The GM "plan"

[Cuba]

Here's the latest update on Obama's plan to hand over GM to the unions and himself (even though he really doesn't want control ) while robbing secured bond holders of 89% of their property. Bondholders- 10% of the new company in exchange for their sacrificing ALL of their $27 billion in secured debt. Unions- 39% for $10 billion in unsecured debt, they keep the other $10 billion, get early retirement buyouts, and have billions funneled to their trust fund. Treasury- 51% for $10 billion in emergency loan forgiveness. Oh and remember, the new company will be run by the unions and the federal government, otherwise known as "into the ground", again.



Here's a look at the numbers behind its new business plan:


• GM's offer to bondholders includes at least 5.5 billion new shares valued at $2.3 billion, along with $635 million in cash as a replacement for interest payments.


• Those shares would eventually account for 9% to 10% of a new GM, depending on how many bonds are turned in.


• GM estimates it will give the U.S. Treasury 51% of the reformulated company, or 31.2 billion shares, in return for cancelling about $10 billion in debt. Under GM's plan those shares would be worth $13.1 billion, as GM assumes it would receive an additional $9 billion in loans from the Treasury following the deal.


• The UAW would receive 39% of the new GM, or 23.2 billion shares worth $9.7 billion, in lieu of $10 billion of the $20 billion GM owes to the retiree health-care trust fund.


• Current shareholders would own 1% of the new GM, worth about $254 million, or 42 cents a share. GM's stock was up nearly 20% to $2.04 a share in afternoon trading.


• Following the transaction, GM would engineer a 1-for-100 reverse stock split.

 

[Cuba]

Today's update: The unions want less equity in exchange for cash payouts and preferred stock.

What this means: They are not confident in the new company actually making money. They don't want to be paid based on profitability, sustainability, or actual value, they just want more guarantees regardless of how poorly the company performs. Some might say that's why these companies failed in the first place...

 

[urbanj]

Today's update: The unions want less equity in exchange for cash payouts and preferred stock.

What this means: They are not confident in the new company actually making money. They don't want to be paid based on profitability, sustainability, or actual value, they just want more guarantees regardless of how poorly the company performs. Some might say that's why these companies failed in the first place...

EDIT It was the Oshawa GM plant

The big three can burn for all I care but it's exactly why they failed. A buddy of mine was a BMW tech and went to Ontario for some training. He met these two girls out there, I can't remember which big three they worked for but they got paid $35 an hour to install wiper motors. Not only do the unions milk every cent they can, they build a crap product. No business can be profitable that way. Don't know about the States but the CAW is garbage up here.

They made the bed, now they have to sleep in it

 

[wrightme43]

I am just freaking disgusted. These people are stealing, lying, and destroying the future of our country, but hey they got the union vote huh?

 

[notjohndavid]

all I can say is uuuugh

 

[wolfc70]

I am not too sure how Obamamotors (GM) will work out. You can build a clean high mpg car, but you can't make the public buy it.

The fact that the bond holders got screwed really scares me. Why should I invest in a company with asset secured bonds if the government can change my guaranteed money? The way the administration handled this reminds me of Mafia tactics; "Take this or get nothing". The bond holders (if you have a 401k, you are most likely a bond holder in GM) should be able to get what is due, but since the Obama administration seems to be a wholly owned subsidiary of the Union, us investors get the leftover scraps. I am really beginning to think that this current administration will be the end of the USA being a economic superpower, we are in a massive amount of debt barely past 100 days in. I wonder what the next 1360 days will bring.

 

[ThirtyTwo]

I'm not agreeing or disagreeing with the "rightness" of the Feds' management of GM, but I do have a question:

Why is it that the auto industry is such a sensitive topic? It seems that people have strong opinions of what car manufacturers are up to, how they're doing, how they run their companies, etc.

You hardly ever hear, by contrast, about how the "Big 3" in healthcare are managing their businesses, how they treat or mistreat their employees, whether profits are up or down.

