GM to say, 'more aid or bankruptcy'

[Gpond]

General Motors Corp. will offer the government the choice of giving it billions more in bailout money or seeing it file for bankruptcy when it presents a restructuring plan next week, according to a report published Saturday.

http://www.marketwatch.com/news/story/GM-say-more-aid-bankruptcy/story.aspx?guid={D2483F8A-638A-4A2B-9EC2-428EE920D5E5}&dist=hplatest

 

[clifp]

I am shocked!, shocked I tell you that GM will need more government aid.

 

[ikubak]

I don't know about everyone else, but I am getting a little tired of companies saying, "give me more money or I'll file for bankruptcy." I have owned a few GM cars and that's why I now drive a Honda and so does DW. If you make a good car, people will buy it.

 

[Gpond]

Just about every bond fund and money market owns GM bonds. GM going BK could potentially break the buck on money markets that may spark another run on the banks like we saw last September.

 

[Gpond]

I don't know about everyone else, but I am getting a little tired of companies saying, "give me more money or I'll file for bankruptcy." I have owned a few GM cars and that's why I now drive a Honda and so does DW. If you make a good car, people will buy it.

Yet GM is building $1B plants in Brazil and Thailand. Go figure.

 

[Lakewood90712]

Just about every bond fund and money market owns GM bonds. GM going BK could potentially break the buck on money markets that may spark another run on the banks like we saw last September.

Re org. BK may not be a complete wipe out of the bondholders, but share holders (including myself) are toast.

BK is the only real way for GM to survive.

 

[Gpond]

Re org. BK may not be a complete wipe out of the bondholders, but share holders (including myself) are toast.

BK is the only real way for GM to survive.

You may not be aware of this.

Under the terms of its bailout, GM is seeking to reduce its unsecured debt by two-thirds to $9.2 billion and has offered to exchange equity in the restructured company to bond holders.
GM bondholders demand better terms-Detroit News | Markets | US Markets | Reuters

GM wants to turn the bond holders into stock holders. This will really dilute the stock price and down the road more then likely wipe the ex bondholders out also when they do file for BK.

 

[clifp]

As indirect bond holder (Vanguard high yield) of GM, I'd be delighted with 33 on the dollar, frankly anything over .20 is higher than GM debt has been trading recently. Although we demand a huge dilution of GM shareholders 90%+.

 

[Gpond]

As indirect bond holder (Vanguard high yield) of GM, I'd be delighted with 33 on the dollar, frankly anything over .20 is higher than GM debt has been trading recently. Although we demand a huge dilution of GM shareholders 90%+.

Under GM's plan. 66% of bond holders will be turned into stock holders. I imagine the 34% is bonds that mature this year.

 

[73ss454]

I just read that UAW walked out of talks with GM today. I hate to say this but unless GM breaks the back of the UAW and goes into BK their toast. Seems so obvious to me yet the government gives them billions, I don't get it.

 

[mf15]

Makes me a little nervous have just about all of IRA sitting in FDRXX Fido core MM,
but now the 7 day yield has dropped to around 1% so I guess it is time to add slightly more risk or go to govt bond fund.

As far as GM too big to fail, I dont look at it that way, more like too important to fail.
This countrys GDP is 70% service we need all the industry we can get.
As a counter point our steel industry is much leaner and meaner, but quite downsized on tonnnage, I think.
Our primary Aluminum capacity is still good, but with all of Alcoa's problems who knows.
What they should do is change the tax laws to encourage companies to not outsource jobs overseas.
My 3 cents,= 2 cents adjusted for inflation.
Old Mike

 

[Gpond]

I just read that UAW walked out of talks with GM today. I hate to say this but unless GM breaks the back of the UAW and goes into BK their toast. Seems so obvious to me yet the government gives them billions, I don't get it.

Union breaks off talks with GM

The United Auto Workers has walked away from concession talks with General Motors Corp. over a dispute on payments to a retiree health-care fund, according to a report published Saturday.

