General Motors Restructure

[clayinaustin]

GM Goes For Broke (http://money.cnn.com/2009/04/27/news/companies/gm_announcement/index.htm)

GM will issue new stock to pay its debts to the Federal Government and the Unions. Between them, Treasury and the unions would own 89% of GM.

If you own GM stock, be prepared for a serious dilution! :eek:

[clayinaustin]

Oh yeah... GM also confirmed reports that surfaced Friday and officially announced plans to drop its Pontiac brand altogether. :(

[RLJ676]

I did some real quick and dirty math, and based on our current market cap, I think that the shares are worth 2-3 cents each now. Under this plan the current stockholders would now own 1% of the equity!

[Ratickle]

It is a terrible plan. My guess is it won't be approved and bankruptcy will follow.

[RLJ676]

It is a terrible plan. My guess is it won't be approved and bankruptcy will follow.

Terrible for who? For the bondholders.....yes. The company and everyone else, not as much.

However, the bondholders aren't likely to get better in court. The gov't is the one who's limited them to 10% equity in the swap.

GM will be in great shape balance sheet and structure wise if this plan happens.

[Expensive Date]

It is a terrible plan. My guess is it won't be approved and bankruptcy will follow.


I doubt that it sets a dangerous precedent for the pensions.If they go into bankruptcy they walk away from the pensions you will see more company's doing it then.

[Ratickle]

I doubt that it sets a dangerous precedent for the pensions.If they go into bankruptcy they walk away from the pensions you will see more company's doing it then.

They walk away from the pensions in excess of $54,000 per year.

[2112]

I hope they don't offload Saturn to the Chinese (what I read) I have been eyeballing a Sky Redline for the wife. My part to help the American economy. :leaving:

[Ratickle]

Terrible for who? For the bondholders.....yes. The company and everyone else, not as much.

However, the bondholders aren't likely to get better in court. The gov't is the one who's limited them to 10% equity in the swap.

GM will be in great shape balance sheet and structure wise if this plan happens.

For all. The government will have to support a company which is modeled as a loser forever with our taxes. There is no way they will ever be competitive again.

[Ratickle]

I doubt that it sets a dangerous precedent for the pensions.If they go into bankruptcy they walk away from the pensions you will see more company's doing it then.

Like United did?

[Sunsation96]

I hope they don't offload Saturn to the Chinese (what I read) I have been eyeballing a Sky Redline for the wife. My part to help the American economy. :leaving:

I thought the same thing a few weeks back. My wife and I were in the need of a new car and living just 20min outside of Detroit I thought good time to support my family and friends. So we bought a new Pontiac G8 love the car then GM is getting rid of Pontiac after 83 years. I am kind of upset about this news nothing I can do.:ack2::(

[catmando]

I hope they don't offload Saturn to the Chinese (what I read) I have been eyeballing a Sky Redline for the wife. My part to help the American economy. :leaving:Two years ago I test drove an Aura XE for my wife it was awesome. Sirius radio, F1 paddle shifters, 255hp. She didn't buy it. :boxing_smiley: :dupe: :mad:

[boatme]

My wife just got a new G6 one month ago

I hate to see the line go but tis the way that it is

we tossed GM big money and they will banko anyway I said that would happen months ago

they shoulda let them banko a year ago instead of proping them up to fail later

I still want to know when we are going to hold the banks feet to the fire

Banks are now enemy number 1 (lawyers are enemy number 2)

[Ratickle]

My wife just got a new G6 one month ago

I hate to see the line go but tis the way that it is

we tossed GM big money and they will banko anyway I said that would happen months ago

they shoulda let them banko a year ago instead of proping them up to fail later

I still want to know when we are going to hold the banks feet to the fire

Banks are now enemy number 1 (lawyers are enemy number 2)

I'd still put politicians first.....

[boatme]

I'd still put politicians first.....