I'm just curious why the auto industry is such a hot topic? Anyone? Bueller? Bueller?

 

[Cuba]

I'm not agreeing or disagreeing with the "rightness" of the Feds' management of GM, but I do have a question:

Why is it that the auto industry is such a sensitive topic? It seems that people have strong opinions of what car manufacturers are up to, how they're doing, how they run their companies, etc.

You hardly ever hear, by contrast, about how the "Big 3" in healthcare are managing their businesses, how they treat or mistreat their employees, whether profits are up or down.

I'm just curious why the auto industry is such a hot topic? Anyone? Bueller? Bueller?

I think it plays into the perception of the good old fashioned middle class manual laborer. The "honest days work for an honest days pay". There is a perception that US autoworkers are all somehow victims of their employers (this was carefully crafted by the unions themselves) so it should be very interesting to see how they fare while they are self/gov't employed--> who will they blame, who will be victimizing them now? Probably Bush

The fact is we do have a problem with a shrinking middle class in America, but it is a result of technology, not greed. How can a local general store owner (remember those?) compete with Walmart? What advantage does being local have now that the internet supplier can ship supplies globally at a moment's notice more efficiently and less costly than anyone else? The system has become much more efficient by cutting out the middle man. The answer our president has come up with is not to change these middlemen, but to change everything else. To mandate inefficiency in order to unnaturally prop up these middlemen. Don't teach them to adapt to the changing environment (teach them how to fish) but instead punish everyone else for being creative, efficient, and profitable. The idea is that profitability is somehow shameful, that competition is evil, that efficiency is wrong. I for one disagree, but let's see what happens when the auto industry either a) fails to become profitable and ends up an endless taxpayer subsidized money pit, or b) does exactly what they should have done and slash expenses until they are in the black. The administration can't really win this one, they either layoff thousands, close plants, erase the entitlements, and drastically improve efficiency, or they continue stealing our money to pay their union buddies and buy votes. Should be interesting to watch.

The philosophical argument is fantastic. Here is a man all out attacking business for what he perceives to be ruthless uncaring greed (we private business folks prefer to think of it as efficiency, profitability, and sustainability), yet he's also attacking the auto industry for their inefficiency, waste, and unsustainability. You can't have both, so which will it be? Mandate inefficiency to prop up a group of laborers, or turn things around and make the company sustainable? Managers have to make those tough decisions everyday, no one wants to lay people off, but you have to. Now he has inserted himself in the management role and will come out bruised no matter what (or we can all just ignore any decenting opinions or criticisms or our leader). My guess is either way it will cost us all a ton of money, and we would have been much better off not getting so involved.

 

[Oscar54]

So, only Union workers are greedy!

Everyone knows that the Executives are by definition altruistic and only think of doing the most efficient and economic activity to "enhance shareholder value"? An Executive would never do anything to enrich himself, I guess because the "Market" would never allow it. And of course they are also Patriots and would never engage in any activity that would be detrimental to the USA like moving factories overseas to pay slave wages.

And of course GM and Chrysler failed only because of the union workers demanding to be paid too much and wanting unsustainable benefits. Let's just ignore the fact that union labor and benefits amounted to around 10% for a $25,000 vehicle. Let's also ignore the fact that management is solely responsible for the final decisions on the mix, quality, and the economy of the vehicles offered for sale. And also lets ignore that GM and Chrysler lost market share not because their cars were too expensive or because they cost too much to make. They lost market share because management decided to market vehicles people preferred not to buy.

Lets ignore the fact that the management of the American Auto Industry came up with the brilliant idea of forced obsolescence (read poor quality) and fought tooth and nail against raising CAFE and safety standards. In all these things the Japanese did the opposite. And here we are.

If the American Auto Industry fully funded their pension obligations all through the years from 1946 they wouldn't be screaming about benefit costs they now have to pay out of current income.

Oh, and lets also ignore the fact that the German Auto Industry is heavily unionized and is profitable.

The American Auto Industry is failing not because of Union Workers, it is failing because of bad management.

