GM Declares Bankruptcy

[DanS]

In about 7 hours time. And it's about damn time.

The US government will put in another $30 billion and the Canucks another $10 billion in debtor-in-possession financing.

I have some quibbles. The deal is quite generous to the UAW and bondholders (much more generous to the UAW than the bondholders) and puts way too much risk on the shoulders of the taxpayers. But at least this is coming to a conclusion.

[Kuciwalker]

I was hoping this deal would fail and it would actually go through the courts. I don't want to bail out the unions that caused the problem in the first place

[SlowwHand]

This won't solve anything, other than stiffing those with money coming.
"We want a do-over", and life goes on.

[Whoha]

In about 7 hours time. And it's about damn time.

The US government will put in another $30 billion and the Canucks another $10 billion in debtor-in-possession financing.

I have some quibbles. The deal is quite generous to the UAW and bondholders (much more generous to the UAW than the bondholders) and puts way too much risk on the shoulders of the taxpayers. But at least this is coming to a conclusion.

I think that they have a 3 day grace period.

[Zkribbler]

Kuci, you magnificent flying jackass, this bankruptcy was NOT caused by the unions. In case you hadn't noticed, we're suffering through the greatest economic downturn since the Great Depression, and demand for cars has dried up like the Gobi Desert. If you're GM, and you can't sell cars, you have problems.

Here's the skinny from Yahoo News:

WASHINGTON (AFP) – General Motors will declare bankruptcy Monday, ending an era in US manufacturing and setting a path for the government to take a majority stake in what was once the world's largest corporation.

Senior US officials detailed Sunday what they hope will be a swift process in which GM should be able to reemerge from bankruptcy protection as a new, leaner company within 60 to 90 days.

General Motors will enter the courtroom with billions in government financing and agreements already in place to cut labor costs, swap much of its debt for equity and reduce its liabilities by 50 percent.

Officials said the process is expected to be similar to that of Chrysler, which is expected to emerge from bankruptcy protection this week after just over a month.

However, the process will not be "as speedy as Chrysler because GM is a far larger, far more complicated global company," senior administration officials cautioned.

President Barack Obama is to hold a press conference at 11:55 am (1555 GMT) Monday to discuss the state of the automotive industry.

Newly appointed GM chief executive officer Fritz Henderson, who is expected to continue to steer the new company, will speak to the media shortly afterwards.

"It'll have a huge impact in the United States because it's more than just a corporation -- it's an icon," said Gary Chaison, a professor of labor relations at Clark University.

"It represented manufacturing supremacy and good jobs for American workers. That's gone."

The largest US automaker will close 11 plants and idle three others as it slashes its operating costs in order to lower its break-even point by 40 percent in terms of overall US industry sales.

The US government will provide an additional 30.1 billion dollars in financing to help GM restructure under court protection and will receive a 60 percent stake in the new company. It has already provided 19.4 billion dollars in loans.

Officials cautioned that the Obama administration has no intention of nationalizing General Motors over the long term and will not be participating in its day-to-day operations.

nationalizing General Motors "The government has no desire to own equity stakes in companies any longer than necessary, and will actively seek to dispose of its ownership as soon as practicable," senior administration officials said in a media briefing.

"The goal is to promote strong viable companies that can become profitable quickly and contribute to economic growth and jobs without government involvement."

The governments of Canada and Ontario, which have several GM factories, will provide an additional 9.5 billion dollars in financing and receive a 12 percent stake.

Creditors holding about 54 percent of General's Motors bonds agreed to a plan that would swap 27.1 billion dollars in debt for a 10 percent stake and warrants for an additional 15 percent stake, officials said.

Bondholders who rejected the plan could still fight it in court, but the government maintains they could end up with little or nothing if they take that path.

A retiree health care trust will receive a 17.5 percent stake in the new GM and 6.5 billion dollars in preferred stock in exchange for forgiving much of a 20-billion-dollar obligation.

Employees will continue to be paid and GM will immediately seek permission to continue to pay suppliers and honor customer warranties.

GM will also offer about 40 percent of its dealers 18 months to wind down their operations and will immediately seek permission to honor incentives offered to its remaining dealers.

Media reaction to the plan ranged from optimistic to skeptical. The Detroit Free Press sought solace in the fact that "the Chrysler, GM and other bankruptcies in the automotive sector are meant to be transitions, not liquidations."

