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Old 08-18-2010, 02:08 PM   #201
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But when and how does that hamster wheel stop? "Once we and the average Chinese worker are on equal economic footing" so it no longer makes economic sense for the company to export jobs is not an acceptable answer to most folks, I suspect.
Not being 'acceptable' doesn't change anything.

I don't find gravity 'acceptable' when I need to lift something heavy - but gravity doesn't care.

Some of this has been mentioned - higher productivity, creativity, technology, infrastructure - we need something to make us worth more if we we want more.

Maybe some good govt policies could help. Better and more tailored education (heh-heh - maybe that means less govt involvement?), more pro-business regs (or fewer anti-business regs?) - lots of opportunities I guess. Of course, balance this with real issues (pollution, safety, etc). I won't hold my breath.

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Old 08-18-2010, 07:50 PM   #202
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However, the US taxpayers only avoid paying for UAW benefits (whether they be health insurance, DB plans, or whatever) the investment is profitable. You remain hopeful.... I am not so optimistic.
I guess we will have at least a preliminary indication soon.
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Third, there is case law under the Bankruptcy Code that permits a secured creditor to direct a portion of his recovery under a plan of reorganization to a lower class of creditor and bypass intermediate classes. Thus, in this case, the government could preferentially share some of its recovery with the VEBA trust if it wanted. No, this was not done here, but the threat existed and may have shaped the negotiation.

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Why would a senior shareholder do this? If the government was looking out for the people's interest (instead of the UAW's), then they would not.
It goes to the technical 11 U.S.C. Sec. 1129(a) requirements for confirming a plan of reorganization. To win confirmation approval, you need to have at least one accepting, impaired class of unsecured creditors. Accepting means more than 1/2 of the members of the class, holding at least 2/3 in dollar amount, vote to accept their treatment under the plan. Impaired means they are getting paid less than full value of their claims. And note that it must be an unsecured class; secured creditors do not get a vote. Note also that not all unsecured creditors are in a single class. Rather, classes are comprised of claims with similar characteristics (as you might imagine, there is substantial fighting over who goes in what class). The VEBA trust and the regular bondholders need not be in the same class, although both are unsecured. Thus, if you are a secured creditor and you favor a plan of reorganization, you need to recruit at least one class of unsecured creditors who will accept it, or the plan cannot be confirmed. That is why a secured creditor may wish to sweeten the pot for one particular class out of its own recovery. Here, assuming the bondholders would oppose a plan the government favored, the government would need to recruit the VEBA trust as the accepting impaired class. Thus, it would not be that the government was kowtowing to the UAW. Rather, it would be the government advancing its own interests in soliciting support for a plan it preferred.
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Old 08-18-2010, 08:29 PM   #203
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A good friend of mine lost $200,000 in GM stock. Any they say GM is on the way back. What about all the investors that lost their life saving in GM stock. How about GM pay them back before they continue to do business.
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Old 08-18-2010, 09:00 PM   #204
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A good friend of mine lost $200,000 in GM stock. Any they say GM is on the way back. What about all the investors that lost their life saving in GM stock. How about GM pay them back before they continue to do business.
I don't get this either. I dabbled in K-Mart stock, sold it off (at a loss) before it hit zero. Then, they turn-around, re-structure it as Sears Holdings, claim there is value in the old K-Mart Real Estate, etc, and suddenly have a stock trading above zero.

Made no sense to me. Those who were holding at zero should have got something. Heck, I could (theoretically) run an IPO, say 'sorry, have to declare BK' the next month, then do it all over again, pointing to some new-found value. Obviously, you'd have trouble finding investors the 2nd time around, but I did say 'theoretically'.

Just doesn't seem right. If this GM IPO gets off the ground, I hope the holders of the BK GM stock get their share first.

-ERD50
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Old 08-19-2010, 12:32 AM   #205
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Absolutely true. They have to move jobs to China and India because their competitors are and they can't let them have a huge cost advantage. But when and how does that hamster wheel stop? "Once we and the average Chinese worker are on equal economic footing" so it no longer makes economic sense for the company to export jobs is not an acceptable answer to most folks, I suspect.
Earlier this year I read a book called $20 per gallon: how the inevitable rise in the price of gasoline will change our lives for the better. Each chapter described a change that was likely to occur when gas prices reached that level. Manufacturing jobs will no longer be exported to China when the transportation cost of shipping the raw materials there and the finished product back here exceeds the savings in labor cost obtained by having the factory in China instead of in the US. I think "manufacturing returns to the US" was somewhere in the middle of the book, around eight or ten dollars/gallon. Of course, it may end up taking longer for transportation costs to hit the crossover point than it does for the Chinese workers to reach the same economic footing.

I can only think of two things that might stop the hamster wheel before either wages or transportation costs reach equilibrium. The first is overtly protectionist policies, such as tariffs on imports from low-wage countries, and the other is a mechanism that would aim at negating the savings from not having to meet U.S. standards for pollution, worker safety, etc.
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Old 08-19-2010, 01:04 AM   #206
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I don't get this either. I dabbled in K-Mart stock, sold it off (at a loss) before it hit zero. Then, they turn-around, re-structure it as Sears Holdings, claim there is value in the old K-Mart Real Estate, etc, and suddenly have a stock trading above zero.

Made no sense to me. Those who were holding at zero should have got something. Heck, I could (theoretically) run an IPO, say 'sorry, have to declare BK' the next month, then do it all over again, pointing to some new-found value. Obviously, you'd have trouble finding investors the 2nd time around, but I did say 'theoretically'.

Just doesn't seem right. If this GM IPO gets off the ground, I hope the holders of the BK GM stock get their share first.

