We own GM now I guess

[m21sniper]

Originally Posted by milt

I took ashes to mean Chap 7.

Fair enough. I apologize for the ambiguity on my part.

[Rich76_911s]

Originally Posted by HardDrive

You guys are acting like the government had a choice. Consider what would happen if GM were allowed to go into bankruptcy without 'debtor in possesion' financing from Uncle Sam.

I wish the one lesson we would learn from the banking and the auto mess, is that when a company is "too big to fail" it is just that, too big. Failure is a key component of capitalism, without it we end up here again, and again, and again.

[the]

Originally Posted by HardDrive

You guys are acting like the government had a choice. Consider what would happen if GM were allowed to go into bankruptcy without 'debtor in possesion' financing from Uncle Sam.

Sure the govt had a choice, plenty of choices.

It could have simply provided the financing. It did NOT have to take over 60% of GM, or give 20% to the UAW.

Obama did so because he is bought and paid for by the UAW. This is a totally fake bky, and a fraud on the public. The govt took over GM (and gave a huge chunk of GM to the UAW) to protect the UAW, period.

If GM were permitted to file a legitimate bky, and do the things that it would be allowed to do in that bky, it would for sure come out reorganized and ready to compete.

It will have a much harder time now, and far more expensive to the taxpayer, because under this fraudulent bky the very things that have killed GM and COULD have been taken care of in the bky are still in place. And, amazingly, now actually OWN a big chunk of GM.

It's really remarkable, and 99% of the public has no idea. Maybe GM will recover, maybe not. But one thing for sure, either way, the UAW is protected. At the worst, GM just ends up being a hidden long term entitlement program, taking taxpayer money and paying it out to the UAW, while "running" a defunct, non-profit corporation.

[the]

Also, in protecting the UAW and their benefits, the Govt is in the unique position of being both the business (GM), and it's customer! That's a weird situation.

So, for example, to help its business, the govt today announced that it has speed up it's purchase of fleet vehicles from GM.

How awesome is that! The govt has the power to use taxpayer dollars to purchase vehicles it doesn't really need from it's own Gov't run car company.

The wonders you can achieve when you have the power to (1) print money and (2) take money under threat of imprisonment from your subjects . . . err, citizens.

[Zeke]

Maybe we don't have much of an idea, but what you are implying, AFAIC, is that the UAW go pound sand, no more pensions for the retired, etc. Sure, legacy costs are huge, but does it make total sense to promise a generation or 3 a decent life with benefits and then just take them away?

Oh, I guess plenty of airlines and other companies have done that like Enron and WorldCom, but that hasn't made it any better for anyone who thought they could work a lifetime and then retire.

Anyone can put the blame on the UAW if they so choose. It's one of many factors, not any that were caused by the rank and file assembly line worker or lower level white collar like a designer or engineer.

[jyl]

Originally Posted by m21sniper

Got some evidence to back this claim?

Milt, many companies survive Ch 11 and come back leaner and meaner and more competitive. Whould GM/Chrysler? Probably at least one of them would survive...but i do not profess to have a crystal ball.

As of end 2008, GM's cash level was about to fall below the minimum required to function, and no bank(s) were able/willing to step up with many tens of $BNs of necessary DIP financing for a re-organization in BK.

[the]

GM could have used the bankruptcy laws to effectively reorganize - that includes, but is not limited to, UAW issues. It could have made decisions based on business. As it was done, it was more about politics than business. The govt took over to make sure its favored interests were protected. Thus, large parts of the benefits of bky protection are completely unavailable to GM.

[the]

Oh, and no doubt, GM should have filed for Bky a long time ago. At least a year ago, probably more.

[jyl]

Wait a minute. The taxpayer is providing several tens of billions to fund GM's restructuring. But you propose the taxpayer not receive any ownership stake?

Then who would own the restructured GM including those tens of billions of dollars?

Originally Posted by the

Sure the govt had a choice, plenty of choices.

It could have simply provided the financing. It did NOT have to take over 60% of GM, or give 20% to the UAW.

Obama did so because he is bought and paid for by the UAW. This is a totally fake bky, and a fraud on the public. The govt took over GM (and gave a huge chunk of GM to the UAW) to protect the UAW, period.

If GM were permitted to file a legitimate bky, and do the things that it would be allowed to do in that bky, it would for sure come out reorganized and ready to compete.

It will have a much harder time now, and far more expensive to the taxpayer, because under this fraudulent bky the very things that have killed GM and COULD have been taken care of in the bky are still in place. And, amazingly, now actually OWN a big chunk of GM.

It's really remarkable, and 99% of the public has no idea. Maybe GM will recover, maybe not. But one thing for sure, either way, the UAW is protected. At the worst, GM just ends up being a hidden long term entitlement program, taking taxpayer money and paying it out to the UAW, while "running" a defunct, non-profit corporation.

[m21sniper]

Originally Posted by jyl

As of end 2008, GM's cash level was about to fall below the minimum required to function, and no bank(s) were able/willing to step up with many tens of $BNs of necessary DIP financing for a re-organization in BK.

If GM wasn't holding out for a gov't rescue they'd have declared bk when they had the required assets to do so.

[Porsche-O-Phile]

Do you HONESTLY think the taxpayer is going to get benefit from this either way? C'mon.

Let's assume for a moment that Government Motors is wildly successful - they come up with a new line of vehicles that run on water and get a zillion miles to the gallon of H2O. They make great looking, high-performance sports cars, fantastic utility vehicles and pickups, family cars, the works. They sell like hotcakes and the return on investment is 100-to-1.

You think our taxes are gonna' drop even one penny?

HAHAHAHA!!!

