives more" will end in court with both getting a fraction of what the once wanted.

Will the public still buy GM cars and trucks? The government believes sales won't take a huge hit now that President Obama is guaranteeing the federal government will stand behind all GM warranties.

Will the residual values of Chevy's, Caddy's, and other GM brands plummet? The predictions vary, but many think the value of these models should hold up since the company is not imploding and going out of business.

Does GM have the leadership and pipeline to succeed when it re-organizes? The pipeline is there. Having seen what I've seen in GM's future, this company has the designs to win. The leadership is a different question because we still don't know what GM's re-constituted board will look like come this summer. And that board is the one that will push Fritz Henderson(or some other CEO) and his lieutenants in a particular direction. Figuring out the chemistry of a company as it comes out of bankruptcy is never a sure thing.

So there you have it. The drum beats are growing, and at this rate, they will soon be on the steps of bankruptcy court.

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