GM's report to the Treasury Department due Tuesday is expected to spell out how the iconic automaker plans to remain viable.
http://www.marketwatch.com/news/story/Report-Union-breaks-off-talks/story.aspx?guid={C6831869-1E05-4E6A-AF0D-1D85BA228254}&dist=hplatest

 

[freebird5825]

I just read that UAW walked out of talks with GM today. I hate to say this but unless GM breaks the back of the UAW and goes into BK their toast. Seems so obvious to me yet the government gives them billions, I don't get it.

Disclaimer: I am a total outsider to the auto industry.
My guess is an outside mediator (govt agency type) will be forced on both warring parties.
Pure logic => if GM mgmt and/or UAW can't see the bigger picture , then somebody will certainly show it to them.
"Make up and play nice, boys, or nobody gets a nice green lollipop."
Alway follow the money.

 

[cashflo2u2]

Any money manager of a MM fund that still holds GM at this late date would have to be brain dead.

 

[Zathras]

Yet GM is building $1B plants in Brazil and Thailand. Go figure.

Well, if GM is profitable and growing in Brazil and Thailand, it is easy to figure.
If they are importing the vehicles built there into the US, that would be rediculous.

 

[clifp]

Under GM's plan. 66% of bond holders will be turned into stock holders. I imagine the 34% is bonds that mature this year.

I don't think so, although I have been unable to find a detailed article, probably because the negotiations are confidential, the Bloomberg article says this.

The government is requiring that GM convince bondholders to accept terms that reduce $27.5 billion in unsecured debt to $9.2 billion in an exchange for equity. About $14.1 billion in debt won’t be affected by the exchange offers.
“The problem with the debt exchange is that with little equity value in GM, and a highly leveraged company remaining, the bondholders are not receiving significant value for giving up their par claims,” Barclays’ Johnson wrote in the report.

The total market cap for GM is only $1.5 billion (and overpriced at that small amount IMO). So the bond holders are being asked to transform more than 18 billions in debt into some fractional ownership of GM. I have been saying for more than year, the enterprise value of GM has been a negative number (i.e. bankrupt)for since at least 2005 and the company should be liquidiated. I am no bankruptcy lawyer, but I think if the bondholders agree to give up debt for the equity now before the company goes bankrupt, they risked being hosed even worse when GM eventually does enter chapter 11 or 13 bankruptcy. I think GM is a massive lemon, it has no hope of making money in the future, the long we keep running the more taxpayer money it is going to burn through, lets take it to junkyard and sell it for parts.l

 

[samclem]

Well, if GM is profitable and growing in Brazil and Thailand, it is easy to figure.
If they are importing the vehicles built there into the US, that would be rediculous.

GM cannot survive as a company with the labor costs they pay now. If they can make cars at lower cost overseas and make a profit when they sell them here, that's what you (we, all of us) should care about as shareholders. If we aren't shareholders, then we don't have a say in the issue of where they build their cars.

It's likely bankruptcy is the only way GM can end up with labor rates and debt service costs that will allow them to build cars in the US and be competitive in the future. Reorg under the bankruptcy laws is the best way to save the company. Unfortunately, many politicians owe the unions a lot for support in previous elections, and hope to have their support in the future. These unions don't want to cure what ails GM, they want to keep the terminally sick GM on life support as a "pass through" to allow new government bailout funds from taxpayers to go to the unions and their members. Any taxpayer $$ supplied to GM under this scheme should be seen for what it is--a payoff to unions using your money, and a step which delays the day when the company can be a real business again.

 

[Zathras]

If we aren't shareholders, then we don't have a say in the issue of where they build their cars.

But we all are now, until GM pays back the bail-out/loan.
I think it is only smart for GM to be building plants in countries where their business is growing. However, I also feel that if the government is going to bail them out, they should use that money to hire American workers.

I agree with you that bankruptcy is likely the only way GM can restructure their agreements with labor. And I fear your description of what the unions want is accurate.

 

[haha]

But we all are now, until GM pays back the bail-out/loan.
I think it is only smart for GM to be building plants in countries where their business is growing. However, I also feel that if the government is going to bail them out, they should use that money to hire American workers.

And ship them to Brazil?

