GM bankruptcy

[Fobbon Lazyfoot]

Part of me looks at this as a big deal, since GM is such a huge automaker, lots of jobs lost, etc.

Another part of me says they're probably just going to pull themselves out of it and in the end it won't mean anything in the end.

I'm curious what you businussy-types have to say about it.

[Embar Angylwrath]

GM today won't be the GM of tomorrow. GM will have to sell off much of itself. After the BK, it will only be a minor player in the auto market.

The real interesting part of the equation is how the rest of the world reacts to the BK. Over half of GM is located in a country other than the US. I wonder if those nations will nationalize the part of GM within their borders, or let them die. United States BK law wasn't really designed for huge, transnational corporations, so it will be interesting to see how this plays out.

That said, nationalizing GM (and anyone who says that the government didn't nationalize it.. the US now owns about 70%) was absolutely the wrong thing to do. Those billions could have been better spent elsewhere, and people in and out of the industry were calling on the government to stay out of it, since everyone but the government could see the writing on the wall. Now, with all those billions at stake, the car industry just became a political footbal, the losses were socialized, and even with all those billions pouring into a dead company, nothing really substantial became of it.

In fact, there's enough bondholder outrage at the stinker of a deal they were served, I predict a lawsuit to force GM into Chap 7, becuase the bondholders will get more money that way. And I agree. Chopping it up and selling it the highest bidder would probably get the most money for the company.

[Kulaf]

GM should try to hold on to the Chevy, Saturn and Cadilac brands, which are its most progressive brands with hybrids and fuel cell futures......and scrap everything else.

[Lurker]

The real interesting part of the equation is how the rest of the world reacts to the BK. Over half of GM is located in a country other than the US.

How do you figure "over half of GM is located" outside the US? Certainly not by revenue. In any case, Canada already reached an agreement for Government assisted restructuring and GM said it's Asia holdings are sound.

nationalizing GM... was absolutely the wrong thing to do. Those billions could have been better spent elsewhere, and people in and out of the industry were calling on the government to stay out of it, since everyone but the government could see the writing on the wall.

Even if we assume that doing nothing would have been cheaper for the taxpayers - a false assumption btw since the Government would have had to pay billions for pensions, medical, unemployment etc... - what would a better use of the billions have been in your opinion? Also, can you back up your statements that a significant number of "people in and out of the industry were calling on the government to stay out" of this?

In fact, there's enough bondholder outrage at the stinker of a deal they were served, I predict a lawsuit to force GM into Chap 7, becuase the bondholders will get more money that way. And I agree. Chopping it up and selling it the highest bidder would probably get the most money for the company.

A majority of GM Bondholders backed the plan. Whether some of the remaining will sue or not remains to be seen, but can you provide some evidence for your statement that bondholders would get more out of Chap 7 liquidation than they will under the restructuring plan?

[Ddrak]

GM-Holden here is separate enough not to be affected. Pretty sure GM-Vauxhall is in the same position in the UK. Both will continue trading as normal.

Dd

[Embar Angylwrath]

The real interesting part of the equation is how the rest of the world reacts to the BK. Over half of GM is located in a country other than the US.

How do you figure "over half of GM is located" outside the US? Certainly not by revenue. In any case, Canada already reached an agreement for Government assisted restructuring and GM said it's Asia holdings are sound.

nationalizing GM... was absolutely the wrong thing to do. Those billions could have been better spent elsewhere, and people in and out of the industry were calling on the government to stay out of it, since everyone but the government could see the writing on the wall.

Even if we assume that doing nothing would have been cheaper for the taxpayers - a false assumption btw since the Government would have had to pay billions for pensions, medical, unemployment etc... - what would a better use of the billions have been in your opinion? Also, can you back up your statements that a significant number of "people in and out of the industry were calling on the government to stay out" of this?

In fact, there's enough bondholder outrage at the stinker of a deal they were served, I predict a lawsuit to force GM into Chap 7, becuase the bondholders will get more money that way. And I agree. Chopping it up and selling it the highest bidder would probably get the most money for the company.

A majority of GM Bondholders backed the plan. Whether some of the remaining will sue or not remains to be seen, but can you provide some evidence for your statement that bondholders would get more out of Chap 7 liquidation than they will under the restructuring plan?

Structure
General Motors is structured into the following operating groups:

Group Number of Employees as of September 2008[16]
GMAP (GM Asia-Pacific) 35,000
GME (GM Europe) 56,000
GM LAAM (GM Latin America, Africa and the Middle East) 36,000
GMNA (GM North America) 123,000
GMAC (GM Acceptance Corporation – finance and insurance services)
SPO (Service, Parts and Operations)
Other operations 2,000
Total number of employees 252,000


I'd say that's about half.

Also... look at what bondholders were part of the deal, what bondholders weren't. Clearly the main street investor got screwed, and the institutional ones (the ones that are either directly or indirectly benefitting from the financial services bailouts) took what they were told to take.

