Sunday, April 26, 2009


I've had the pleasure of reading a couple great articles on the car industry lately. First is the The Road Ahead  by Peter Boyer. It's a meandering article through the history of the automotive industry and arrives at present day. Normally meandering is not a compliment, but so many of us are searching for context on what is going on in the industry today, and for context, it's usually helpful to turn to history. Boyer, who consistently writes great articles for the New Yorker, also contrasts the Automotive Industry with the Steel Industry. It's a great article that also includes a lot of deal making insights that got us here, and what it take the industry to survive.

After reading that article, I was pleasantly surprised to read the Businessweek article titled, GM: Some Bondholders Want Bankruptcy. Turns out many of the bondholders hold credit default swaps, which are basically insurance in case the company goes bankrupt. It's going to be very hard to cut a deal with those bond holders because they make more money in a bankruptcy. It's a prudent move for the bondholders to buy the credit swaps because it protects them from Government or Union hardball. Brilliant move by the creditors to protect themselves...

The situation is really interesting to me because the finance world finds itself intertwined with the political world. I can't wait to see how this places out.