But The Washington Post quoted a letter sent to Treasury Secretary Timothy Geithner by 20 members of the House of Representatives, who complained that "contractual rights of investors are being trampled by the government."

Also on Monday, New York bankruptcy judge Arthur Gonzales was set to rule on number three US automaker Chrysler, which filed for bankruptcy protection on April 30.

Under an expedited process, Gonzales was expected to approve the creation of a new Chrysler that would preserve the automaker's healthiest assets and liquidate the rest.

The new entity will be controlled by a consortium consisting of the Italian automaker Fiat, the United Auto Workers union's retiree health care trust fund, and the US and Canadian governments.

[dannubis]

To be fair, GM has been suffering from its historical liabilities for more than 2 decades now. And the prime cause for that are the unions... However, what tipped the scale is indeed the current crisis.

[BeBMan]

No GM food

[dannubis]

GM banana

[Zkribbler]

To be fair, GM has been suffering from its historical liabilities for more than 2 decades now. And the prime cause for that are the unions... However, what tipped the scale is indeed the current crisis.

..

UAW Wage Vs. Non-Union Labor At Transplants a Surprising Look

Editor's Note: After seeing these wage comparisons. it looks like labor is being made the scapegoat once again, by not only inept auto company management and inept U.S. Senators, but also the by UAW leadership...if these numbers are fact then the UAW should have agreed out of hand to the Senates request for parity and eliminated the drama and negative feeling to working men and woman.

DETROIT, Dec 12, 2008; Poornima Gupta writing for Reuters reported that the wages and benefits for the United Auto Workers union are at the center of a debate on a $14 billion package in emergency loans to U.S. automakers.

Some Republican senators want Detroit autoworkers to have pay parity with foreign auto manufacturers.

But the UAW has said the wages and benefits of its members are now competitive with workers employed by Japanese automakers following landmark labor agreements the union reached with General Motors Corp, Chrysler and Ford Motor Co in 2007.

The agreement slashed wages for new hires and created a trust for retiree healthcare called a Voluntary Employee Beneficiary Association, or VEBA, to shift liabilities to a union-aligned trust to be established in 2010.

Here are details of the average hourly labor cost of UAW workers employed at Ford and those employed by non-U.S. based automakers with plants in the United States. The figures are similar across the three Detroit automakers.

WAGES: Base hourly wages and cost of living adjustments

* UAW: $29
* Transplants: $26

WAGE RELATED: Paid vacation, overtime, holidays, night and weekend pay, break time

* UAW: $14
* Transplants: $9

BENEFITS: Healthcare, training, etc

* UAW: $12
* Transplants: $11

LEGACY COSTS (Without VEBA): Pension and healthcare benefits for retirees

* UAW: $16
* Transplants: $3

LEGACY COSTS (With VEBA): Pension and healthcare benefits for retirees

* UAW: $3
* Transplants: $3

TOTAL LABOR COST:

* UAW (without VEBA): $71
* UAW (with VEBA): $58
* Transplants: $49

Source of data Ford Motor Company.

The VEBA Plan is a tax-free health reimbursement arrangement (HRA) that enables your employer to make tax-free contributions into a special trust account on your behalf. These tax-free funds can then be used to pay or reimburse eligible out-of-pocket health care costs and premiums for yourself, your spouse, and your qualified IRS dependents.

[Seeker]

"The goal is to promote strong viable companies that can become profitable quickly and contribute to economic growth and jobs without government involvement."

Don't they know that people can't tell if you're serious or not without emoticons??

That part was a joke right?

[Zkribbler]

Let's see. The gov't buys tons of stock at rock bottom prices, turns the company around, makes it profitable, and then sells its stock for a big gain. GM trives. The government coffers are full.

Looks like the joke is all those who claim that the only viable economic system involves Darwinian economics and governments so small you can drown them in a bathtub.

[DinoDoc]

What's the point of continuing to throw billions down the toilet for an enterprise that refuses to suceed?

PS @ Zk: Why do foreign manufacturers, no stranger to unions, almost uniformly decide to locate in the south?

[Asher]

Not sure how Zkrib can even pretend Unions have no blame here. Delusional or evil, not sure which he is.

[Rufus T. Firefly]

So is it time to buy GM stock? It's trading at $0.75 a share.

[DanS]

Pre-trading, it's at $0.55 a share.

It's an asteroid in the process of making a crater. If that's appealing to you, then by all means invest.