[Lurker]

Ohhh... Wikidata! So half of GM is outside the US based on number of employees, no matter how much revenue is involved or whether those areas are even in jeopardy. Too funny.

On the bondholders... you didn't support your claim that they would have gotten more through liquidation than they did by taking a stake in the restructured company.

[Embar Angylwrath]

Ohhh... Wikidata! So half of GM is outside the US based on number of employees, no matter how much revenue is involved or whether those areas are even in jeopardy. Too funny.

On the bondholders... you didn't support your claim that they would have gotten more through liquidation than they did by taking a stake in the restructured company.

You can search NPR for more on the distribution of GM if you wish. Also, you should probably include adjusted revenue pegged to the basis of standard of living in the countries before you hold everyone to the standard of the dollar. (Actually, go ahead and do that, and I'll concede the point, as long as all your future arguments are pegged to worth of the dollar, and all that it implies for standards of living) Don't know why that's such an issue for you, but whatever...

As for the bondholders... all I can say is watch the lawsuits that will come forward in the next couple of months. If the bondholders think they'll get the best deal through the Chap 11 BK, then they won't want to sue, will they?

[Lurker]

Don't know why that's such an issue for you

I think when someone speaks out of their rear end they should be held accountable. By any reckoning (revenue, assets, liabilities) the majority of GM is inside the US. People don't usually count the line workers to determine the size of a company. It wasn't your main point, obviously, but you were still incorrect especially when we exclude regions that aren't in jeopardy... like all of Asia.

As for the bondholders... all I can say is watch the lawsuits that will come forward in the next couple of months. If the bondholders think they'll get the best deal through the Chap 11 BK, then they won't want to sue, will they?

Saying we should wait and see if people sue doesn't do much to support your point. Why do you think liquidation would be better for the bondholders than the restructuring deal? For that matter, why do you think the "main street investor" didn't benefit "directly or indirectly from the financial services bailout"? Who were the "people in and out of the industry were calling on the government to stay out"?

You make a lot of statements that seem to boil down to your unsupported opinion.

[Embar Angylwrath]

Heh.. search on bondholders sueing the BK ruling and get back to me..

[Lurker]

Can you provide some evidence of significant bondholder outrage tied to the current restructuring deal? I'm not seeing the news stories.

In any case, some unhappy bondholders wouldn't prove your contention that liquidation was a better option for the bondholders than the current deal. It would just prove that there were some unhappy bondholders.

[Embar Angylwrath]

Do some homework Lurker. Look at the different types of bondholders. Break them out into two classes: institutional and individual. Then look how each camp is reacting, and ask yourself why.

[Lurker]

They didn't feel they had a voice in the negotiations. That still doesn't back up your statement that liquidation would get them more than restructuring.

[Embar Angylwrath]

They didn't feel they had a voice in the negotiations. That still doesn't back up your statement that liquidation would get them more than restructuring.

Then why are they sueing (or considering sueing?)

[Lurker]

First of all, you haven't shown any evidence that there's significant bondholder outrage over the final deal.

Secondly, no bondholder is suing (or considering suing) to try to force Chapter 7 liquidation. The bondholders -both types- hold unsecured assets and would end up with nothing in a liquidation. My guess is you are caught up in the notion that the UAW is getting a sweet deal and bondholders are getting screwed. It's a popular talking point for pundits and politicians that are (you'll be shocked to find this out)... anti-union. Go figure.

The bottom line is that Obama decided GM and Chrysler were worth saving, the companies themselves didn't want to liquidate, and simply keeping the companies afloat with taxpayer money was out of the question. Chapter 11 restructuring was the only option.

So the goal is to get through Chapter 11 restructuring with a competitive new company as quickly as possible. Will some bondholders sue or otherwise attempt to sway decisions made by the judge in bankruptcy court? Of course. I'd expect nothing different given the number of people and sums of money involved. People are going to look out for their best interest and try to get as much for themselves as possible.

Here's a Bloomberg News article (must read stuff!!) detailing how the Obama Administration took control of things. Cue Embars outrage over Government intervention in the private sector.

[Arathena]

I think it sure would be sweet if the world started making cars again.

I work at a supplier for a signficant fraction of the world's automakers and their parts suppliers. Our sales are down over 30% from last year, and we are in a short cycle, just-in-time business. We are taking it up the ass. Yesterday they came through and laid off a shitload of managers - very few peons left to terminate.

[Kulaf]

http://online.wsj.com/article/BT-CO-200 ... 06741.html

Well looks like Penske bought the rights to Saturn.

[Embar Angylwrath]

@ Lurker

The deal with the UAW had nothing to do with my post. This CNN snippet though captures most of what I'm presenting.

http://www.cnn.com/video/#/video/busine ... ideosearch

[Lurker]

That CNN interview with an unsatisfied bondholder does nothing to prove your point that bondholders would be better off with Chapter 7 liquidation, and it goes a long way to disproving your contention that they are going to fight for Chapter 7.

[Embar Angylwrath]

I put it up there to help you understand my points. You seem to think this is an ax-grinding session driven by whatever it is the UAW got out of the deal.