Most Politicians qualify for enemy number 2 since most are liars opps i mean lawyers

Maybe we make the politicians and the banks Jointly number 1 public enemy

[Ms PatriYacht]

hard to believe that the Pontiac name will be history, my last three cars have been Pontiacs, I also have the G6 and so does my sister. GM will only be left with one mid priced car brand now, Chevy. I am pretty sure Saturn is one of the brands they want to dump, along with 21,000 more employees:( With each of these mass layoffs, my house value and chance of selling it takes another dive, so much for our lakefront investment.

[Ms PatriYacht]

Most Politicians qualify for enemy number 2 since most are liars opps i mean lawyers

Maybe we make the politicians and the banks Jointly number 1 public enemy

The politicians and the tree huggers are our countries worst enemy now. During the last couple of decades their agendas and policies have forced manufacturing out of the United States. The auto industry (including all their suppliers) are really the last of the large industries left in our country, I can't fathom what will take it's place that will give people a chance to make a living that will pay them enough to afford a modest house. The government seems to think it is important for just about every kid to go to college, I keep wondering where all the jobs will be when they graduate.

[sledge]

Anybody miss Oldsmobile? It's not the end of the world. And we still build airplanes, helicopters, skyscrapers, and lots of other things in this country. And with union employees too!

You can still get parts, you can still get things covered under warranty. If it wasn't blasted over the TV day in and day out, you might not even notice. The economy sucks right now; it's happened before. It will get better eventually.

[Magic Medicine]

The politicians and the tree huggers are our countries worst enemy now. During the last couple of decades their agendas and policies have forced manufacturing out of the United States. The auto industry (including all their suppliers) are really the last of the large industries left in our country, I can't fathom what will take it's place that will give people a chance to make a living that will pay them enough to afford a modest house. The government seems to think it is important for just about every kid to go to college, I keep wondering where all the jobs will be when they graduate.

I have to agree.

[Airpacker]

How many kids with degrees in useless things like Poli Sci are very good at asking, " would you like to biggie size that order?" I guess we will find out in the coming decade.

[Sunsation96]

Anybody miss Oldsmobile? It's not the end of the world. And we still build airplanes, helicopters, skyscrapers, and lots of other things in this country. And with union employees too!

You can still get parts, you can still get things covered under warranty. If it wasn't blasted over the TV day in and day out, you might not even notice. The economy sucks right now; it's happened before. It will get better eventually.

Great point not only did GM do this to me before with my Olds now they did it to me with the G8 two weeks after I bought it:ack2: Glad I could help them out

[Ratickle]

The politicians and the tree huggers are our countries worst enemy now. During the last couple of decades their agendas and policies have forced manufacturing out of the United States. The auto industry (including all their suppliers) are really the last of the large industries left in our country, I can't fathom what will take it's place that will give people a chance to make a living that will pay them enough to afford a modest house. The government seems to think it is important for just about every kid to go to college, I keep wondering where all the jobs will be when they graduate.

Well said Donna.

[Ms PatriYacht]

Anybody miss Oldsmobile? It's not the end of the world. And we still build airplanes, helicopters, skyscrapers, and lots of other things in this country. And with union employees too!

You can still get parts, you can still get things covered under warranty. If it wasn't blasted over the TV day in and day out, you might not even notice. The economy sucks right now; it's happened before. It will get better eventually.

I guess you by skyscrapers you mean large office buildings, with industrial vacancies just about everywhere the construction industry if you have not heard is WAY down. I sell to companies that support aerospace, believe me that industry is way down as well.

[Sunsation96]

What we need is import tax. For me to ship to china there is a 30% tax on the goods going plus freight. If the US companies had to pay 30% tax to bring thier china built goods and other countries that make stuff, do you think that the manufacturing would increase in this country once again. Sorry I my feelings are very string on this as I see friends and family being affected by the auto industry. But with a plan like this America would grow once again and be great. I know its not bullet proff but it is a start.

