Ford (F, $3.20, up $0.48) and General Motors (GM, $5.06, up $0.98) both opened higher this morning as hopes of a bailout continue to get lifted. Although there will be strings attached it now appears the auto companies could get a life-line of $15 billion to start with. However, one of the possibilities is that some or all of the current CEO’s will have to step down.
One of the senators who is also the chairman of the Banking Committee said Monday that overhauling the top brass of Ford, GM, and Chrysler is necessary. Out with the old in with the new is what the public wants to see.
Of course, the details of a bailout plan are still being hammered out, but some of the early leaks include a Cabinet-level oversight board, along with a provision to withdraw the money if the board decides the companies are not doing enough to get back on track.
Even if this bailout package fails, the government could use some of the TARP funding to carry the automakers over to the Obama administration. Either way, Ford and GM could continue higher this week as we move closer to some kind of resolution.
The Ford December 3 calls (FLG, $0.44, up $0.18) are up nearly 50% from the 31 cents they were selling for on Black Friday while the GM December 5 calls (GMLA, $0.75, up $0.33) are about 25% cheaper. The December contracts expire in 11 days so manage your positions accordingly.
Rick Rouse
Rick@OptionsMentoring.com
