General Motors stock skids on bankruptcy reports

[1prophet]

General Motors stock skids on bankruptcy reports

WASHINGTON (AFP) ? General Motors skidded on the stock market Monday after reports that the government was directing the troubled auto giant to lay the groundwork for a June 1 bankruptcy filing.

GM plunged 17.65 percent to 1.68 dollars at 1405 GMT in initial trades as the market opened after a long Easter weekend.

The New York Times reported Monday that the Treasury Department was directing GM to prepare for a bankruptcy court-supervised restructuring despite the company's public contention that it could still reorganize outside court.

President Barack Obama?s auto task force spent last week in meetings and on conference calls with GM officials and advisers in Detroit and Washington, the newspaper said, quoting people with knowledge of the plans.

Those talks are expected to continue this week.

The goal is to prepare for a fast "surgical" bankruptcy, the report said.

The government on March 30 gave GM, which has received 13.4 billion dollars in public aid, 60 days to come up with an aggressive restructuring to be eligible for further aid the company says it needs to avoid collapse.

Some analysts say creditors are pressing GM for a better deal.

"GM?s creditors seem to believe that they should get a better deal than the car company is offering them so that it can reduce its debt," said Douglas McIntyre of 24/7 Wall Street.

"Even the most senior creditors are being asked to take a very modest portion of the face value of their loans to help the huge car company get out of financial trouble," he said.

Creditors believe that they have the ability to stop or at least draw out a Chapter 11 bankruptcy process, McIntyre said.

"That would make a bankruptcy less attractive to the Treasury, which would simply like to get the GM matter resolved in a way that does the least to disrupt the industry, its suppliers, and its employees," he said.

According to The Wall Street Journal, the creditors may find that they have very few rights.

The paper said, "Some bondholders fear GM?s fast-track reorganization inappropriately mirrors what was done last fall when Lehman Brothers filed for bankruptcy protection as the US financial system seized up."

The government decided to let Lehman, the US investment banking icon, collapse in September last year amid financial turmoil following a home mortgage meltdown.

No matter who you want to blame Management, Unions, Bondholders, etc. if you don't have customers ready willing and able to buy your product or service your time is limited as a business and all loans and bailouts do is prolong the inevitable.

 

[dphantom]

For those of us who say this coming last year, well I just wish our government then had not bothered with spending billions to prop up a company that was going to fail anyway. GM and Chrysler would both be better off today if they had gone thru a prearranged bankruptcy last year.

 

[MotF Bane]

What a waste of money.

 

[dullard]

Originally posted by: dphantom
For those of us who say this coming last year, well I just wish our government then had not bothered with spending billions to prop up a company that was going to fail anyway. GM and Chrysler would both be better off today if they had gone thru a prearranged bankruptcy last year.

I can't count how many times I've posted that we'll bail them out and there STILL will be bankruptcies, unemployment, and all the problems. All that the billions of dollars did was to postpone the inevitable (oh and raise your taxes in the future).

 

[LegendKiller]

Originally posted by: dullard

Originally posted by: dphantom
For those of us who say this coming last year, well I just wish our government then had not bothered with spending billions to prop up a company that was going to fail anyway. GM and Chrysler would both be better off today if they had gone thru a prearranged bankruptcy last year.

I can't count how many times I've posted that we'll bail them out and there STILL will be bankruptcies, unemployment, and all the problems. All that the billions of dollars did was to postpone the inevitable (oh and raise your taxes in the future).

Ever hear of DIP financing? That was more or less what the government did.

 

[Harvey]

GM's failure is one of the worst things that could happen to our economy, especially our labor force, and they have nothing but decades of their own poor management to blame. All you have to do... Hell! All THEY had to do was compare the products they were building to those from their competition. They've been a company of chronic slow thinkers.

 

[babylon5]

And a few billions dollars are gone

 

[Fear No Evil]

Originally posted by: Harvey
GM's failure is one of the worst things that could happen to our economy, especially our labor force, and they have nothing but decades of their own poor management to blame. All you have to do... Hell! All THEY had to do was compare the products they were building to those from their competition. They've been a company of chronic slow thinkers.

