That’s right. The book value of GM’s [GM 3.85 -0.17 (-4.25%) ] equity is negative; Ford’s [F 2.26 -0.22 (-8.87%) ] equity is a barely significant amount of its capital. These companies’ debt, it seems, has overtaken any equity they have in their own business. That puts power not in the hands of stockholders, but the debt holders.
Cramer sees parallels in Ambac [ABK 1.16 -0.11 (-8.66%) ] and MBIA [MBI 4.29 -0.42 (-8.92%) ] , where he said the common-stock investor is no longer in control. Citigroup [C 4.53 -1.37 (-23.22%) ] faced a similar situation in 1990 until Prince Alwaleed of Saudi Arabia came to the rescue. If Citi – and Bank of America [BAC 10.20 -0.45 (-4.23%) ] , Wachovia [WB 5.54 --- UNCH (0) ] , Merrill Lynch [MER 277.474 -0.526 (-0.19%) ] and Lehman Brothers [LEH 0.061 -0.003 (-4.69%) ] – don’t find that kind of angel this time around, Cramer said, these financials could end up like the autos.
So don’t let any on-the-surface cheapness of a stock lure you into buying, especially when it comes to GM and Ford, both companies Cramer said could be owned by its creditors soon enough.