[jluetjen]

Originally Posted by jyl

Wait a minute. The taxpayer is providing several tens of billions to fund GM's restructuring. But you propose the taxpayer not receive any ownership stake?

Then who would own the restructured GM including those tens of billions of dollars?

Actually taxpayer $'s should never have been used to bail out the company. If no one could find any investors to invest that sort of money into GM, it should have said something. You know, like it's a bad investment.

But the self proclaimed gifted man who was destined to become the leader of the free world decided that he knew better.

A fool and his money is separated. The US Treasury can kiss that money good-by.

[Hebrewhomeboy]

Forgive my ignorance, but I don't have much education on matters such as the stock market and bankruptcy. I do, however, own some GM stock. So my question is: is my GM stock going to retain a value (even a low one), or is it going to become completely worthless? From what I understand it depends on the kind of bankruptcy they file, but like I said I'm not too keen on those. I just noticed that GM stocks are 75 cents per share right now, and I figured if there's a chance they'll go back up again, then I'd like to buy while they're low.

According to the news blurb on my stock account webpage, the government is giving GM something in the area of $30 billion dollars in exchange for a 60% share in the company. Canada is getting I think around 12%.

[jyl]

I agree GM should have filed BK a year ago. I and many others posted as much, back then. Their previous CEO Wagoner was, well, come up with your choice of uncomplimentary adjective. He kept driving GM down a dead end street, and made today's alternatives even worse than they would have been. (Oddly, some here on PPOT were outraged when the govt forced Wagoner to resign.)

[the]

Originally Posted by jyl

Wait a minute. The taxpayer is providing several tens of billions to fund GM's restructuring. But you propose the taxpayer not receive any ownership stake?

Then who would own the restructured GM including those tens of billions of dollars?

Under normal bankruptcy law, the equity owners (i.e. shareholders) are wiped out, and the creditors (bondholders, etc.) would own the company. A DIP financer normally doesn't prepare the bky filing for the company, and normally doesn't take ownership of the company at the beginning of the bky. The DIP of course has a claim for the money owed, and has to be paid back.

The bottom line is this: GM could have been permitted to file a bky and avail itself of all of the protections and rights of bky. This, of course, includes the right to reject contracts, including union contracts.

Obama and the govt made sure to structure this in a way such that the UAW is protected, no matter what. For all practical purposes, large chunks of the bky law, designed to help companies effectively reorganize, are completely unvailable to GM. For purely political reasons.

[jyl]

A normal BK process as you describe would not have helped GM.

There is no bank able to provide the needed scale of DIP financing. Look at what the big banks that are GM's major bondholders are doing - they are in the markets trying to raise $5BN here and $10BN there to shore up their own balance sheets and pay back the TARP money - they just don't have $30BN to spare.

By late 2008, GM was in a liquidity crisis. Tearing up the UAW contract doesn't help if the company doesn't have the cash to operate.

Originally Posted by the

Under normal bankruptcy law, the equity owners (i.e. shareholders) are wiped out, and the creditors (bondholders, etc.) would own the company. A DIP financer normally doesn't prepare the bky filing for the company, and normally doesn't take ownership of the company at the beginning of the bky. The DIP of course has a claim for the money owed, and has to be paid back.

The bottom line is this: GM could have been permitted to file a bky and avail itself of all of the protections and rights of bky. This, of course, includes the right to reject contracts, including union contracts.

Obama and the govt made sure to structure this in a way such that the UAW is protected, no matter what. For all practical purposes, large chunks of the bky law, designed to help companies effectively reorganize, are completely unvailable to GM. For purely political reasons.

[the]

Again, the bottom line is this: GM waited too long to file bky. 2 years ago, it was still a real company, but it hasn't been for a long time. So the govt likely would have had to step in to provide at least some financing at this point. But, even with that financing, GM could have been permitted to file a bky and avail itself of all of the protections and rights of bky. For purely political reasons, including how wealth is redistributed, and who the govt chooses to be political winners and losers, it was not permitted to do so, but was nationalized instead.

[the]

Originally Posted by Hebrewhomeboy

I just noticed that GM stocks are 75 cents per share right now, and I figured if there's a chance they'll go back up again, then I'd like to buy while they're low.

your future unborn child will thank you to not do that.

[Hebrewhomeboy]

Well said. I'll just chalk my GM stocks up to a total loss I guess.

[jyl]

The only protection of BK that GM is arguably not availing itself of is the power to nullify its UAW contract. Everything else - wiping out debt, terminating dealers, etc - it is doing.

So it's worth looking at that contract, i.e. the one the UAW just voted on. Here's what I've read about it so far (edit -adding to this as I read more):
- GM will close 14 plants and cut UAW-represented employees from 60K to 40K. GM will convert one or two closed plant to build small cars that it had planned to import from China.
- GM will take over 5 Delphi plants and continue the UAW/Delphi contract there.
- GM's $57BN obligation for retiree medical will be cut by appx 75%. GM will pay about $10BN cash, plus equity. I've read this will cut the retiree medical cost per car to appx $300/car.
- GM can hire new unionized employees at the "Entry level" of $14/hr. In 2015, the number of such employees is capped at 20-25% of total hourly workforce. The traditional full UAW scale is $28/hr. In theory, if GM had 25% entry level and 75% traditional, its blended wage rate would be $24.50. Toyota is $26/hr and Honda is $24, by the way. However, at present GM has no need to hire new employees.
- Other cuts to overtime, COLA, bonuses, etc are supposed to total $1.5BN/yr savings
- The UAW gives up its right to strike. Any disputes between UAW and GM are resolved by binding arbitration.
- I'm not sure what, if anything, happens to retiree's pension benefits. GM's plan is underfunded by appx $12BN.

I don't know if these changes to the UAW contract are "enough" but they certainly are substantial.