Their problem was not entirely the products they were producing, but also their massively higher costs per vehicle due to the labor agreements they had. You can't compete in a market when your costs are like 3-4k higher per vehicle.

But I disagree with this being one of the worst things that could happen to our economy. GM in the grand scheme of things isn't a big deal anymore. Yeah, there are a lot of employees, but that was part of the problem.. they had WAY too many current and former employees costing them too much. But in reality - Does anyone give a shit if GM dies? Someone will pick up their profitable cars or trucks, and make them, or GM will restructure and make them and be stronger for it.

I do have a big issue with the Obama Administration not seeing this while everyone else did. Yet they gave them the loans anyway. Payback maybe? Obama's 500 million had to come from somewhere.

 

[Fern]

I suppose this means we lose our $13.4 Billion?

Way to go Washington! (golf clap).

I wonder which banks are being asked to take a loss on their GM loans? Are these the same ones we're bailing out? If they take a loss on those GM loans will they just get more bailout money later to make up for it?

How much money in total have we blown here?

Fern

 

[Fear No Evil]

Originally posted by: Fern
I suppose this means we lose our $13.4 Billion?

Way to go Washington! (golf clap).

I wonder which banks are being asked to take a loss on their GM loans? Are these the same ones we're bailing out? If they take a loss on those GM loans will they just get more bailout money later to make up for it?

How much money in total have we blown here?

Fern

What's a few billion dollars among friends?

 

[LegendKiller]

Originally posted by: Fear No Evil

Originally posted by: Harvey
GM's failure is one of the worst things that could happen to our economy, especially our labor force, and they have nothing but decades of their own poor management to blame. All you have to do... Hell! All THEY had to do was compare the products they were building to those from their competition. They've been a company of chronic slow thinkers.

Their problem was not entirely the products they were producing, but also their massively higher costs per vehicle due to the labor agreements they had. You can't compete in a market when your costs are like 3-4k higher per vehicle.

But I disagree with this being one of the worst things that could happen to our economy. GM in the grand scheme of things isn't a big deal anymore. Yeah, there are a lot of employees, but that was part of the problem.. they had WAY too many current and former employees costing them too much. But in reality - Does anyone give a shit if GM dies? Someone will pick up their profitable cars or trucks, and make them, or GM will restructure and make them and be stronger for it.

I do have a big issue with the Obama Administration not seeing this while everyone else did. Yet they gave them the loans anyway. Payback maybe? Obama's 500 million had to come from somewhere.

That's such a stupid statement it doesn't even really deserve the bandwidth wasted transmitting it.

Forcing the companies into BK was always on the table, they first wanted to see if it was needed. The money would have been out the door one way or another, the govt just gave them DIP financing before it went into BK. Nothing wrong with that at all.

 

[MotF Bane]

Originally posted by: Harvey
GM's failure is one of the worst things that could happen to our economy, especially our labor force, and they have nothing but decades of their own poor management to blame. All you have to do... Hell! All THEY had to do was compare the products they were building to those from their competition. They've been a company of chronic slow thinkers.

Do you place any of the blame on the unions?

 

[MikeMike]

Originally posted by: 1prophet

No matter who you want to blame Management, Unions, Bondholders, etc. if you don't have customers ready willing and able to buy your product or service your time is limited as a business and all loans and bailouts do is prolong the inevitable.

That is why GM is still selling the most vehicles per month of any manufacturer in the US right?
(note, TM MIGHT be higher, im not doing the reasearch, this line is the most retarded line that is uttered every day by dimwits who feel that they know more about the industry than those within the industry)

note: i am not saying GM doesnt have issues, but i AM saying that there are MILLIONS of people who buy GM products every year... that doesnt mean their customer base dried up... they are gaining more customers on their better product, and have been making huge strides...

also, let's not mention how much of the changes can be attributed to Wagoner and company, he was CEO for 8 years... most engineering cycles within the industry take 8 years, so you are JUST NOW seeing the results of his implementations.

