Bankruptcies don’t usually occur because a company suddenly stops paying interest on its debt…its because creditors start having a "crisis of confidence" and pull their credit lines. That causes a liquidity crisis and causes the creditor company to enter into bankruptcy.
We could be seeing the beginning stages of this. GE sees the same problems that I do. And with so much debt coming due, GM could see a real crisis of confidence. The company has more than $15 billion of debt coming due this year alone according to Bloomberg…
NEW YORK (Reuters) – General Electric Co.’s(NYSE:GE – News) GE Capital unit has withdrawn a $2 billion loan facility for General Motors (NYSE:GM – News) and its suppliers, the Financial Times reported on Tuesday.
GM, which slashed its 2005 profit outlook last week due to a lagging U.S. auto market, will now provide its own factoring, or early payment, service to its suppliers, the paper reported.
"After GE Capital announced plans to discontinue their early pay program, it was important for GM to continue to provide this benefit to its suppliers given the current challenges to the automotive industry," Mark Fischer, director of supply risk management at GM, told the paper.