What's GM worth?

What's GM worth? http://tinyurl.com/ngn2jy
Taxpayers, the union and bondholders - GM's new owners after bankruptcy - are eager to find out. But it's uncertain how the market will value a
new GM. By Chris Isidore, CNNMoney.com senior writer Last Updated: May 29, 2009: 7:54 PM ET
NEW YORK (CNNMoney.com) -- Once the bankruptcy process at General Motors plays itself out, what will the company be worth?
It's more than an academic question of interest only to Wall Street traders. It will determine how much money taxpayers can expect to recoup from multiple bailouts of GM. When all is said and done, the Treasury Department is likely to pump more than $50 billion into GM (GM, Fortune 500) -- including loans made to the automaker last year.
It is also key to determining the level of future health insurance benefits for hundreds of thousands of GM retirees and how much money holders of $27 billion on GM bonds, including pension funds and individual investors, will be able to recover.
GM is widely expected to file for Chapter 11 bankruptcy protection on Monday. As a result, the government, bondholders and a trust fund controlled by the United Auto Workers union will wind up owning virtually all the stock in a reorganized GM. (Current GM shareholders will essentially have their holdings wiped out through bankruptcy.)
So taxpayers, retirees and bondholders need for shares of a new, leaner GM (GM, Fortune 500) to start trading for them to stand any chance of benefiting from the company's emergence from bankruptcy. Unfortunately, these new owners probably won't know until at least 2010 just how much money, if any, they will recover.
GM's most efficient plants, dealerships, brands and other assets could exit bankruptcy within two to three months.
However, it will take at least 6 to 18 months for the bankruptcy court to wade through the company's unprofitable plants, most of its debts and other liabilities, according to a senior Obama administration official. During that time GM stock is unlikely to be publicly traded.
But even once shares of GM do begin trading again, it's highly uncertain what the company could be worth. $25 billion: too high or unreasonably low?
According to a filing by General Motors late last month, the company estimated the equity value of its common stock would be about $25 billion once it completed a reorganization.
That's substantially higher than the market value of about $450 million that GM was worth based on Friday's closing stock price of just 75 cents a share. But the last time GM was worth as much as $25 billion was late 2007.
A new company, with a greatly reduced debt burden, fewer plants and lower labor costs, could end up being an attractive investment. But auto analysts and other experts are reluctant to speculate on exactly what GM's value could be following bankruptcy.
Len Blum, managing director of Westwood Capital, an investment bank, said he thinks there's a better chance for taxpayers to recover money from their investment in GM than with insurer AIG. Taxpayers also have a majority stake in that company, and the government has kicked in more than $180 billion so far to keep AIG afloat.
Blum said that given the reduction in GM's debt level and operating costs that are being planned, there could be "some real value" in a new GM,but that there was still great risk for all shareholders.
"If it was a slam dunk, the union would have wanted more common equity," he said. The UAW wound up agreeing to a 17.5% stake.
Other experts question whether cost cutting and a lower debt load are enough to make the company attractive to investors, even if it they enable GM to earn its first profit on its auto operations since 2004.
"Back in 2007 GM was being valued on its future prospects and its assets, not its profitability," said Chris Jadro, an equity strategist focusing on distressed companies for Jefferies & Co. "But it's just hard to imagine that GM will be worth what it was a year ago coming out of this down cycle."
The two biggest shareholders of the new company also expressed doubts about how quickly the stock will recover.
A senior Obama administration official speaking to reporters Thursday conceded it is unlikely that the government can get back its entire investment in GM. The official said the government hopes "to recover as many taxpayer dollars as we can," and that it expects to sell the shares as soon as possible.
UAW President Ron Gettelfinger, who also said he would like to sell the union's stake in GM as soon as possible to have money available in the trust fund, downplayed expectations about the company's value going forward.
Although he said Friday that the union believes "the stock should be worth a lot more a lot quicker," he added that "right now, we realize the value is zero."
Some auto industry experts believe that the changes made by GM could position it for a level of profit it hasn't earned in decades. David Cole, chairman of the Center for Automotive Research, said GM is well-positioned for even a modest rebound in industrywide sales.
Carr said the $25 billion market value estimate "is pretty reasonable and it could even be conservative." He said that profits for GM and the rest of the industry could be robust in the next few years due to reductions in capacity and pent up demand for autos.
But a number of experts doubt that GM's market value will get anywhere near the $25 billion figure in the next few years. They point out that GM will face a difficult competitive position compared to cash-rich Toyota Motor (TM) and even U.S. rival Ford Motor (F, Fortune 500), both of which could pass it in terms of U.S. sales in the coming years as GM sheds brands and dealers.
Sean Egan, managing director of rating agency Egan-Jones Group, said he's not sure GM can generate a profit even with all the cost concessions they've received from the union.
"In almost every competitive front, GM is being beaten. People who see strong profits for GM are being delusional," Egan said.
But Susan Helper, an economics professor at Case Western Reserve University in Cleveland and expert on the auto industry, worries that even if GM does return to profitability following bankruptcy, investors could penalize the stock due to the company's previous problems and doubts about its future.
"It's tough to see there being a line of investors looking to get into the stock," Helper said.
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Civis Romanus Sum

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If you are talking about the stocks and bonds, not one f***ing penny.
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Stocks, I agree. I have really been tempted to short them.... they are litterly worth 1 cent. Redeeming value in that if you get a stock certificate if might become a collectors item.
Bonds on the other hand have dibbs on the assets like plant and equipment. Bond holders can in fact force the sale to recoupe their loans to GM. Does not mean they have enough assets to cover, which I am sure they don't. But does mean they have a value much greater than zero.
Which is why the government is twisting the bond holders to agree...as by law they do have rights to the assets. And if the bond is secure, it is specific to a property or asset they have the right to aquire it in lieu of repaymentment. Puts GM in a tenious spot as it is sort of like the bank on a home mortgage, they can repo it.
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Some huge bad assetions below, GM bring down the whole auto business? That is self important bu1l$hit GM talk. GM and welchers like GM are the cause. Debtors not paying debt. They are causing the economic problems. And Obama is making the governments role in debt even worse. GM's own financials, as cooked as they are declare $177B or so in debt.
At least they are coming clean, between GM and Chrysler they are getting close to $100B in handouts. I say handouts as they are are already "forgiving" a lot of the taxpayer funded cash. It is only a long if there is a chance you can and will pay it back. GM and Obama knew it was never coming back to the taxpayer. Just politicial fraud for back room deals.
And that excludes GMAC which will for sure push the total well past $100B. Add in Delco, spund off earlier, cooked books and also on the corporate welfare. A lot of wasted wealth for one failing business.
GM is now a penny stock, the article fails to mention that little tid-bit. Dilute the shares at 300:1 then do a reverse 1000:1 split and it will be worth a few bucks, maybe.
Worse yet, once all the taxpayers cash is shot down the toilet not only is there a lot of people unemployed and growing, taxes are going to go up while the dollar tanks. Going to dry up consumber discretionary spending pretty good, making this a long depression. In fact this has already started. The cost of a barrel of oil isn't going up, the value of the USD is going down. Some 8% this last month.
And to beat all the brand damage is going to last generations. The new GM will have the same culture and we will see them suck even harder for taxpayer cash. All for one persons ego and lack of respect for others fiscal liberty.
I dare Obama and GM to put this to a public vote.

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