-ERD50
This is one of the risks of being an equity holder - when things go bad you are the last person to get your money back and the first person to take the loss. If there is not enough value left in a company when it is placed in chapter 11 (or similar), the ordinary shareholders may not get anything in the restructuring (unless someone with a more senior ranking elects to reallocate part of their entitlement). Once the restructuring has taken place it's all over and there is no further recourse.

Given that equity holders have the most potential upside, it seems fair to me that they take the most risk on the downside.

This is one of the reasons why I tend to look at the balance sheet and cash flow statements of companies I invest in before I look at the earnings.
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Old 08-19-2010, 06:05 AM   #207
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This is one of the risks of being an equity holder - when things go bad you are the last person to get your money back and the first person to take the loss. If there is not enough value left in a company when it is placed in chapter 11 (or similar), the ordinary shareholders may not get anything in the restructuring (unless someone with a more senior ranking elects to reallocate part of their entitlement). Once the restructuring has taken place it's all over and there is no further recourse.
+1

Note also that the GM doing the IPO is a technically a new company that purchased the assets. Old GM is still in existence under the name Motors Liquidation Corp. (MLC) and the old GM shareholders actually hold shares in MLC.
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Old 08-19-2010, 07:03 AM   #208
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I truly don't know why there have been some heated discussions here.
Global warming?
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Old 08-19-2010, 08:25 AM   #209
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I can only think of two things that might stop the hamster wheel before either wages or transportation costs reach equilibrium. The first is overtly protectionist policies, such as tariffs on imports from low-wage countries, and the other is a mechanism that would aim at negating the savings from not having to meet U.S. standards for pollution, worker safety, etc.
There is a third: a major war for the remaining oil supplies that blossoms into a third world war--read that, NUCLEAR CONFLICT. This is a distinct possiblility as oil consuming countries, such as the USA are positioning themselves for this future conflict for the remaining oil on the planet.
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Old 08-20-2010, 01:22 AM   #210
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There is a third: a major war for the remaining oil supplies that blossoms into a third world war--read that, NUCLEAR CONFLICT. This is a distinct possiblility as oil consuming countries, such as the USA are positioning themselves for this future conflict for the remaining oil on the planet.
You are right that a nuclear war would stop the exportation of jobs. I hope you are wrong that such a war is contemplated as a possible way to gain or retain control of oil resources. I could say I didn't think of it because it's unthinkable, but unfortunately it really isn't, although it is a no-win scenario. God save us from anyone insane enough to start that war.
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Old 08-20-2010, 11:02 AM   #211
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You are right that a nuclear war would stop the exportation of jobs. I hope you are wrong that such a war is contemplated as a possible way to gain or retain control of oil resources. I could say I didn't think of it because it's unthinkable, but unfortunately it really isn't, although it is a no-win scenario. God save us from anyone insane enough to start that war.
That was the thing about the Cold War. Say what you will about the Soviet Union, but one thing I never thought of them was that they had suicidal leadership which was willing to martyr themselves for a cause. I think the same is true of China today. They were/are rational enough, IMO, to realize that there are no winners in a nuclear exchange.

My fear isn't those superpowers but some rogue fanatic who is perfectly happy to martyr himself and millions/billions of others for a cause.
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Old 08-20-2010, 11:40 AM   #212
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That was the thing about the Cold War. Say what you will about the Soviet Union, but one thing I never thought of them was that they had suicidal leadership which was willing to martyr themselves for a cause. I think the same is true of China today. They were/are rational enough, IMO, to realize that there are no winners in a nuclear exchange.

My fear isn't those superpowers but some rogue fanatic who is perfectly happy to martyr himself and millions/billions of others for a cause.
Generally, I agree with you. I can see how a nuclear war can happen. Take what Ferguson says in the video below - in future years the USA will drastically reduce military budgets (and I'm guessing, cutting back on bases around the world). A weakened USA military and a strong China military get involved in a conflict. The USA is losing and tens of thousands of troops are in danger (think 125K Germans captured by USSR in WWII only 10K returned alive - check number). Does the USA use tactical nukes and does it escalate from there?

I know it seems impossible at this time but, desperate people do desperate things.

Niall Ferguson Argues That Empires Can Collapse Very Suddenly
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Old 08-21-2010, 02:56 AM   #213
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Generally, I agree with you. I can see how a nuclear war can happen. Take what Ferguson says in the video below - in future years the USA will drastically reduce military budgets (and I'm guessing, cutting back on bases around the world). A weakened USA military and a strong China military get involved in a conflict. The USA is losing and tens of thousands of troops are in danger (think 125K Germans captured by USSR in WWII only 10K returned alive - check number). Does the USA use tactical nukes and does it escalate from there?

I know it seems impossible at this time but, desperate people do desperate things.

Niall Ferguson Argues That Empires Can Collapse Very Suddenly
The USA only uses tactical nukes in that situation if it is willing to try to save tens of thousands of troops at the risk of losing tens of millions of civilians. I think the only way to win is to prevent that war from ever happening, by being in a position to tell the other guys, "you go ahead, we don't really need any more oil". I don't know if it would be possible to redirect the competition between powers into the arena of efficiency more than military clout, but I don't know how else the conflict could be defused. Maybe it would be a new sort of "cold war" if each country tried to top the others in doing more with less energy, but it would be a war that would result in everyone winning rather than everyone losing. Are we (the US, China, Russia, the EU....humanity as a whole) smart enough to do that instead of starting a war that nobody can win? We've managed (so far anyway) not to destroy ourselves with nukes over politco-economic ideologies. Maybe we can refrain from doing it over oil too.
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