General Motors...RIP

[mickeyd]

 

[ziggy29]

Goodbye General Motors, hello Government Motors.

 

[soupcxan]

And nothing of value was lost.

 

[calmloki]

My gal worked for a number of GM dealerships as a service adviser, then long time service manager, now warranty clerk/personnel manager/one who knows where the right switches are type person. She's loyal as can be, not swayed by a paycheck, and she was talking last night about where she would be if we hadn't gotten together. At one time GM corporate was courting her, she turned them down because we were together and i was staying here. I can easily imagine her having all her assets in GM stock - instead we only have a thousand shares or so and have no plans to sell. If the share value goes to zero so be it - might have to find some old July 4th skyrockets and pop a champagne cork to say farewell to General Bullmoose.

 

[Arif]

So why couldn't they have declared bankruptcy back in Jan before they got the money from the government? Seems like the billions of tax dollars just delayed the inevitable.

 

[kumquat]

So why couldn't they have declared bankruptcy back in Jan before they got the money from the government? Seems like the billions of tax dollars just delayed the inevitable.

Ding, ding, ding.

Someone noticed.

 

[ls99]

'cause the bankruptcy would have allowed Gm to can the union, and the new gummint did not want a bunch of unemployed union members voicing their opinion in a protest.

 

[clifp]

So why couldn't they have declared bankruptcy back in Jan before they got the money from the government? Seems like the billions of tax dollars just delayed the inevitable.

Here is what I said back in Dec.

Why not have Uncle Sam provide a guarantee that they will honor a warranty of the Big 3 cars. That gets rid of the argument that consumers won't buy from a bankrupt car company and clearly there is a 3rd party industry that already handles this. Albeit not on GM's scale but it would certainly provide work for GM dealers. Say it cost $2K/car and the big 3 make 10 million cars while in bankruptcy the cost to Uncle Sam is only 20 billion, cheap by comparison.

The second argument which worked was this. A speculator can buy GM debt at roughly $.25 on the dollar, e.g an 8% GM bond for $250 meaning that they are collect 32% interest with the potential of a 4x return if the company is still in business 10 or 20 years from know.

As long as GM is out of bankruptcy the speculator collected their ridiculous interest rate at the taxpayers expense. Once bankruptcy happens no more interest payments to speculators (or other bondholders for that matter). Eventually the bankruptcy court sorts out who gets paid what and what percentage of new GM stock each bondholder, suppliers, banks etc own.

Uncle Sam providing the bankruptcy financing is also a reasonable compromise but the only way GM survives is it has to stop paying interest on its debt.

I was far from alone in advocating this, with even the most free market folks on the board reluctantly supporting Uncle Sam providing debtor in possession financing.

6 months latter this pretty much exactly what has happened, except bond holder have been generally received an additional payment, workers have gotten full wages, suppliers have been paid, with many tens of billions expended all courtesy of we the taxpayers.

 

[bsmup]

By far the worst part of this entire fiasco is the adminstration's outright fraudulance by destroying the capital structure. The way the bondholders were told to bend over on this one changes the entire risk structure for corporate debt. Who's going to buy corporate debt now when they see Chrysler and GM bondholders told to shut up and take whatever the gov't deems appropriate?

 

[Zathras]

I like to deal in realities, not soundbites.
Why specifically to some people refer to it as becomming Government Motors.
And why the talk about the administration destorying the capital structure?
The government brokered a deal, the bondholders refused (in Chrysler's case) and the case rightfully went to court.
In GM's case, the bondholders refused until they got what they thought was a better deal and most likely GM is STILL going to go to bankruptcy case, so that deal my be null and void.

GM started to turn things around, but did so too late. I will be happy to see them as a leaner more nimble company that can put more money into the customer experience.

 

[ziggy29]

I like to deal in realities, not soundbites.
Why specifically to some people refer to it as becomming Government Motors.

Because the government will own a majority of the restructured company?

Seems like a pretty darned good reason to me.

 

[bsmup]

Secured lenders were screwed in these bankruptcies. They were told by O's administration to accept the government's plan or else. The plan striped the senior lenders of protections under law. Why buy the safest form of debt if your not first in line to receive any proceeds from a bankruptcy, answer: you don't.

GM started to turn things around, but did so too late. I will be happy to see them as a leaner more nimble company that can put more money into the customer experience.

Haha, I like to deal in realities.

 

[JOHNNIE36]

And nothing of value was lost.

What the hell kind of statement is that?

 

[kumquat]

The ultimate question will be 'does the new GM build cars people want to buy, or will they build cars the government wants them to build'?

I think everyone here can figure out how many they will sell under both assumptions (or at least under assumption two).

 

[Snidely Whiplash]

The ultimate question will be 'does the new GM build cars people want to buy, or will they build cars the government wants them to build'?

I think everyone here can figure out how many they will sell under both assumptions (or at least under assumption two).

They will sell more than most think especially once the increased government gasoline tax kicks in and takes us well above several dollars per gallon. And the other shoe will be strict emissions testing for older and "obsolete" vehicles.