[Magic Medicine]

How many kids with degrees in useless things like Poli Sci are very good at asking, " would you like to biggie size that order?" I guess we will find out in the coming decade.

there parent should have pointed them in the right direction. don't blame it all on the kids, young people need direction from the piers and the older generations!

[Ratickle]

What we need is import tax. For me to ship to china there is a 30% tax on the goods going plus freight. If the US companies had to pay 30% tax to bring thier china built goods and other countries that make stuff, do you think that the manufacturing would increase in this country once again. Sorry I my feelings are very string on this as I see friends and family being affected by the auto industry. But with a plan like this America would grow once again and be great. I know its not bullet proff but it is a start.

It is another common sense law that will never get passed by the idiots who run this country. You want to sell here, you meet the rules and laws our in-country manufacturers have to. Tax, the same : Air Pollution controls, the same : water pollution controls, the same, : child labor laws, the same - etc.


I've said it for years, the playing field only needs to be level and we will succeed.

[sledge]

What we need is import tax.

That has been addressed so many times and every time it's a failure. Taxes are almost always passed on to the consumer. All it would do is raise the cost of things you buy. Even if manufacturing came back to this side of the world, everything would still cost more.

Yes Ms. P, i know all the industries are down. The only people making money these days are lawyers, drug cos and politicians. And when they've taken all we have to give, they're going to want to spend it. And people will get back on their feet again.

[Ratickle]

That has been addressed so many times and every time it's a failure. Taxes are almost always passed on to the consumer. All it would do is raise the cost of things you buy. Even if manufacturing came back to this side of the world, everything would still cost more.

Yes Ms. P, i know all the industries are down. The only people making money these days are lawyers, drug cos and politicians. And when they've taken all we have to give, they're going to want to spend it. And people will get back on their feet again.

Taxes are always passed on to the consumer. But, at least the consumer has a job to pay those taxes if the products are made at home vs. the current situation where over 1/2 of all consumers either do not have jobs and receive something from the ones who do, or make so little they pay no taxes.

There are no instances where you can point to an equally recipricating import/export excise tax that did not work. None.

[sledge]

There are no instances where you can point to an equally recipricating import/export excise tax that did not work. None.

Kinda defeats the whole "controlling an imbalance" idea if they're equally reciprocating doesn't it? But along those lines, like I said before, all it would do in the end is increase costs to everyone so where's the gain?

Tariffs and import taxes on necessary goods do little to curb consumption. It comes down to competitive advantage, whether it be natural or "man made."

If the entire planet were set on economically equal grounds, where no continent, no country, no company could make more money than another by producing a good or offering a service, then NOBODY would make it. If you didn't have the opportunity to make a profit, you wouldn't do anything. It would then be up to "A government" to decide what's best for everyone and tell them what to do and how much they would make.

Sounds eerily familiar to a couple places where that experiment is failing as we write....

[Ratickle]

Kinda defeats the whole "controlling an imbalance" idea if they're equally reciprocating doesn't it? But along those lines, like I said before, all it would do in the end is increase costs to everyone so where's the gain?

Tariffs and import taxes on necessary goods do little to curb consumption. It comes down to competitive advantage, whether it be natural or "man made."

If the entire planet were set on economically equal grounds, where no continent, no country, no company could make more money than another by producing a good or offering a service, then NOBODY would make it. If you didn't have the opportunity to make a profit, you wouldn't do anything. It would then be up to "A government" to decide what's best for everyone and tell them what to do and how much they would make.

Sounds eerily familiar to a couple places where that experiment is failing as we write....


You have that correct. Unfortunately, the only way to protect gains made by a country, from an unscrupulous country, is through tariffs and laws.

If the Chinese can use child labor, have zero pollution control on factories, use slave/inmate labor, have no SSI type retirement expenses, etc. Then of course it will be cheaper to manufacture there until such a time as their standard of living matches the consuming markets for their products. The only way to prevent that from occuring, is excise taxes and manufacturing requirements which match the government mandated laws and expenses here.