 

[imported_K3N]

Nationalize the company already and replace the management with industrial engineers, i don't even care if they're german! Union busting FTL.

 

[Schadenfroh]

Looks like chapter 11 for them is likely inevitable. Let them restructure under bankruptcy protection. I doubt them going into it will cause a massive drop in sales, as most people seem to expect them to enter bankruptcy already. Shame those emergency loans were wasted.

 

[Fear No Evil]

Originally posted by: K3N
Nationalize the company already and replace the management with industrial engineers, i don't even care if they're german!

Why would you nationalize a company that we have a dozen alternative companies building similar products? That would simply transfer a failing company from the shareholders to the taxpayers (Even more so than we are already on the hook thanks to Obama and Geitner).

 

[Fear No Evil]

Originally posted by: LegendKiller

Originally posted by: Fear No Evil

Originally posted by: Harvey
GM's failure is one of the worst things that could happen to our economy, especially our labor force, and they have nothing but decades of their own poor management to blame. All you have to do... Hell! All THEY had to do was compare the products they were building to those from their competition. They've been a company of chronic slow thinkers.

Their problem was not entirely the products they were producing, but also their massively higher costs per vehicle due to the labor agreements they had. You can't compete in a market when your costs are like 3-4k higher per vehicle.

But I disagree with this being one of the worst things that could happen to our economy. GM in the grand scheme of things isn't a big deal anymore. Yeah, there are a lot of employees, but that was part of the problem.. they had WAY too many current and former employees costing them too much. But in reality - Does anyone give a shit if GM dies? Someone will pick up their profitable cars or trucks, and make them, or GM will restructure and make them and be stronger for it.

I do have a big issue with the Obama Administration not seeing this while everyone else did. Yet they gave them the loans anyway. Payback maybe? Obama's 500 million had to come from somewhere.

That's such a stupid statement it doesn't even really deserve the bandwidth wasted transmitting it.

Forcing the companies into BK was always on the table, they first wanted to see if it was needed. The money would have been out the door one way or another, the govt just gave them DIP financing before it went into BK. Nothing wrong with that at all.

Maybe we should loan them even MORE money then JUST TO MAKE SURE? Everyone knew this wasn't going to work..

 

[Harvey]

Originally posted by: Fear No Evil

Their problem was not entirely the products they were producing, but also their massively higher costs per vehicle due to the labor agreements they had. You can't compete in a market when your costs are like 3-4k higher per vehicle.

That's true, but when your products aren't competitive for function, making them cost less to produce doesn't change much.

But I disagree with this being one of the worst things that could happen to our economy. GM in the grand scheme of things isn't a big deal anymore. Yeah, there are a lot of employees, but that was part of the problem.. they had WAY too many current and former employees costing them too much. But in reality - Does anyone give a shit if GM dies? Someone will pick up their profitable cars or trucks, and make them, or GM will restructure and make them and be stronger for it.

I agree, philosophically, but in terms of the number of lives and jobs that could be disrupted, it could be very painful for those caught in the shakeup.

I do have a big issue with the Obama Administration not seeing this while everyone else did. Yet they gave them the loans anyway. Payback maybe? Obama's 500 million had to come from somewhere.

I think Obama and his admin knew this was a possiblity when they gave them the bailout money, and I believe they did it knowing they would need a fallback plan.

GM readies for 'fast' bankruptcy

Micheline Maynard and Michael De La Merced, Detroit
April 14, 2009

THE US Department of the Treasury is directing General Motors to lay the groundwork for a bankruptcy filing by June 1, despite GM's contention it could still reorganise outside court.

Members of President Barack Obama's vehicle industry taskforce spent last week in talks with GM officials and its advisers. The talks are expected to continue this week.

The goal is to prepare for a fast, surgical bankruptcy, sources said at the weekend.

GM, which has been given $US13.4 billion ($A18.5 billion) in federal aid, insists a quick restructuring is necessary so its image and sales are not damaged permanently.