 

[Snidely Whiplash]

Goodbye General Motors, hello Government Motors.

I think that aside from the taxpayer, Ford may be the biggest loser in all of this. They played the game as they should have, put themselves in a position to have been the last man standing, and now wont benefit from an increase in market share due to government support of their primary competitors.

 

[samclem]

I like to deal in realities, not soundbites.
Why specifically to some people refer to it as becomming Government Motors.

If you like "realities", welcome to the new reality.

 

[ziggy29]

I think that aside from the taxpayer, Ford may be the biggest loser in all of this. They played the game as they should have, put themselves in a position to have been the last man standing, and now wont benefit from an increase in market share due to government support of their primary competitors.

I hope you're wrong, but I'm afraid you're not. I'd really like to see Ford be the big winner in all of this.

 

[kumquat]

They will sell more than most think especially once the increased government gasoline tax kicks in and takes us well above several dollars per gallon. And the other shoe will be strict emissions testing for older and "obsolete" vehicles.

Why? Do you think that Government Motors will supply a car that is "better and cheaper" than Ford, Honda or Toyota?

If I was a "buy domestic" type of guy, who would I choose? Ford, GM or the other company?

Or are you suggesting (and it might happen) that the gov't will make laws about CAFE or some other thing so that only GM can supply?

 

[Midpack]

I hope you're wrong, but I'm afraid you're not. I'd really like to see Ford be the big winner in all of this.

My fear too. Ford deserves to benefit from being the one major domestic automaker that has not taken a taxpayer bailout, but I don't see how that shapes up. Just another aspect of the current mess that does not make any sense to me...

 

[atlas888]

The bondholders have 10% of the new company, the current shareholders got nothing. The major shareholders were mutual funds that people put the 401k money in, pension plans, and small investors. Hardly big fat capitalist pigs.

Let's hope the new company that is mostly owned by the government will not be run like the US Postal Service, or the British Leyland Motor Company. British Leyland , when it was taken over by the British Government in the 1970s, was producing such poor quality cars, made by a disinterested work force, that it was a nonentity and persistent drain on the public coffer. As to whether the new GM will be making cars that the public wants or the governement wants, take a look at the new model car they trotted out, in ghoulish green color. It looks ugly and flimsy, but put together to cater to new proposed government fuel economy goal. It may be the new subject of a 2010 edition of Nader's "Unsafe In Any Speed"

 

[Zathras]

Hmmm, my appologies, I should have phrased that differently.
Yes, the government will own more than half of the common stock. No, they will not hold a seat on the board, they will not (at least they have said) be making any management decisions.
Most of the time when I have heard people use the phrase 'government motors' they have not been refering to simply 51-75% common stock ownership, but complete decision making control as well.
Yes, regulations are coming down the pike for more efficient cars. Not only for GM though.

Secured lenders were screwed in these bankruptcies. They were told by O's administration to accept the government's plan or else.

I still don't see this. The government tried to broker a deal. In Chrysler's case they failed, the lenders said 'no way' and the company went into chapter 11.
In GM's case, a deal was attempted, the bondholders said 'no way' and a deal more to their liking was reached.

Personally I would rather the government stay out of it as of last year and let both companies liquidate (as they could secure no restructuring financing from banks). However, I understand how much that would have hurt the economy (it is yet to be seen if this path will hurt more or less over the long run).

 

[atlas888]

Government will own more than half of the common stock. No, they will not hold a seat on the board, they will not (at least they have said) be making any management decisions.
.

The government forced out Rick Wagoner in March and install someone who would dance more to the administration's tune. They had made management decisions.

They will not hold a seat on the Board, but they have a say as to who should be on the Board, and they have the car czar to oversee corporate decisions. So, small difference.

 

[Snidely Whiplash]

Or are you suggesting (and it might happen) that the gov't will make laws about CAFE or some other thing so that only GM can supply?

Yes, I do believe that is what will hapen. I look for the government to insist that GM produces smaller, much more fuel efficient vehicles that meet very much stricter emmisions standards regardless of whether there is demand for that type of vehicle. Now, I recognize the benefits to that type of vehicle, I'm just not convinced the majority of car buying North Amercians do, especially at a price that doesnt make sense (a-la Volt estimates).

So in order to increase demand for said vehicles I can very much see a push for increased gasoline taxes to "nudge" buyers into selecting those vehicles. Emmisions standards will be the second shoe to drop that will increase demand by making standards so burdensome and costly buyers will look to trade-in their older vehicles to get the newer more emisions friendly "government motors" vehicles.

 

[Snidely Whiplash]

I hope you're wrong, but I'm afraid you're not. I'd really like to see Ford be the big winner in all of this.

I'm not sure now how that can happen. Ford is competing against domestic manufacturers that have access to government funds, and as has been the case so far, with no reasonable expectation that the billions will be be paid back.

Had Dodge and GM been allowed to go into bankruptcy, either to reorganize or go-away, Ford would have benefitted tremendously. All those buyers of Dodge Rams and Chevy pickups wouldnt have went to Toyota for their next truck. Ford's increased market share of the very profitable pickup market would have been VERY lucrative.