Example, you own a company in town A. Town B is 1/2 mile away. If town A passes a law that you must pay your employees $10.00 per hour and provide them with a catered steak lunch every day, and a retirement plan equal to 11% of their wage. But, town B has a company which does the exact same thing as you but has only the minimum wage law of $7.00 per hour, no lunch rule, no retirement rule. Who is gonna survive?

If your town wants to save your company, and the jobs you provide, they must pass a simple law that all imports of the exact same products you make have to meet the same rules or pay an excise tax equal to those mandated expenses. Otherwise you are gone, the employees are unemployed, and the town has no tax base.

[Ratickle]

That's what I mean by equally recipricating.

[sledge]

yes, it's a nice theory. The problem is, the reason the cheaper firm existed is because there's enough people that didn't want to pay the higher prices. So when the end effect is a higher price across the board, people won't buy as much of the product and eventually both companies fail.

[MattBMiller]

The politicians and the tree huggers are our countries worst enemy now. During the last couple of decades their agendas and policies have forced manufacturing out of the United States. The auto industry (including all their suppliers) are really the last of the large industries left in our country, I can't fathom what will take it's place that will give people a chance to make a living that will pay them enough to afford a modest house. The government seems to think it is important for just about every kid to go to college, I keep wondering where all the jobs will be when they graduate.

Well said.:ack2:

[Ratickle]

yes, it's a nice theory. The problem is, the reason the cheaper firm existed is because there's enough people that didn't want to pay the higher prices. So when the end effect is a higher price across the board, people won't buy as much of the product and eventually both companies fail.

Ah, capitalism.
If the product is wanted, ie Large SUV's and Pickups, but the market is controlled, ie CAFE Standards, the market will fall. That's what is happening now.

We bought low mileage vehicles, SUV's/Pickups because that is what we wanted.

Those who wanted high mileage cars bought imports. Why? They were cheaper and better ie, more value.

Why were they cheaper and better? Because they were made by employees who made less money, had less benefits, and had less retirees to support.

Why did the Big 3 make small cars that they lost money on every one when people did not want to buy them? Because Congress, not capitalisnm, mandated they had to meet fleet CAFE standards to sell vehicles in this country. So, now they will be gone or starting over. I am pushing for starting over.

Could you imagine where the Big 3 would be right now if they got to make only what they wanted to instead of mandated rules?

[Ratickle]

yes, it's a nice theory. The problem is, the reason the cheaper firm existed is because there's enough people that didn't want to pay the higher prices. So when the end effect is a higher price across the board, people won't buy as much of the product and eventually both companies fail.

You miss one point. They were both manufacturing and selling in the same market to begin with. Some political entity decided to change 1/2 the rules, not all. That's what happened here.

A political entity decided to create NAFTA and then give China most favored nation trading status. Rules change, no control.

[sledge]

You're all over the place...I can't keep up. :D

So NAFTA is allowing the Chinese SUVs to ruin our economy?

[Sunsation96]

It is simple look out for our own no more imports simple and very effective. We need to keep america strong, it would be a great circle 1. I make it 2. you buy it 3. I profit 4. I employ you 4.you have a job 5. you spend money that is how it needs to work and the only way it will work

[sledge]

It is simple look out for our own no more imports simple and very effective. We need to keep america strong, it would be a great circle 1. I make it 2. you buy it 3. I profit 4. I employ you 4.you have a job 5. you spend money that is how it needs to work and the only way it will work

One big wrench that stops those gears from turning: natural resources. This country simply does not produce enough resources to sustain the consumption that we crave. We HAVE to go outside our borders. Let's take copper for example: http://en.wikipedia.org/wiki/Peak_copper#Production
I imagine there are materials out there that could replace copper, but at what cost? And at what availability? Just one example where we do not have a competitive advantage and have to go outside the great circle.

[Ratickle]

You're all over the place...I can't keep up. :D

So NAFTA is allowing the Chinese SUVs to ruin our economy?