 

[blchandl2]

So, only Union workers are greedy!

<snip>

The American Auto Industry is failing not because of Union Workers, it is failing because of bad management.

BOTH are to blame. The union made unrealistic demands and management agreed to them because business was good. Now, BOTH are too stubborn/stupid to change.

 

[urbanj]

BOTH are to blame. The union made unrealistic demands and management agreed to them because business was good. Now, BOTH are too stubborn/stupid to change.

i agree. the executives mentality rubs off on everyone. if the union sees every year the execs and manager getting big bonuses and raises they will fight for the same. but they build a product most people didnt want. they lost money for years. I don't know what their salaries were but I can almost guarantee they didn't go down.

ah well what can you do other than don't buy a GM

 

[Cuba]

So, only Union workers are greedy!

Everyone knows that the Executives are by definition altruistic and only think of doing the most efficient and economic activity to "enhance shareholder value"? An Executive would never do anything to enrich himself, I guess because the "Market" would never allow it. And of course they are also Patriots and would never engage in any activity that would be detrimental to the USA like moving factories overseas to pay slave wages.

And of course GM and Chrysler failed only because of the union workers demanding to be paid too much and wanting unsustainable benefits. Let's just ignore the fact that union labor and benefits amounted to around 10% for a $25,000 vehicle. Let's also ignore the fact that management is solely responsible for the final decisions on the mix, quality, and the economy of the vehicles offered for sale. And also lets ignore that GM and Chrysler lost market share not because their cars were too expensive or because they cost too much to make. They lost market share because management decided to market vehicles people preferred not to buy.

Lets ignore the fact that the management of the American Auto Industry came up with the brilliant idea of forced obsolescence (read poor quality) and fought tooth and nail against raising CAFE and safety standards. In all these things the Japanese did the opposite. And here we are.

If the American Auto Industry fully funded their pension obligations all through the years from 1946 they wouldn't be screaming about benefit costs they now have to pay out of current income.

Oh, and lets also ignore the fact that the German Auto Industry is heavily unionized and is profitable.

The American Auto Industry is failing not because of Union Workers, it is failing because of bad management.

Once again you ignore the actual argument and insert baseless accusations that no one was talking about in the first place. Your "facts" are once again made up and/or unsupported. No one said the unions were the only cause. I would make the assumption that gas prices followed by economic meltdown MAY have also played a role, but the accusation that management decided they should just make bad cars that no one will buy is dead wrong, and I question either the common sense or the honesty of anyone that would make that claim. It is absurd. I for one see no shortage of American cars on the road. I've actually been counting them as I drive around. GM and Chrysler vehicles are all over the place. Trucks, SUVs, sedans, coupes, they are everywhere. These companies were producing SUVs because people were buying them, and still are. Honestly, why do you think they made these vehicles? Do you think the managers at fortune 100 companies are sitting around trying to figure out how to produce things their customers don't want? They made a killing from SUV sales, it was the fastest growing market around for a long time, and they were more profitable per unit than small cars.

Here's another interesting fact for you. GM has more fuel efficient cars on the road and fuel efficient car models than any other car maker on the planet. Period.

Check out the facts:
Auto Sales - Markets Data Center - WSJ.com

The big 3 have the largest market share and saw comparable declines to forgein companies in car sales during the current recession. All suffered massive declines in sales, however you cannot argue the popularity of these companies, they have the highest sales, they are the most popular, and that's a fact. So if sales are superior, why are they going under? Because their costs are higher. The metric I heard was that there are approximately 780,000 UAW members that are getting paid for not working... and that foreign manufacturers have 0.

 

[Oscar54]

... The metric I heard was that there are approximately 780,000 UAW members that are getting paid for not working... and that foreign manufacturers have 0.

Since you always want to make your responses personal I have to say that you pulled the above statement out of your butt.

According to the Associated Press UAW membership was only 464,910 in March 2008.

Check your facts before you accuse others of not knowing what they are talking about. I can only assume you got your information from your personal oracle Glenn Beck.

