Many individuals own stock in General Motors, either by direct stock, mutual funds, 401K investments, or retirement contributions.
On July 10, news reports claimed that General Motors emerged from bankruptcy protection.
More accurately, the US government created a new company, Vehicle Acquisition Holdings LLC, which purchased four divisions of GM: Cadillac, Chevrolet, GMC and Buick.
General Motors then changed its name to Motors Liquidation Company. The GM stock symbol changed from GMGMQ to MTLQQ on July 15.
GM stock had been worth a maximum of over $90 per share at the start of May in 2000 and is currently worth less than $0.40 per share.
Motors Liquidation Company is now tasked with selling shuttered plants, settling liability claims and lawsuits from accident victims, paying secured and unsecured creditors, and paying bondholders. GM stock is expected to have “no value” even under the most “optimistic of scenarios” at the end of the ongoing bankruptcy liquidation process.
In addition to purchasing the four divisions of GM, Vehicle Acquisition Holdings purchased the name “General Motors”, and on July 10, changed its name to “General Motors”, thus leaving the impression the GM emerged from bankruptcy.
Ninety percent of this new “General Motors” company is owned by the US Government, the Canadian Government, and the United Auto Workers’ new VEBA retirement fund. The remaining ten percent is owned by Motors Liquidation Company (the original GM).
The new GM may offer and initial public stock offering as early as next year, with two billion shares being available for sale, while the current owners, listed above, own only ½ billion common shares.
GM sales began to decline earlier in the decade as rising oil prices led to a decrease in light truck and SUV sales. The primary cause of oil price increases were the failure of the global oil supply to grow since 2005.
Geologists have known since the 1950’s that the global oil supply would eventually reach a maximum, now known as “peak oil”. Numerous books published in the last five years suggest that peak oil would be reached in the 2005 to 2009 time frame. During 2006, the US Government examined the timing of peak oil and also determined that it could occur at any time.
Assorted books by experts, such as geologists Colin Campbell and Ken Deffeyes, explain that peak oil would lead to changes in oil prices, which would in turn lead to broader economic impacts, including economic recession or an economic depression or even an overall collapse of the global economy.
Based on sales projections, General Motors did not plan for the possibility of rising oil prices or the coming economic recession suggested by peak oil.
As part of the sale of the four automotive divisions to Vehicle Acquisition Holdings, the same team of top managers who lead the old General Motors to bankruptcy will continue to run the new General Motors.
In planning for the future, individuals, businesses, and public servants may find it beneficial to learn about peak oil; to consider how the stagnant global oil supply has impacted their finances over the past several years; and the various ways in which the declining global oil supply in the future will impact the economy, their investments, and their daily lives.