Now that's funny......:rofl:

[Ratickle]

One big wrench that stops those gears from turning: natural resources. This country simply does not produce enough resources to sustain the consumption that we crave. We HAVE to go outside our borders. Let's take copper for example: http://en.wikipedia.org/wiki/Peak_copper#Production
I imagine there are materials out there that could replace copper, but at what cost? And at what availability? Just one example where we do not have a competitive advantage and have to go outside the great circle.

Ahh, but that is okay. If we are the main consumers and manufactures of products produced with copper, then the circle works. But, you need to manufacture for the countries who supply the natural resources we need. Or supply them with the natural resources we have that they don't. Like fighter jets....:) (or food)...

[Magic Medicine]

Ahh, but that is okay. If we are the main consumers and manufactures of products produced with copper, then the circle works. But, you need to manufacture for the countries who supply the natural resources we need. Or supply them with the natural resources we have that they don't. Like fighter jets....:) (or food)...

I like the way you think, we get hosed on the trade agreements plain and simple

[JupiterSunsation]

The government seems to think it is important for just about every kid to go to college, I keep wondering where all the jobs will be when they graduate.

Education is never a bad thing. Keep in mind many of the industrial/service jobs require smarter people to do them. I have a buddy that went to a Ford sponsered mechanic school. Just to begin he had to have 2 years college. The cars/trucks are heavy on computers and they wanted smarter mechanics working on them.

I recently watched a HBO special about a midwest town that is facing a GM plant closure. It had a weekend racer slant on the story. Guy worked at the plant so he could race on dirt ovals on the weekends. Interviewed several GM lifelong employees and their families. It was a very interesting piece but the common denominator was uneducated multi-generation white trash that has unrealistic expectations towards the government/ employer. These people were an embarrassment to America. The people interviewed felt that the $22 an hour job being offered was underpaying what they thought they were worth. They interviewed many just trying to eek out their employment long enough to get a pension, just like their dad and grandfather did before them. I thought it looked pathetic and yet when the camera panned the parking lot at the plant you would be surprised at how many non-GM cars were there.....

I think the unions have ruined many good companies in America.........

[JupiterSunsation]

http://www.hbo.com/docs/programs/dirtydriving/index.html

http://www.youtube.com/watch?v=yhwE4wT08JM

Great show by HBO but depressing also.....

[sledge]

Ahh, but that is okay. If we are the main consumers and manufactures of products produced with copper, then the circle works. But, you need to manufacture for the countries who supply the natural resources we need. Or supply them with the natural resources we have that they don't. Like fighter jets....:) (or food)...

Agreed! But again the devil is in the details: the U.S. outconsumes every country we trade with. We can produce for our trade partners, but they can't consume as much as we produce and consume.

Our trade deficits are highly correlated to our consumption excesses...plus or minus FX.

[RLJ676]

For all. The government will have to support a company which is modeled as a loser forever with our taxes. There is no way they will ever be competitive again.

I don't agree with this at all.

How does wiping the balance sheet clean, and getting competitive labor, etc make GM uncompetitive?

Now if the gov't decides to take over all product decisions, etc, we're screwed. But if (as they claim) that isn't the case, the actual passing of this would make GM profitable at a 10M a year industry......and very, very profitable anywhere near 16-17. This is assuming something similar to this plan happens.




As for "the global market", as I've been saying a global economy is great if you live in the bottom countries, not so hot if you live with the best standard of living in the world. A global economy moves towards equilibrium, which brings down the top and up the bottom. The countries with some degree of protectionism and pride are the ones who will be least affected. We have neither. We have a wide open market, and the jackasses here root against our biggest mfg companies....why, because they had bad luck in the 80's with a transmission. Now they are convinced a jap car is "American" and the only good thing to drive. The rest of the world is laughing at us and our reaction towards our auto industries while they do all they can to save and grow theirs.

[Ratickle]

I don't agree with this at all.

