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Moody's: Government-backed Bankruptcy Likely For Automakers

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December 16, 2008 – Comments (1) | RELATED TICKERS: GM , F

[Time to end my Ford pick.]

SAN FRANCISCO -- Moody's Investors Service on Tuesday said there is a 70% chance that the U.S. government will provide financial assistance in a prepackaged bankruptcy scenario for the domestic automakers. The credit ratings agency put the probability of a government bailout without bankruptcy at 25%. A "freefall bankruptcy" with no federal lifeline has only a 5% chance of taking place, according to Moody's. General Motors Corp. shares rose almost 4% to $4.24 in midmorning trades while Ford Motor Co. was mostly flat at $3.18.

Copyright © 2008 MarketWatch, Inc.

1 Comments – Post Your Own

#1) On December 16, 2008 at 12:09 PM, kdakota630 (29.47) wrote:

This is no surprise, but this is Jim Rogers' take on the GM bailout:

Rogers: Bankruptcy Good for GM

Investment guru Jim Rogers has opposed every government bailout since the financial crisis began over a year ago.

So it’s no surprise that he thinks General Motors should be allowed to enter bankruptcy.

“It would be good for GM to fail,” he told Bloomberg TV.

“They could renegotiate a lot of bad contracts and clean up a lot of bad mistakes.”

There is no reason to liquidate any of the Big Three automakers, Rogers says.

“Let it be a regular bankruptcy and let the courts and creditors sort it out,” he says. “This is the way the system is supposed to work.”

The idea is that “when people get in trouble, the competent take over the assets of the incompetent,” Rogers explains.

“What’s happening now is that the government is taking assets away from the competent, giving them to the incompetent and saying, ‘Now, compete with the competent.’ ”

The result: “It’s bad economics and bad morality. It never works.”

Rogers blasted the government’s handling of the financial crisis. “It has spent $8 trillion to $10 trillion trying to prop everyone up,” he says.

“That will lead to the demise of the dollar, much higher interest rates, and much higher inflation. It will be disastrous for America.”

Others are coming to agree with Rogers. "There's bailout fatigue right now," Rep. Roy Blunt (R-Mo.) told the Los Angeles Times.

“People are tired of 'Give us the money and we'll see what we need to do with it.'”

© 2008 Newsmax. All rights reserved.

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