Ah, who needs the End of the World when we are already leaving in financial apocalypse? More grim news from General Motors and Blockbuster today as both companies flirt with the edge of oblivion. An interesting trend emerges from both these stories, more on that a bit later.
First the news of GM via the Calculated Risk Blog (by way of Reuters):
From Reuters: GM shares skid on bankruptcy preparation news
... a source familiar with the company's plans told Reuters it was in "intense" and "earnest" preparations for a possible bankruptcy filing.
Also from Reuters: U.S. carmakers at 70 percent risk of bankruptcy: Moody's
Moody's Investors Service said it still sees a 70 percent chance of bankruptcy for Detroit's automakers ... "Given the lack of progress achieved and the additional progress that will be required in the revised plans, this threat will need to be seen as credible in order to compel adequate movement on the part of stakeholders," Moody's said in a note dated Monday.
As was hinted at before this will most likely be a Chapter 11 style re-structuring (not a liquidation) with the U.S. Government providing the debtor in possession financing. Ideally, GM will survive. A leaner, meaner, hopefully smarted car company. But they will survive.
Blockbuster? Blockbuster not so much. The iconic symbol of the Saturday Date Night movie rental and the minimum wage employer of every Would-be Quentin Tarantino and Kevin Smith looks like it might be on its last legs.
From MSNBC.com:
Movie rental company Blockbuster Inc. said Monday the risk that it may not complete financing deals raises “substantial doubt” about its ability to continue as a going concern.
Dallas-based Blockbuster, which has struggled amid the rising popularity of DVD-by-mail services like Netflix, disclosed the warning in a filing with the Securities and Exchange Commission. The company had already cautioned last month that its auditor was likely to raise doubts about its ability to stay in business.
Much like GM Blockbuster has earned its failure. Blockbuster was murdered by poor company management up and down the line.
What's interesting about this current economic downturn to me is that everything everyone knew would happen "Some Day" in the Far Flung Future is happening Today. GM is a dinosaur living on borrowed time and has been since the 70s. Anyone with a Netflix account knew that Blockbuster was another dinosaur waiting for history to run it down and catch it. But I think everyone had not anticipated the dinosaurs to die out quite this quickly.
So who's next? (Personally I say put money on Paper Book Publishing; Kindle is the future.)