Brace for default impact

GM bondholders have been bracing themselves with the increasing likelihood of a default. What has caught them off-guard is the speed of the decline, which government intervention has failed to arrest. They are now facing up to even lower recovery rates, possibly in the 20 cent on the dollar range.

The above recovery rate explains why this business is spent - when the assets of the business are worth such a small fraction of its debt, any further cash to fund GM is simply money down the drain. Other commentators have been hammering this away since the crisis began, but Washington blinked in the face of the political dead-weight of bankruptcy.

I think there is no longer an "if" on bankruptcy proceedings, merely a discussion on the form of these proceedings. It is hard to be optimistic that GM can suddenly face up to its 20 year lag behind its Asian and German rivals and make cars that a) work, b) have style and c) incorporate 21st century manufacturing processes.

Sadly, it's best to admit that it's over. Wind this spent force down as soon as possible. If something can be salvaged from the wreck of GM, so much the better. But General Motors' time has passed - prolonging the agony is quite cruel in the long run.