GM's one very small & very expensive step toward economic recovery

June 1, 2009 GM filed for chapter 11 bankruptcy. 6 months ago, GM's former CEO Rick Wagoner said bankruptcy was unthinkable. He said American car buyers would not purchase cars from a carmaker in bankruptcy for fear of loss of warranty support. For the latest on this and other interesting tidbits of info on this monumental bankruptcy, go to GM's official bankruptcy website, www.gmreinvention.com. There you will find reassurances that current GM customers have nothing to worry about, GM asked the bankruptcy court to require continued honoring of all warranties, parts needs and promotions. Even customers of dealers that will not have their contracts renewed have nothing to worry about. Other GM dealers will gladly step up to the plate and fulfill any customer needs. I hope none of the unrenewed dealers were the only GM dealer within a 25-50 mile radius of their city/town. That would create a major inconvenience for existing customers and a discouragement for future prospective customers.

GM also plans to trim its dealerships down to 3600 by the end of 2010. From its 5969 dealers in 2008, this is a 40% reduction. At the end of 2008 GM had 20% share of the USA auto sales. Toyota had 19% share with 1500 dealers in the USA. Either GM is going to increase their market share or further reduce the number of dealers. Only time (36 to 60 months) will tell.

Now, for the really bad news. What can the owners of GM stock expect now. Go to gmreinvention.com and click on investors. This is how GM will respond to investors that try to file a claim with the bankruptcy court:

Why can't stockholders file claims with the court?
The Bankruptcy Code is clear that stock is an "interest" and not a "claim." Stockholders will be
instructed as to how they can establish their proof of interest. If a stockholder does file a "proof
of claim," the company will object to that claim on the basis that the stockholder does not have a
valid claim according to the rules of the Bankruptcy Code.

In 25 words or less, current GM shareholders are toasted road kill. Now we know why diversification of your investments is so important. If any of the GM shareholders are highly dependent on their GM share dividends in their retirement, they are in a world of pain. I hope most shareholders saw the writing on the wall before the US government did and bailed out. Ultimately, the bankruptcy court will decide if the shareholders will get any compensation. Let's face facts, folks. If the GM shares were worth anything, GM would not be in chapter 11. The share price reflects the market's and investors' valuation of the company as a profitable ongoing concern. The only good news for shareholders is if they also have a GM credit card, they will keep the bonus points and use them to purchase their next GM vehicle, if they feel so inclined and can still afford one. The stock of one of the (formerly) largest corporations in the world gets trashed but credit card points remain intact??!! With priorities like these, I no longer wonder how we got into this recession.