The groundwork is aimed at ensuring a GM bankruptcy filing is ready should it be unable to reach a deal with bondholders to exchange about $US28 billion in debt into equity in GM and with the United Automobile Workers union.

Mr Obama was concerned about risks to GM's pension plan and wanted to avoid harming workers, the sources said.

Spokesmen for GM and the Treasury did not comment.

One plan being considered would create a new company that would buy GM's good assets almost immediately after it files for bankruptcy.

Less desirable assets, including unwanted brands, factories and health-care obligations, would be left in the old company, and could be liquidated over several years.

Treasury officials are examining whether the "good GM" enters and exits bankruptcy protection in as little as two weeks, using $US5-7 billion of federal money. The rest of GM might need as much as $US70 billion in government money, and possibly more to resolve the health-care obligations and liquidation of the factories, legal experts and federal officials said.

Since replacing Rick Wagoner two weeks ago, GM chief executive Fritz Henderson has sent clear signals that bankruptcy is probable unless agreements are reached with labour and the bondholders by June 1.

Mr Henderson has asked staff to work with legal and government advisers, but he does not believe bankruptcy is inevitable.

John Paul MacDuffie, an associate professor at the Wharton School at the University of Pennsylvania, said he saw little chance of an out-of-court restructuring, given that the Obama Administration had rejected GM's proposed revitalisation plan last month. It was submitted without the concessions needed from bondholders and the union.

"The simplest way to frame it is that they took the loans, there were conditions on the loans, they didn't prove their case for financial viability, and they didn't meet the deadline, either," Associate Professor MacDuffie said.

Treasury has hired Boston Consulting Group to help with the plan. Participation from banks also may be needed.

GM has started an advertising campaign stressing that car buyers should have confidence in it, and offering to make nine monthly payments of up to $US500 each for owners who lose their jobs.

NEW YORK TIMES

Originally posted by: MotF Bane

Do you place any of the blame on the unions?

Not much. They made their deals in other times. They signed legal, binding contracts that included retirement benefits, and employees who put in their time and their contributions to the retirement fund kept their end of the bargain and relied on GM's management to keep the fund solvent. Responsiblity for the retirement fund, itself, only recently shifted from GM to the unions.

You can argue after the fact that the deal became burdensom on GM, but you can't fault those who spent their working lives performing their part of the deal and expecting to be secure in their retirement.

 

[1prophet]

Originally posted by: MIKEMIKE

Originally posted by: 1prophet

No matter who you want to blame Management, Unions, Bondholders, etc. if you don't have customers ready willing and able to buy your product or service your time is limited as a business and all loans and bailouts do is prolong the inevitable.

That is why GM is still selling the most vehicles per month of any manufacturer in the US right?
(note, TM MIGHT be higher, im not doing the reasearch, this line is the most retarded line that is uttered every day by dimwits who feel that they know more about the industry than those within the industry)

note: i am not saying GM doesnt have issues, but i AM saying that there are MILLIONS of people who buy GM products every year... that doesnt mean their customer base dried up... they are gaining more customers on their better product, and have been making huge strides...

also, let's not mention how much of the changes can be attributed to Wagoner and company, he was CEO for 8 years... most engineering cycles within the industry take 8 years, so you are JUST NOW seeing the results of his implementations.

The bigger you are the more you need to eat, a big man may starve on the same portion a smaller man may find adequate, GM may sell more cars but due to expenses it may not be enough to help them out of bankruptcy, change my statement to enough customers if that makes it clearer.


If you want to know how good a car company is doing pay attention to those on the front lines ,the Dealers, since they are the ones who are dropping like flies or struggling due to lack of sales.

Even some of the better run dealers had to make severe cutbacks do to lack of sales which affect the local communities.

 

[BoberFett]

Originally posted by: Harvey
Not much. They made their deals in other times. They signed legal, binding contracts that included retirement benefits, and employees who put in their time and their contributions to the retirement fund kept their end of the bargain and relied on GM's management to keep the fund solvent. Responsiblity for the retirement fund, itself, only recently shifted from GM to the unions.

