Publish date:

Today's Outrage: Warning to GM Shareholders

Note to General Motors investors or would-be buyers of GM stock -- consider this your second warning. Shareholders are the least of the Obama Administration's concerns as it presses GM into bankruptcy.
Author:

If you own

General Motors

(GM) - Get General Motors Company (GM) Report

shares or are thinking about buying the stock, consider this your second warning.

Shareholders are the least of the Obama Administration's concerns as it pushes GM into bankruptcy.

With today's report that the

Treasury Department directed GM to prepare for a bankruptcy

filing by June 1, it's looking more and more like a fait accompli.

Basically, GM now has less than two months to prove it can restructure without the power of court protection to force unions to accept concessions and press bondholders and creditors to accept new terms. Unions and bondholders are in the drivers seats for this game of chicken.

Unions will need to accept deep job cuts and reductions in pay and benefits, especially health care and pension perks. Bondholders will need to be willing to swap debt for shares.

So current stockholders will feel the pain either way. In bankruptcy, shareholders are among the last in line for protection. In the debt-for-equity swap, shareholders face massive dilution of their holdings and share value.

Of course at this point, GM stock is only worth $2 and change, so there's not much value left there anyway.

Shares of

Ford

(F) - Get Ford Motor Company Report

, which chose to forego government bailout money and all the strings attached, have been gaining lately and are up to $4.24.

I'm not saying it's safe to bet on Ford either, by the way. With or without bankruptcy, GM will emerge as a more competitive rival. The mere threat of bankruptcy may be enough to get unions and bondholders to accept terms more favorable to GM.

What I don't get about all this is why the Obama administration is putting the screws to GM so forcibly while keeping the kid gloves on with

AIG

(AIG) - Get American International Group, Inc. Report

,

TheStreet Recommends

Citigroup

(C) - Get Citigroup Inc. Report

and

Bank of America

(BAC) - Get Bank of America Corp Report

. Are those companies any less problematic? Or is GM just an easier target for politicians seeking to show they are fixing things?

For whatever reasons, GM is caught in the crosshairs. And that can't be good for shareholders.

Hall is the editor of

TheStreet.com

. Previously, he served as deputy editor and chief innovation officer at

The Orange County Register

and as a news manager at

Bloomberg News

in Frankfurt, Amsterdam and Washington, D.C. As a reporter, he covered business and financial markets, worked in both print and television in the U.S. and Europe, and conducted in-depth investigative coverage at

The Journal-Gazette

in Fort Wayne, Ind. His work also has been published in a variety of newspapers including

The Wall Street Journal

,

The New York Times

and

International Herald Tribune

. Hall received a bachelor�s degree in journalism and political science from The Ohio State University and has taken graduate management science courses at Boston University.