GM news: good, bad, ugly?

[Gone4Good]

Quote:

Originally Posted by ERD50 What I'm saying is, we have a history with court ryun bankruptcies - so some amount of certainty comes with that.

Not for the customer.

And, in this instance, not even for the investor. Not all uncertainty is bad. The certainty of seeing your investment go to zero (as for the equity and possibly the unsecured bond holders of GM in bankruptcy) is not better than the "uncertainty" of another outcome. Which is why you'll see bondholders continue to try to avert the "certainty" of bankruptcy by negotiating with the government.

[ziggy29]

Quote:

Originally Posted by . . . Yrs to Go And, in this instance, not even for the investor. Not all uncertainty is bad. The certainty of seeing your investment go to zero (as for the equity and possibly the unsecured bond holders of GM in bankruptcy) is not better than the "uncertainty" of another outcome. Which is why you'll see bondholders continue to try to avert the "certainty" of bankruptcy by negotiating with the government.

Hey, if the government can manage to get GM management, bondholders and the UAW together and lock them in a room with no climate control or plumbing, and get them to all sign off on a plan that avoids bankruptcy, rolls back some unaffordable legacy benefits and swaps at least some of the debt for equity by the bondholders, in a way that looks like it would allow enough breathing room for GM to be viable, I'd be all for it.

Everyone knows something has to give in order to avoid bankruptcy, but all the stakeholders expect everyone else to sacrifice, not themselves. That's sort of a microcosm of the government spending problem we have, too. I want spending cut to avert fiscal disaster -- but cut THEIR spending, not mine...

[Gone4Good]

Quote:

Originally Posted by ziggy29 Everyone knows something has to give in order to avoid bankruptcy, but all the stakeholders expect everyone else to sacrifice, not themselves.

The really interesting story may be Chrysler. The WSJ reported today that the secured bank lenders (lead by JPM) were not willing to budge, figuring they'd get treated better in bankruptcy than under the current negotiated deal. This creates all kinds of potential conflicts between the banks and the government. It will be interesting, and telling, to see how this one plays out.

[ERD50]

re: uncertainty and bankruptcy versus Congressional bailouts:

Quote:

Originally Posted by . . . Yrs to Go Not for the customer. And, in this instance, not even for the investor.

Sorry, I'm just not following you. I gave a reason why there is less uncertainty with BK court (history), and all you are saying is "no there isn't".

And I don't give two hoots about the investors - they took their risk and if GM goes to zero, that's it. That's how investing in individual stocks works, and I don't want the govt messing with it. The "riskiness" of GM stock has been talked about for years now.

Quote:

Originally Posted by ziggy29 Everyone knows something has to give in order to avoid bankruptcy, but all the stakeholders expect everyone else to sacrifice, not themselves...

And isn't that exactly how BK works, and why we should let it do it's thing? The court *tells* everyone what they will get, based on some procedures.

It sure sounds to me like Congress does not want to relinquish their control to a BK court, they want to play Car Company CEO, just like they play Automotive Engineer.

-ERD50

[ziggy29]

Quote:

Originally Posted by ERD50 And isn't that exactly how BK works, and why we should let it do it's thing? The court *tells* everyone what they will get, based on some procedures. It sure sounds to me like Congress does not want to relinquish their control to a BK court, they want to play Car Company CEO, just like they play Automotive Engineer.

As long as Congress and the "car czars" don't FORCE something on all the GM stakeholders, I have no problems with facilitating discussions to see if there can be some "shared sacrifice" agreement among them. Other than that, you take your chances with the bankruptcy court whether you're a stockholder, a bondholder or the unions. If you demand a loaf today, you can either all agree to accept half a loaf or risk getting a lot less than half a loaf in court.

I would agree with the administration's current position (at least as stated in public) that throwing more money at a business that's fundamentally bankrupt without significant changes to its cost structure is a bad idea. And if the AIG bonus backlash didn't do anything else (other than stupid Congressional grandstanding based on populist anger), at least it seems to be making government more gun shy about just handing over more of our money without preconditions.

[Gone4Good]

Quote:

Originally Posted by ERD50 Sorry, I'm just not following you. I gave a reason why there is less uncertainty with BK court (history), and all you are saying is "no there isn't".

Chief risk for customer is complete liquidation of the company (chapter 7)

Chapter 7 is highly likely in bankruptcy

Chapter 7 (or similar) very unlikely with government intervention.

The same argument as above.

[ERD50]

Quote:

Originally Posted by . . . Yrs to Go Chief risk for customer is complete liquidation of the company (chapter 7) Chapter 7 is highly likely in bankruptcy Chapter 7 (or similar) very unlikely with government intervention. The same argument as above.

Why does it have to be Chapter 7? I was thinking Chapter 11.

wiki (emph mine):

Quote:

Chapter 7: basic liquidation for individuals and businesses; Chapter 11: rehabilitation or reorganization, used primarily by business debtors, but sometimes by individuals with substantial debts and assets;

It just seems to me that Congress is trying to do Chapter 11 on their own. My point all along has been that we have a system for doing that, it is called Bankruptcy Court, and I think we ought to use it.

U.S. Courts | Bankruptcy Courts


-ERD50

[samclem]

Quote:

Originally Posted by ziggy29 As long as Congress and the "car czars" don't FORCE something on all the GM stakeholders, I have no problems with facilitating discussions to see if there can be some "shared sacrifice" agreement among them.

