To restructure the company, GM must first develop a realistic operating plan that is cash flow positive. This is the essential first step in any corporate restructuring. After this plan is vetted and agreed upon by various stakeholders, these cash flows dictate the level of debt that the company can support. This operating plan also gives rise to the valuation of the company.
Once the cash flows, debt capacity and valuation are determined, then, and only then, can the company determine the size of the pie that must be divided up amongst the stakeholders. I have written this before. But GM has not followed this process, so it is no surprise that it hasn't been able to complete an out-of-court restructuring.
Stay tuned as more info comes to the forefront.
Cheers, Mike
Monday, March 30, 2009
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