General Motors (GM) is widely expected to file for bankruptcy protection Monday, setting into motion the restructuring of the iconic auto maker, once by far the largest in the U.S.
The Obama Administration is expected to provide GM with at least $30 billion in financing to carry it through the bankruptcy proceedings. GM has already received $20 billion in government loans.
The government would get a 72.5% stake in the newly formed company, while the United Auto Workers will get 17.5% and creditors the final 10%, with an option to increase that to 25%.
So far, GM’s long slide toward bankruptcy has had little impact on the broader stock markets, as investors have undoubtedly calculated the filing into their long-term forecasts. The move has been expected for months.
Meanwhile, Chrysler could emerge from bankruptcy next week if a federal judge approves a deal that would sell the car maker to a new entity led by Italian car maker Fiat.
Investors are likely more focused on the release of U.S. unemployment figures on Friday. Economists expect the jobless rate to climb to 9.2% for May. It’s unlikely consumers will feel confident enough to resume spending if the unemployment rate continues to climb, a dynamic that could prolong the recession, now well into its second year.
Auto makers and retailers will report May sales on Tuesday and Thursday, respectively. New-vehicle sales are expected to rise from April but still remain far below year-earlier levels.
This week’s retail figures will mark the first time since 1979 that the data will not include data from Wal-Mart (WMT), which said in April it would stop reporting that information. Strong results at the world's largest retailer and drugstore chains drove the biggest monthly gain in same-store sales last month since August, at 1.2%.
Home builders Hovnanian Enterprises (HOV) and Toll Brothers Inc. (TOL) are expected to post losses when they report fiscal second-quarter results on Tuesday and Wednesday, respectively. The latest data has not shown much improvement in the housing market, and prices are being hurt by a glut of unsold houses.
On Tuesday, the National Association of Realtors will issue its April pending home sales index. The index increased 3.2% in March.
Also out Wednesday are data on April factory orders, which are expected to rise slightly. A revised number for first-quarter productivity is expected Thursday.
Finally, Treasury Secretary Timothy Geithner travels to Beijing this weekend to urge Chinese leaders to rethink the export-oriented economy that has created years of trans-Pacific trade tensions.
