U.S. Likely Taking Majority Ownership of GM

[ilmor]

GM may become 70% owned by the US Goverment. Now, all of the UAW at GM will essentially be goverment employees. Now I know for sure that I would not buy a GM car! This is a crazy idea.

 

 

http://www.foxnews.com/politics/2009/05/27...y-ownership-gm/

 

edit - oh yeah...all of our taxes will go up in order to subsidize GM's existence. So, we'll all be GM owners whether we like it or not!!

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[David Hawkins]

UP DATE:

 

 

DETROIT – A General Motors Corp. bankruptcy filing seemed inevitable after a rebellion by its bondholders forced it to withdraw on Wednesday a plan to swap bond debt for company stock.

 

GM has until Monday to complete a government-ordered restructuring that includes debt reduction, labor cost cuts and plant closures. But a Chapter 11 reorganization is likely after the company said its offer to exchange $27 billion in unsecured debt for 10 percent of the company's stock had failed. GM has received $19.4 billion in federal loans.

 

GM shares lost 17 cents, or 11.8 percent, at $1.27 in morning trading.

 

John Pottow, a professor at the University of Michigan who specializes in bankruptcy, said GM evading bankruptcy now is almost impossible.

 

"They said no. That's it. They tried. That's why they're going to have to file for bankruptcy," Pottow said.

 

GM spokesman Tom Wilkinson said the board will meet later this week to decide its next move, but he would not say exactly when. He also would not say if the company would soon file for Chapter 11, nor would he reveal what percentage of bondholders took the offer.

 

"The principal amount of notes tendered was substantially less than the amount required by GM to satisfy the debt reduction requirement under its loan agreements with the U.S. Department of the Treasury," GM said in a statement issued Wednesday.

 

The Obama administration has said it would only provide more funds if 90 percent of the bondholders, as well as unionized workers, agreed to concessions that substantially reduced GM's costs.

 

GM also said it canceled meetings set for Wednesday with holders of notes that were not sold in U.S. dollars. The statement said the meetings were to discuss amendments to the debt-for-equity offers, but it did not specify what the amendments were.

 

There was a small hope Tuesday that GM could avoid a bankruptcy filing when the United Auto Workers union disclosed that it would take a 20 percent stake in GM — down from the original plan of 39 percent. That seemingly freed 19 percent of the Detroit-based company's shares to sweeten the pot for its recalcitrant bondholders.

 

Wilkinson would not say why GM didn't make the offer to bondholders more attractive.

 

Because the bondholder deal did not go through, the equity freed by the UAW deal now apparently will go to the U.S. government, which may have to commit billions more for GM's restructuring in court.

 

The government's stake in the company originally was to be 50 percent, according to GM's regulatory filings. But it now could be as high as 69 percent. The Canadian government also could get equity for up to $8 billion in aid for the automaker.

 

Such an arrangement would leave bondholders back where they started — and a Chapter 11 filing all but certain. The deadline for GM's bondholders to tender their debt was midnight Tuesday.

 

Meanwhile, crosstown rival Chrysler LLC heads to court Wednesday to ask a bankruptcy judge for permission to sell the bulk of its assets to a group headed by Italy's Fiat Group SpA in hopes of saving itself from liquidation. Attorneys for Chrysler maintain that the Fiat deal is the company's only hope to avoid being sold piece by piece, but car dealers, bondholders, former employees and others are protesting what they see as the government speeding Chrysler through the bankruptcy process without regard for certain creditors.

 

Chrysler filed for bankruptcy protection April 30, after the government ended talks with a group of holdout bondholders.

 

Automakers worldwide are struggling as the global recession has reduced demand for new vehicles. But GM and Chrysler have been particularly hobbled by promises to cover the health and pension costs of tens of thousands of unionized retirees — along with recent record-high gasoline prices that reduced demand for their low-mileage trucks and SUVs.

 

The UAW disclosed Tuesday it agreed to take a much smaller 17.5 percent stake in GM, plus a warrant for an added 2.5 percent stake to partially fund the $20 billion that GM must put into a trust that will start paying retiree health care costs next year.

 

In exchange for agreeing to a lower equity ownership stake, GM promised the union $6.5 billion of preferred shares that pay 9 percent interest, plus a $2.5 billion note. The union, facing the possibility that it may not be able to quickly sell GM shares to fund its trust, preferred the certainty of the $585 million annual dividend that accompanies the preferred shares.