UAW membership falls below 500,000 to lowest level since WWII -

 

[Cuba]

Since you always want to make your responses personal I have to say that you pulled the above statement out of your butt.

According to the Associated Press UAW membership was only 464,910 in March 2008.

Check your facts before you accuse others of not knowing what they are talking about. I can only assume you got your information from your personal oracle Glenn Beck.

UAW membership falls below 500,000 to lowest level since WWII -

I never said it was true, only that I had heard that, which I did. I looked it up and confirmed similar numbers, but also that the job bank paid 12,000 UAW members 95% of their salaries to not work, plus benefits. Also the metrics for average hourly costs of UAW vs. non union auto workers is $74/hr vs. $44/hr. These figures include salary/benefits/tax liability. This is almost exactly the same as in the furniture industry, except that we can hire a temp worker for $12/hr. all in.

Glenn Beck... Guess if he says it it's not true, right? Wait what about when he says it, the president denies it, but then flip flops and admits to it fully (vis-a-vis the complete unsustainability of his budget proposals)?

So as a manager if your labor cost are almost twice that of the competition, what do you do? You can't fire them, they won't negotiate, they won't conceed to the unsustainability of this model, so eventually... they fail. Light trucks and SUVs were the fastest growing market segment, US companies had a major headstart and advantage over the competition, AND they made much higher margins on them which helped absorb the massive labor cost per unit. I guess they should have focussed on unprofitable small cars and failed while Bush was still in office, then they could have erased the union contracts, sold off some divisions, restructured into a viable profitable company, and employed the proper number of workers for their business. Now they will just be surviving off of our tax dollars to continue paying them more than economics would allow.

I assume you are ignoring the massive conflict of interest with having a president who is utterly supported by the unions now running the company and paying his supporters with our money?

 

[Hellgate]

All I know is Obama is dropping by my house to change the oil and rotate the tires on my Malibu.

I was relieved to hear the Fed call for a serious cut back in spending.

Part II of this whole mess (Obamanomics) is going to be very, very serious inflation; not sure when but it is looming.

 

[Cuba]

Part II of this whole mess (Obamanomics) is going to be very, very serious inflation; not sure when but it is looming.

I just bought a house with a 5% fixed rate mortgage that is assumable! I'll be a millionaire in a few years I tell ya! Wait no, I forgot, they're planning to tax my capital gain down to nothing . Plus by then it'll be the $10 menu and you'll need to pay with yuan.

 

[wolfc70]

Part II of this whole mess (Obamanomics) is going to be very, very serious inflation; not sure when but it is looming.

Part III of this mess will be when our Treasury Notes loose their AAA rating, then no one will buy Treasury bills. Then we have to print the money to stay sustainable. Inflation? If things fall apart (and they probably will) we will see inflation and stagflation that may very well set new records. And we wonder why the Chinese are laughing at us... Other countries are questioning our debt, why aren't we? When our debt equals 80% of our GDP, (not if, when) how do you stay a sustainable society.

We have been trying to be more like Europe, but with the last European elections, the EU has moved hard to the right (conservative). They tried the Liberal, big government way, and could not sustain a growing economy. Everything we are about to do, has been done before. And it did not work out that well. We need to be learning from our and other countries mistakes, and try and support a strong, developing, and enterprising private sector. The private sector is what grows our economy, and big government takes money from the private sector. It does not (or perhaps, should not) take a genius to see what we are doing wrong here. End :rant:

 

[Cuba]

We have been trying to be more like Europe, but with the last European elections, the EU has moved hard to the right (conservative). They tried the Liberal, big government way, and could not sustain a growing economy. Everything we are about to do, has been done before. And it did not work out that well. We need to be learning from our and other countries mistakes, and try and support a strong, developing, and enterprising private sector. The private sector is what grows our economy, and big government takes money from the private sector. It does not (or perhaps, should not) take a genius to see what we are doing wrong here. End :rant:

I couldn't agree with you more.