How does wiping the balance sheet clean, and getting competitive labor, etc make GM uncompetitive?

Now if the gov't decides to take over all product decisions, etc, we're screwed. But if (as they claim) that isn't the case, the actual passing of this would make GM profitable at a 10M a year industry......and very, very profitable anywhere near 16-17. This is assuming something similar to this plan happens..

Because they are not wiping the sheet clean with a company as a bankruptcy filing would. They still have to support their retiree health care, dental care, etc. Plus the current contracts with modfications, none of which I've seen do anything about the excess benefits pay, When compared to their Profitable competitors. ALl this does is postpone the filing of bankruptcy for a few years until they go completely under. Every car they build loses them money. Only the larger vehicles are profitable.




As for "the global market", as I've been saying a global economy is great if you live in the bottom countries, not so hot if you live with the best standard of living in the world. A global economy moves towards equilibrium, which brings down the top and up the bottom. The countries with some degree of protectionism and pride are the ones who will be least affected. We have neither. We have a wide open market, and the jackasses here root against our biggest mfg companies....why, because they had bad luck in the 80's with a transmission. Now they are convinced a jap car is "American" and the only good thing to drive. The rest of the world is laughing at us and our reaction towards our auto industries while they do all they can to save and grow theirs.

Well said

[RLJ676]

Because they are not wiping the sheet clean with a company as a bankruptcy filing would. They still have to support their retiree health care, dental care, etc. Plus the current contracts with modfications, none of which I've seen do anything about the excess benefits pay, When compared to their Profitable competitors. ALl this does is postpone the filing of bankruptcy for a few years until they go completely under. Every car they build loses them money. Only the larger vehicles are profitable.




I don't think that is correct, the retiree health care is covered by the VEBA, which is being half paid in equity. The healthcare was taken off the books in 06 by the VEBA agreement, and now we're further reducing that with the equity swap. This plan (which the bondholders won't agree to most likely) would make GM profitable (EBIT) basically next year, assuming there is any rebound at all (SAAR above 10M). I believe in whole it reduces liabilities by $44B, and the labor costs by $4 B annually.

Have you read the S4 from yesterday for this debt for equity exchange? It spells all this out, and I don't see anywhere it sets up a continuing need for taxpayer money. The key is the gov't staying the f' out of the business and letting us make the right cars and paying back the treasury ASAP.

[sledge]

paying back the treasury ASAP.

I haven't read the filings. But isn't that the back-end crux of a lot of all the bailouts - there's no defined exit strategy. It's one thing to be on the hook for an identure which can be repayed according to terms. Is there anything spelled out which will explicitly allow the company(ies) to buy back the equity? Or will Treasury have to file a shelf registration for an eventual public offering?

The actual dollar amount really is a pittance compared to the budget as a whole. But the lack of clearly laid out plans from the administration is what bugs the sh!t out of me.

Can't wait to see what kind of people get put on the Board of Directors. Will be fun come UAW contract negotiation time....

[RLJ676]

I haven't read the filings. But isn't that the back-end crux of a lot of all the bailouts - there's no defined exit strategy. It's one thing to be on the hook for an identure which can be repayed according to terms. Is there anything spelled out which will explicitly allow the company(ies) to buy back the equity? Or will Treasury have to file a shelf registration for an eventual public offering?

The actual dollar amount really is a pittance compared to the budget as a whole. But the lack of clearly laid out plans from the administration is what bugs the sh!t out of me.

Can't wait to see what kind of people get put on the Board of Directors. Will be fun come UAW contract negotiation time....

The plan talks on payback of the loan portion, the equity is much less clear. I'm not sure if it lays out how they'd exit out. I'm not sure even what the status of their stock would be if it's just standard shares or what. Frankly, I'd much rather GM not swap the gov't debt to equity and just take a SAAR of 11M to be profitable and pay them back ASAP and get them the hell out of there. They are the ones though who demanded liabilities reduced by 90%, which includes their debt.