 

The remaining $10 billion will come from health care trust funds that GM already has set up. The trust will get a seat on GM's board as well, although it will have to vote at the direction of GM's other independent directors. The concession deal, on which roughly 61,000 workers will vote by Thursday, also froze wages and cut retiree health care benefits, performance bonuses and cost-of-living raises.

 

When GM announced its debt exchange last month, the company offered bondholders 225 shares of common stock for every $1,000 in debt — or a 10 percent stake in the restructured company. In addition to the UAW's share, the federal government was to take 50 percent for exchanging a combined $20 billion of their debt to equity. Current stockholders would end up owning just 1 percent of the company.

 

A committee representing GM's biggest bondholders — mostly big banks and other institutional investors — has opposed the debt-for-equity swap from the start.

 

Smaller, "retail" bondholders — individual investors like retirees and families — have also railed against the terms of the exchange. Both groups say the offer gives them too small a stake for the amount they are owed.

 

GM had said previously that the government was preventing it from offering bondholders more than 10 percent of the restructured company.

 

Some analysts said GM's bondholders may be holding out for better terms in bankruptcy.

 

Another factor complicating the decision of GM's bondholders: Many large investors hold insurance policies on their bonds known as credit default swaps. Such policies would reimburse bondholders in the event of a "credit event" like a bankruptcy filing.

 

Analysts speculated that few bondholders agreed to GM's offer because they differed with the company's view of its stock value.

 

"They clearly have different valuation opinions as to how much the shares are worth," Pottow said. "If you're bullish on the prospects of the company, you might think that's a great deal. If you're bearish on the prospects of the company, you might not think that's a great deal."

[Boss Doctor]

Can we afford to have a huge company like this go out of business sticking all of their suppliers with defaults on credit lines?

 

Do you want to give tax-payer money to a corporation and allow them to spend it at their whim when they have demonstrated they are untrustworthy?

 

It appears to me that we are damed even more with the former than the latter.

 

What's YOUR solution?

[David Hawkins]

My solution would be to merge GM & Chrysler, get rid of the Unions, get rid of at least half of what they Build, Drop wages of ALL workers, including the executives, by 75% and NO Bonuses given to any Employee who sits behind a Desk. a 3% Cost of Living Raise every 3 Years. Dealerships no longer own the cars, they are paid a commission for each one sold. Send a few of each Vehicle Model to the Dealerships and keep the rest in Storage Lots until ordered by the Dealerships. The Dealerships sells the ones on the Lot AND can order one from the Manufacturers Storage Lot which can be shipped to them in a matter of Days. ADM's can cost a Dealerships a loss of Contract as well as bad Service.

[Boss Doctor]

My solution would be to merge GM & Chrysler, get rid of the Unions, get rid of at least half of what they Build, Drop wages of ALL workers, including the executives, by 75% and NO Bonuses given to any Employee who sits behind a Desk. a 3% Cost of Living Raise every 3 Years. Dealerships no longer own the cars, they are paid a commission for each one sold. Send a few of each Vehicle Model to the Dealerships and keep the rest in Storage Lots until ordered by the Dealerships. The Dealerships sells the ones on the Lot AND can order one from the Manufacturers Storage Lot which can be shipped to them in a matter of Days. ADM's can cost a Dealerships a loss of Contract as well as bad Service.

 

Great! Then our cars would be made by illegals, because no one would do that job for $7.50 per hour.

[David Hawkins]

Great! Then our cars would be made by illegals, because no one would do that job for $7.50 per hour.

 

 

At $80.00 an Hour (with Benefits) its $20.00 an Hour.

 

At $45.00 an Hour (with out Benefits) its $11.25 an Hour.

[Boss Doctor]

At $80.00 an Hour (with Benefits) its $20.00 an Hour.

 

At $45.00 an Hour (with out Benefits) its $11.25 an Hour.

They don't start at $45 per hour, let alone $80.

[David Hawkins]

They don't start at $45 per hour, let alone $80.

 

I recently read an article that compaired the GM Auto Workers making $80.00 an Hour (Benefits included) with the Toyota Auto Workers making $55.00 an Hour (Benefits included). It is also post here at Team Shelby some where.

[Boss Doctor]

I recently read an article that compaired the GM Auto Workers making $80.00 an Hour (Benefits included) with the Toyota Auto Workers making $55.00 an Hour (Benefits included). It is also post here at Team Shelby some where.

I was talking about starting salary. When you make cuts like this you start with the highest paid persons in the position. When I worked as a policeman for the Claycomo, MO which has a Ford Plant, the workers started at around $20 per hour. Benefits do add to that number.

