GM should file for bankruptcy: Hedge fund manager

11/11/08, ToI

 

NEW YORK: General Motors Corp, the biggest US automaker, should file for bankruptcy rather than taking money from the government, hedge fund manager Bill Ackman said. “It has been hamstrung for years because it has too much debt and it has contracts that are uneconomic,” Ackman, manager of the Pershing Square Capital Management LP hedge fund in New York, said. “The way to solve that problem is not to lend more money. They should do pre-packaged bankruptcy.”

GM is petitioning the US government for aid after saying last week that it may not have enough cash to operate this year. A bankruptcy would leave bondholders in control of the company in exchange for forgiving some debts, Ackman said.

GM dropped to its lowest level in 59 years yesterday after a Deutsche Bank AG analyst downgraded the shares and said they may be worthless in a year. The slump demonstrated mounting pessimism that a turnaround will succeed at the automaker amid a global credit crisis and the worst sales market in at least 15 years.

Meanwhile, GM fell 1 dollar, or 23%, to 3.36 dollar in New York Stock Exchange composite trading yesterday, its lowest close since June 17, 1949, according to Global Financial Data in Los Angeles.

The shares have lost 86 per cent of their value this year.

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