I certainly hope you argued as vociferously in defense of the insurance and banking executive bonuses which were legal, binding contracts signed in other times.

 

[Fern]

Originally posted by: LegendKiller
-snip-
That's such a stupid statement it doesn't even really deserve the bandwidth wasted transmitting it.

Forcing the companies into BK was always on the table, they first wanted to see if it was needed. The money would have been out the door one way or another, the govt just gave them DIP financing before it went into BK. Nothing wrong with that at all.

Are you saying our $13.4 billion is secured, we'll recoup it?

If not I have doubts about how good an idea it was. A loan after they were restructured makes a lot more sense to me. A loan before they were restructured just seems like an unnecessary opportunity to blow more money in a failed business model that was doomed anyway.

I'm thinking DIP financing is done during/after ch 11, since the bailout was before I'm worried we'll lose it in the reorg. And I'm concerned they'll just get more from the gov in this restructuring (real DIP financing).

Fern

 

[MikeMike]

Originally posted by: 1prophet

Originally posted by: MIKEMIKE

Originally posted by: 1prophet

No matter who you want to blame Management, Unions, Bondholders, etc. if you don't have customers ready willing and able to buy your product or service your time is limited as a business and all loans and bailouts do is prolong the inevitable.

That is why GM is still selling the most vehicles per month of any manufacturer in the US right?
(note, TM MIGHT be higher, im not doing the reasearch, this line is the most retarded line that is uttered every day by dimwits who feel that they know more about the industry than those within the industry)

note: i am not saying GM doesnt have issues, but i AM saying that there are MILLIONS of people who buy GM products every year... that doesnt mean their customer base dried up... they are gaining more customers on their better product, and have been making huge strides...

also, let's not mention how much of the changes can be attributed to Wagoner and company, he was CEO for 8 years... most engineering cycles within the industry take 8 years, so you are JUST NOW seeing the results of his implementations.

The bigger you are the more you need to eat, a big man may starve on the same portion a smaller man may find adequate, GM may sell more cars but due to expenses it may not be enough to help them out of bankruptcy, change my statement to enough customers if that makes it clearer.


If you want to know how good a car company is doing pay attention to those on the front lines ,the Dealers, since they are the ones who are dropping like flies or struggling due to lack of sales.

Even some of the better run dealers had to make severe cutbacks do to lack of sales which affect the local communities.

oh, trust me, there is so much more to the auto industry than most believe... i believe something like 60% of tier 1 suppliers are used by ALL manufacturers... IF GM closes, they are all screwed... when GM declares bankruptcy, they will have some major cash problems...

 

[dullard]

Originally posted by: LegendKiller
Ever hear of DIP financing? That was more or less what the government did.

With with DIP financing, you have no guarantee of getting the debt repaid. Even if the debt is repaid, you have no guarantee that you'll get your lost interest back (the government had to pay interest to borrow the money). Even if you get the principal and interest back, you have no way of recovering the harm done to the economy due to having a massive zombie car company in the news for months.

 

[Fern]

Originally posted by: dullard

Originally posted by: LegendKiller
Ever hear of DIP financing? That was more or less what the government did.

With with DIP financing, you have no guarantee of getting the debt repaid. Even if the debt is repaid, you have no guarantee that you'll get your lost interest back (the government had to pay interest to borrow the money). Even if you get the principal and interest back, you have no way of recovering the harm done to the economy due to having a massive zombie car company in the news for months.

I'm not disagreeing with, but this is what I rea dof DIP financing:

What Does Debtor-In-Possession Financing - DIP Financing Mean?
Financing arranged by a company while under the Chapter 11 bankruptcy process. DIP financing is unique from other financing methods in that it usually has priority over existing debt, equity and other claims.

I'm curious if our bailout ($13.4B) money has this priority?

Even so, it was likely a poor idea. They'll probably need, and get from our gov, real DIP financing in the bankruptcy. That's why I think the bailout idea was a poor one even if it is secured.

Fern

 

[theeedude]

Bankruptcy is the best thing for GM. It needs to shed a lot of the legacy obligations that are dragging it down.