[ilmor]

Can we afford to have a huge company like this go out of business sticking all of their suppliers with defaults on credit lines?

 

Do you want to give tax-payer money to a corporation and allow them to spend it at their whim when they have demonstrated they are untrustworthy?

 

It appears to me that we are damed even more with the former than the latter.

 

What's YOUR solution?

 

The solution is and always has been to let the free markets work like they are/were supposed to. Things would have taken care of themselves w/out goverment interference. Many companies have emerged successfully from Chapter 11 over the years, even stronger, leaner and meaner. All of GM, its machinery, its assets, etc. would not have disappeared. Or, one or more new American car companies may have formed which could have competed with the best of the rest of the world. But, now we'll never know because Obama did it his way. He was not about to let his Union friends down (the fundamental concern of his). As long as we have the Gov't making our decisions for us and running everything, this is the way it will be. Thankfully, we still have Ford, the one true American car company, remaining.

[ilmor]

Can we afford to have a huge company like this go out of business sticking all of their suppliers with defaults on credit lines?

 

Do you want to give tax-payer money to a corporation and allow them to spend it at their whim when they have demonstrated they are untrustworthy?

 

It appears to me that we are damed even more with the former than the latter.

 

What's YOUR solution?

 

The solution is and always has been to let the free markets work like they are/were supposed to. Things would have taken care of themselves w/out goverment interference. Many companies have emerged successfully from Chapter 11 over the years, even stronger, leaner and meaner. All of GM, its machinery, its assets, etc. would not have disappeared. Or, one or more new American car companies may have formed which could have competed with the best of the rest of the world. But, now we'll never know because Obama did it his way. He was not about to let his Union friends down (the fundamental concern of his). As long as we have the Gov't making our decisions for us and running everything, this is the way it will be. Thankfully, we still have Ford, the one true American car company, remaining.

[ingram4868]

If the Government takes part ownership can we all attend board meetings?

[David Hawkins]

UP DATE

 

 

 

WASHINGTON – Government Motors. A new name for Detroit's weakened auto giant GM is making the rounds, sometimes with irony, sometimes with dread, suggested by the deepest Washington industrial intervention in a half-century. The Obama administration is planting itself at the wheel of General Motors with a major ownership stake — and all that goes with it for the U.S. taxpayer.

 

The company appeared closer than ever to bankruptcy on Wednesday after its bondholders turned their backs on a federally ordered offer to swap their debt for GM stock. If bankruptcy does come, the governments of the United States and Canada could end up with as much as 70 percent of a reconstituted GM when the court dust settles_ with the biggest share by far held by the U.S. Treasury.

 

Administration officials portray themselves as reluctant players in this industrial drama, their hands forced by an economic and financial crisis so severe that inaction would have terrible and far-flung consequences. And they insist they have no intention of managing the day-to-day operations of GM or Chrysler, which is already moving through a swift bankruptcy.

 

But with its huge financial stake, the government has hardly been a passive observer.

 

On March 31, President Barack Obama — a day after firing GM CEO Rick Wagoner — gave the company until June 1 to make aggressive cuts. It was the Treasury Department that instructed GM not to offer bondholders any more than 10 percent of company equity. And no corporate owner has as direct a line to Congress as the Treasury Department. Lawmakers last week were already pressuring Secretary Timothy Geithner to intervene in the planned closure of auto dealerships and complained about GM plans to import cars made in the company's Chinese plants.

 

Obama's auto task force has been working with General Motors, its union, bondholders and dealers to win concessions since February. The panel has been led by Steven Rattner, a former Wall Street financier and a top Democratic fundraiser, and Ron Bloom, a Wall Street turnaround specialist who has advised the United Steelworkers union. When Obama decided to oust Wagoner, it was Rattner who informed the GM executive.

 

"We've tried to be true to the president's basic principle that we should not be in the business of running the company," Bloom told The Associated Press. "We are the president's line people, making recommendations to the decision-makers on large amounts of taxpayer dollars. So we have a tremendous responsibility to be thoughtful about our recommendations on how those dollars get used. On the other hand, we are not the management of the company."

 

A bankruptcy filing this week is unlikely. GM and the administration will probably wait until the June 1 deadline to announce a next move.

 

The federal government has already injected nearly $20 billion into GM. Helping it through bankruptcy would require billions more — exactly how much would depend on the length of the proceedings.

