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Winners And Losers In GM Bankruptcy

General Motors is heading down the road toward an almost certain bankruptcy filing Monday.

The iconic automaker's stock closed at 75 cents a share Friday, after trading as high as $18 during the past year.

There are many players in the GM bankruptcy drama, including workers, taxpayers, and bondholders, to name a few. Who among them stands to benefit and who looks likely to lose?

CBS MoneyWatch.com Editor at Large Jill Schlesinger took a look on The Early Show Saturday Edition.


THE WINNERS

THE BIGGEST: FOREIGN CAR MAKERS: If you're going to buy a car right now, what would you buy? You'd have to have some concerns about buying one from GM. You may get a good bargain. But Toyota and Honda have a huge competitive advantage right now just because of the uncertainty surrounding GM.

BONDHOLDERS: Some of the bondholders bought their bonds at really low prices. They're going to see profits.

What about bondholders who say they lost their whole retirement investment? How do they profit? The majority of the bondholders are institutions, NOT individuals. That means a hedge fund could go out and buy GM bonds in the market at a lower price and then make money if the ultimate settlement value is higher. It's true that individual investors who may have owned the bonds from years ago could lose out.

Incidentally, the difference between a stockholder and a bondholder is that the former owns part of the company. Shares of stock don't come with guarantees. But a bondholder lends the company money. Essentially, bondholders get an IOU from the company. GM bondholders are owed $27 billion. Now, GM is offering them 10 percent equity in a new, reorganized company.

LAWYERS: Bankruptcy is a very procedure-heavy process. There are lots of pieces, lots of lawyers involved. You have to have them to get the process done, and they're going to make a ton of money in this.


THE LOSERS

WORKERS, DEALERSIPS AND SUPPLIERS: This is a no-brainer. They're going to lose jobs. There are 60,000 GM employees now, and the company plans to get down to 38,000 by the end of 2010. "This is a terrible human price to pay for this bankruptcy," Schlesinger told co-anchor Erica Hill. Meanwhile, GM's suppliers are under pressure: Fewer GM cars being sold means less of their products being sold.

UNIONS: The unions gave up a lot of power in this process. I think we've seen a diminished role for unions in this country for a number of years. This really illustrates how little power unions have nowadays. When it came down to it, they had to give up whatever the government wanted them to give up. The unions basically had to say to themselves, "We can try to hold out and get better benefits for our members. While we do this, the company goes broke. OR, we can give in a bit, and we lose benefits and jobs for our members, but there will still be a company intact." It was a very tough place for them.

TAXPAYERS: Washington has pumped $20 billion into GM already, and it seems likely some 50 billion more taxpayer dollars will be heading into company coffers. There is no way of knowing if GM is going to come out of this and survive. There is a LOT of risk here. It could emerge from bankruptcy with fewer obligations and employees, but still could be in big trouble. Toyota and Honda could eat them for lunch, and we'd all lose $70 billion.

It's never a fun thing to bail out any industry. But this is going to be a particularly tough situation. "There's a very big possibility," Schlesinger told Hill, "that the U.S. taxpayer is a big loser because, not only do we have to come out of bankruptcy, we have to get GM to be profitable, and then give us our $70 billion back. That's a real long shot at this point. We're propping them up for a good reason: We're in the middle of a recession. We don't want a big ripple effect. But it doesn't mean we're getting our money back. It doesn't mean it was a great investment."