Ha

 

[Texas Proud]

Disclaimer: I am a total outsider to the auto industry.
My guess is an outside mediator (govt agency type) will be forced on both warring parties.
Pure logic => if GM mgmt and/or UAW can't see the bigger picture , then somebody will certainly show it to them.
"Make up and play nice, boys, or nobody gets a nice green lollipop."
Alway follow the money.

Totally out of the industry also....

BUT, I think management gets it... but the UAW was the sticking point on the attempt by Congress to 'fix' the problem... they bet that the Bush admin would not let them go under and they 'won'... I think they are betting that Obama will also not let GM go under... so why give up all your leverage when you 'know' that taking a hard position will not hurt you... make the other guy give up more from HIS side...

I think that GM should go into BK, WITH gvmt support and get rid of shareholders, make bondholders (all of them) shareholders to get rid of all debt that they can... get rid of the UAW contract, get rid of the 'life' health plan that is crippling the company... and cut back the wages to ALL union workers to a reasonable wage (from what I have read that is still a good wage)...

We will see who wins the 'sweat' game...

 

[Frugality_of_Apathy]

GM cannot survive as a company with the labor costs they pay now. If they can make cars at lower cost overseas and make a profit when they sell them here, that's what you (we, all of us) should care about as shareholders. If we aren't shareholders, then we don't have a say in the issue of where they build their cars.

It's likely bankruptcy is the only way GM can end up with labor rates and debt service costs that will allow them to build cars in the US and be competitive in the future. Reorg under the bankruptcy laws is the best way to save the company. Unfortunately, many politicians owe the unions a lot for support in previous elections, and hope to have their support in the future. These unions don't want to cure what ails GM, they want to keep the terminally sick GM on life support as a "pass through" to allow new government bailout funds from taxpayers to go to the unions and their members. Any taxpayer $$ supplied to GM under this scheme should be seen for what it is--a payoff to unions using your money, and a step which delays the day when the company can be a real business again.

Here's a fun bit of trivia. GM and Toyota sold within a couple thousand cars of each other last business cycle, and while Toyota had billions in profit GM had billions in loses.

 

[OAG]

Even Toyota is cutting workers (including management (CEO)), work schedules, and has stopped working on a new plant in MS to build new Pirious (sp). Last I saw their sales were down about 8%. They are still profitable, pay well, and will be there to "pick up the pieces" when GM "gives up the ship".

 

[Gpond]

I don't think so, although I have been unable to find a detailed article, probably because the negotiations are confidential, the Bloomberg article says this.

My "guess" would be that they would want to wipe out the higher interest longer term bonds with this equity for bond swap.

 

[2B]

As much as I hate what I expect to happen, GM and the other auto companies will continue to be given taxpayer money. It's not to save jobs because GM recently announced 10,000 salaried layoffs and longterm union worker plant closings. It's not to save retiree health benefits because the government thinks they are the only ones that deserve them. It's all about the UAW.

The UAW and other unions are big dem supporters. They get out dem votes in their key states. The elected officials that are from those states depend on the UAW and other unions. If GM, Ford and/or Chrysler go under, there goes a big hunk of union jobs even if they come right out of BK producing cars with the same number of workers. That does mean unions are losing a major share of the auto industry and the rest will soon follow. The uselessness of unionization in today's global economy will be evident for all to see.

Bush should have killed them when he had the chance. We'll be writing checks to keep the car companies at the mercy of the UAW for decades.

Why should the UAW agree to anything when they know they will continue to be taken care of by the US taxpayer? Here's the interesting part. If the companies can't fail, neither can their bonds. If you have guts of steel, there's a lot of money to be made as long as they don't go under. The government can't force bond holders not to force the auto companies into BK.

 

[ziggy29]

The thing is, collectively as a country we're trying to have it all. To wit:

* We don't want to see the complete demise of American manufacturing.
* We want to see the preservation of good jobs in these industries.
* We want people to BUY what these jobs produce, even at higher prices than foreign competition with a much cheaper labor cost structure.

Short of enforcing "Buy American" as a policy, introducing protectionism and fueling a global trade war -- ill-advised, IMO, especially in this economy which could make it "Smoot-Hawley II" -- I don't think all three of these are feasible together. The genie of the "global economy" can't be put back into the bottle no matter how much we want to make it so.