Whither General Motors?

It looks like President Obama will have his way with the Chrysler bankruptcy. Between demonizing bondholders in public and intimidating them in private, the president has gotten enough secured bondholders to cave that Judge Arthur Gonzalez will most likely approve the prepackaged transfer of Chrysler's assets to Fiat, the United Auto Workers (UAW), and the U.S. and Canadian governments. The Chrysler cramdown is a forshpeis (appetizer) for the much larger GM bankruptcy to come. Chrysler "only" has $6.9 million in bondholder debt compared to GM's $30 billion.

The president has been talking about speculators and hedge fund operators. It's easy to paint them as fat cats, but the Chrysler creditors who tried to litigate the cramdown in bankruptcy court represent pension funds and other regular folks. Many of GM's bondholders are individual investors too; people looking for reliable interest income.

Patricia St. Pierre is a nice lady. She and her husband Cliff worked hard, raised a family, got their kids through college, and retired on their investments. They live on Grosse Ile, a comfortable island suburb downriver of Detroit. She's 70 now and she's worried about having to go back to work because their life savings may be wiped out in a GM bankruptcy. Patricia and her husband have what she calls a "large amount" invested in unsecured GM bonds. Her husband shared with ABC News that it's about $200,000.

The St. Pierres attended a meeting at the town hall in Warren, MI, across the street from GM's Tech Center with other older individual bond holders as the president was announcing the bankruptcy of crosstown rival Chrysler. When I asked her how she came to own the bonds, she said that they had moved to bonds during a downturn in the stock market. They wanted to try "something that was safe." They initially did well with Ford bonds but moved to GM debt three years ago when Ford seemed to be at greater risk than GM. If you remember, Ford ran into rough financial waters and mortgaged the entire company for the $26 billion that's keeping it afloat without government aid.

At the time, Ford looked precarious. Ford Motor Company has a history of near death, plus the family remembers the failure of Henry Ford's first automotive venture. Ford hung on to the Model T for too long and then shut down for six months in 1927 to switch over to the Model A. Henry Ford had to be dragged kicking and screaming into the 1920s, seven years late. Then, after Edsel Ford died during WWII, a senile Henry took over management of the company. Henry was forced out in favor of his grandson Henry Ford II by Eleanor and Clara Ford, who by then controlled 51% of the company. Hank the Deuce brought in the so-called "whiz kid," revived the company with modern management, and introduced the revolutionary 1949 Ford, the first modern postwar car. Barely a decade later, Ford was back to losing millions introducing the superfluous Edsel line in the middle of a recession.