I wonder if there's any hope of a non-coercive environment during these discussions. The government holds all the cards, and is hoping to force a deal. Lots of levers in the hands of the exec branch and others, and everyone knows the government can make their lives miserable if they don't knuckle under. Tax treatment, tax investigations, future government funding assistance (now that they are in for a penny, they are in for a pound on this), where the Justice department will come down on various future legal actions,etc.

The banks and TARP funding provide a good example. I heard a very interesting interview on NPR yesterday with an official of a NY regional bank. They are planning to repay the TARP funds as soon as possible. They never needed the money but (paraphrasing) "when your regulator calls and says it would be good if you participate in this program, it's pretty clear what you should do." In the beginning, this guy said the TARP was portrayed as a program for the strong banks, one that would alolw them to make loans and also acquire the weaker banks, thus making the whole system more sound. As time has passed, the recipients of TARP funds are being vilified and portrayed as weak banks at the government trough squandering money. He no longer wants his bank to be painted with this brush, and wants the flexibility to make deals, do business, advertise, and pay people what they are worth. So, they are giving the money back as soon as possible. They never needed it, but felt compelled due to government pressure. How much more pressure/coercion will there be when the GM management, GM bondholders, GM stock holders, and the UAW meet?

George Will had a column full of good observations on the GM situation today. In part (individual names redacted to avoid the appearance of a partisan political post. This is about government policy):

Quote:

" [A high US government official] displayed reality-denying virtuosity last week when, announcing the cashiering of General Motors' CEO, and naming his replacement, and as the government was prompting selection of a new majority of GM's board of directors, and as the government announced the next deadline for GM to submit a more satisfactory viability plan than it submitted at the last faux deadline, and as the government kept the billions flowing to tide GM over until, well, whenever, the [high US government official] said: "The United States government has no interest in running GM." and "The two best-selling vehicles in America this year are large pickup trucks (Ford F-Series and Chevy Silverado). In February, Toyota sold 13,600 Tundra and Tacoma pickups and 7,232 Priuses. It sells the Prius at a loss, which it can afford to do because it makes pots of money selling pickups. Has the Car Designer in Chief, aka the president, considered the possibility that what he calls "the cars of tomorrow" will forever be that?"

And a good closing:

Quote:

The government's wallow in the automobile industry, under this and the previous administration, merits a hockey coach's evaluation of his team: "Everyday you guys look worse and worse. And today you played like tomorrow."

[jug]

GM will soon be in bankruptcy court, the writing is on the wall after the new CEO gave his speech. More than likely, many people will be taking haircuts and if it does emerge intact, it will be a leaner meaner company with a completely different business model set to compete.

Right now, people are scared sh-t. 401K's are down, and home prices down. Both represent the accumulated lifetime hopes and dreams of most working people. So don't expect people to go run out and buy cars like before. It will take a long time to build any solid confidence. No auto company will do well for the next few years at least.

Times are achanging, and the wishes and hopes of bringing this economy back to what it was are unrealistic, we cannot go back to the credit fueled spending, at least not for a few years. We are broke, and most workers are afraid for their jobs.

jug

[armor99]

At least now the american people will really see what the goal of the people in their govt is at the present time. "Do what we tell you to, or else!" And any word of dissent from anyone at anytime, will be shouted down with, "It is for the common good.... Think of the economy, Do it for the children!!!", or any number of 100's of meaningless catchphrases designed to demean others, but in reality have almost no meaning at all.

I am truly at a loss right now. When words loose their meaning entirely, and emotion rather than logcal thinking are what people will act on, then I am completely dissarmed. A knight without armor or sword on a strange foreign battlefield.

I have spent a lifetime untill now using the power of my own mind, and my own personal judgement. Those qualities have made me live within my means, buy a house, a car, and brought me back from a net worth of 3k to a net worth of well over 200k.

I went to my favorite Gelato place last week. The owners machine was down but being a good customer, he gave it to me for free and said I could pay him back next time I was in. So I did just that, and gave him two extra dollars as a tip. The man was shocked, apparently no one had ever done that before! I told him that superior service deserved superior compensation.... and to be honest... doing that made my whole day! Why? Because in a very small way, I helped make the world work a bit more like my ideal vision of how it should be...

[jug]

Quote:

Originally Posted by armor99 I went to my favorite Gelato place last week. The owners machine was down but being a good customer, he gave it to me for free and said I could pay him back next time I was in. So I did just that, and gave him two extra dollars as a tip. The man was shocked, apparently no one had ever done that before! I told him that superior service deserved superior compensation.... and to be honest... doing that made my whole day! Why? Because in a very small way, I helped make the world work a bit more like my ideal vision of how it should be...

Now I want gelato!!!!

They built this italian themed casino down the road from me, great gelato joint in there, bunch of great flavors, had pistachio last time.

When in doubt, ice cream, gelato can't hurt a bit.

jug

[FinanceDude]

If Gm doesn't watch out, Hyundai will catch them............

[unclemick]

I really don't want to trade in my Chevy for a Ford - BUT

heh heh heh - hurry up and wait I guess.

[FinanceDude]

Quote:

Originally Posted by unclemick I really don't want to trade in my Chevy for a Ford - BUT

Ford might be the only domestic left in 3 years.......