 

By positioning itself to own a sizable majority of the company, the Obama administration is also assuming a greater stake than the 8 percent share it obtained in Chrysler's bailout. Chrysler could emerge from bankruptcy court as early as next week.

 

While even a swift bankruptcy for GM would be a blow to the company's pride as an industrial giant, that step could be the best available. The company would emerge from court with a fraction of its current debt and so-called legacy costs for retirees, and with a more manageable dealer network. At issue is whether the proceeding itself would taint the company and damage its sales. So far, Chrysler's bankruptcy has not driven customers away.

 

Despite the relatively smooth experience with Chrysler, however, GM is a larger company that is more difficult to restructure. Chrysler has Fiat prepared to assume a portion of the company. No similar deal awaits GM. As a result, participants in the negotiations expect a GM bankruptcy to last longer.

 

What's more, any government involvement as broad as Treasury's in GM presents a number of nettlesome issues, not the least of which is whether the administration can resist congressional entreaties to influence management decisions.

 

"The task force role in looking at GM is as a private equity model," Sen. Bob Corker, R-Tenn., a member of the Senate Banking Committee who stays in frequent touch with Geithner and Rattner, said in an interview. "It's most unusual. The government is highly involved and it's a threshold we should have never crossed."

 

Auto industry analysts say GM would need a firm line between its ownership and the people actually running the company's operations.

 

"Politicians and pressure groups and the like are not good business people and could very well lead the company in an unproductive direction — maybe a lethal one," said Gerald Meyers, a University of Michigan business professor and former chief executive of American Motors Corp.

 

The auto industry has economic tentacles that reach across the country. The Center for Automotive Research, in a study released this week, concluded that drawn-out, disruptive bankruptcies for GM and Chrysler would result in 1.3 million job losses by the end of 2009. In contrast, successful bankruptcies — those that conclude within three months — would cost and estimated 63,200 jobs this year and more than 179,000 in 2010.

 

"The intervention is necessary and appropriate," said Mark Zandi of Moody's Economy.com., an economist who frequently advises Washington policymakers. "Without it, GM would go into bankruptcy and not come out. There would be wide-ranging negative impacts across the economy. Just when the fiscal stimulus is kicking in, this would derail it."

 

Governments have played roles propping up auto companies in the past with mixed results. When the Carter administration provided a $1.2 billion loan guarantee for Chrysler in 1980, the government received broad oversight of the company and an ownership stake. Chrysler was able to avoid bankruptcy, developed fuel-efficient K-cars and repaid the loans in 1983, seven years ahead of schedule.

 

But in Great Britain, the bailout of British Leyland in the 1970s and 1980s was largely a failure. The British automaker, which built the MG and Jaguar, suffered through declining market share, poor labor relations and foreign competition before it became MG Rover, which filed bankruptcy in 2005.

 

Some see the same in store for GM.

 

"This is a company that has had its up and downs," said Clifford Winston, an economist who has studied the auto industry at the Brookings Institution. "Why do we think the government is going to do a better job to turn things around?"

 

Sen. Debbie Stabenow, D-Mich., said the Chrysler intervention proved that the consequences of inaction are too great to ignore.

 

"The only reason that pensions and health care and the jobs have been protected is because the Obama administration was willing to come in with significant financing," she said. "Assuming GM goes into bankruptcy, the same will be true."

[Secondo]

GM may become 70% owned by the US Goverment. Now, all of the UAW at GM will essentially be goverment employees. Now I know for sure that I would not buy a GM car! This is a crazy idea.

Why not? It's still an American company. What's wrong with American government employees? So you'd rather buy a Honda instead?

[JeffIsHereToo]

I was talking about starting salary. When you make cuts like this you start with the highest paid persons in the position. When I worked as a policeman for the Claycomo, MO which has a Ford Plant, the workers started at around $20 per hour. Benefits do add to that number.

 

 

It's less than $20 to start now.

 

http://money.cnn.com/2009/05/29/autos/uaw_...sion=2009052905

[Boss Doctor]

It's less than $20 to start now.

 

http://money.cnn.com/2009/05/29/autos/uaw_...sion=2009052905

I think $14 hour is a bit excessive. That's less than $30k per year without OT. While that was a decent starting wage in 1985, it's not so much now days.

[stump_breaker]

I think $14 hour is a bit excessive. That's less than $30k per year without OT. While that was a decent starting wage in 1985, it's not so much now days.

 

I guess it depends upon your location. $14 an hour in the area I live is a pretty healthy wage!

 

Of course if one is accustomed to living at a higher wage, it's a huge sacrifice.