The Detroit News reports that GM and Chrysler are working furiously behind the scenes to extend the March 31 government deadline re: meeting the conditions of their $13.4b bridge loan to nowhere bailout buffet. Surprise! The American automakers’ inability to take responsibility for their actions may be true-to-form, but that doesn’t make it any less nauseating. Nor does the News’ coverage of the company’s weaseling, which put the “sick” in “sycophancy.” The only satisfaction to be had from this lede is the use of the word “scurrying.”
As General Motors Corp. and Chrysler LLC are scurrying to put the finishing touches on their restructuring plans due next Tuesday to the Treasury, finance and auto industry experts say submitting plans is one thing, but getting bondholders and all other parties involved in a massive restructuring to agree to those plans by the March 31 deadline seems unrealistic.
Pass the Alka Seltzer, here we go . . .
“I wouldn’t be surprised if the timetable got extended, because clearly the original plan was a temporary fix,” said Mark Oline, a Fitch Ratings analyst in Chicago. “It was going to be up to the new Congress and Administration to put in a longer-term solution.
Auto analysts and bankruptcy lawyers say the deadline set out in the federal bailout of the automakers is too ambitious to get bondholders on board in just a few more weeks. They say GM in particular needs an extension to avoid being forced into bankruptcy if it can’t show progress on its assignment to cut $27.5 billion of unsecured debt down to about $9.2 billion by the end of March.
So Detroit-friendly analysts are in the tank for Chrysler and GM. Surprise! Well here’s something worth considering: if there’s no “real” deadline, why should any of GM’s bondholders negotiate? They already crossed that bridge to nowhere during the GMAC debacle, when the feds ignored their own deadline and conditions for the then-lender’s (i.e., not bank) debt-for-equity swap, and dumped in $6b instead. Do you think GM and Chrysler bondholders didn’t learn that lesson? Cough. Pimco. Cough. And so GM CEO Rick Wagoner is down in DC doing what he does best [hint: it’s not building profitable vehicles].
GM’s Wagoner is working to smooth the reception of its plan with a series of meetings in Washington today, including one with the new chairman of the House Energy and Commerce Committee, Rep. Henry Waxman, D-Calif.
And the automaker is banking on the fact the loan agreements only require “commencement” of the exchange and not completion.
“So you have time. It’s not like everything is going to be done and buttoned up,” GM Chief Operating Officer Fritz Henderson said to reporters in January. “But we have to have preliminary plans by that time.”
Note to the DetN and our elected representatives: a plan to have a plan is not a plan. Not really. Not if you think about it.
The Hard money guys will sit it out, and do OK, under the circumstances.
The Taxpayers will be milked-the govt is like a parent who complains but always caves in in the end. The Kids know it, too.
It will all be fun until the Sovereign Wealth funds stop buying T-Bills and the dollar is no longer the reserve currency for oil.
A little redaction here perhaps, RF? This article also includes the following paragraph:
Being private, the majority of Chrysler’s bondholders are secured, said spokeswoman Chrysler Shawn Morgan. She said Chrysler doesn’t need and will not seek a delay in the timing set forth by the U.S. Treasury Department.
br549:
I caught that. My information is that this is not the case. My experience tells me that everything Chrysler/Cerberus says must be taken with a grain of salt the size of Gibraltar.
Does anyone know what the yield on the various GM Bonds currently is? I can’t help but think that this might not be such a bad place to park some money.
Perhaps we can start tracking this information in the Yahoo Finance window on the right hand side of the TTAC web page?
GM and Chrysler are in the driver seat now.
Is the government going to dump them and force them into bankruptcy? And lose the loan money already invested? Very bad publicity.
And the Dems need to save the UAW. The white collar workers are thrown under the bus while the union workers are paid big bonuses to retire. See, it pays to give hundreds of millions to the Dems during elections.
bluecon,
While I agree that GM and Chrysler are in the driver’s seat now (due to our elected officials having no spine), I have to call “bullshit” on your line about “it pays to give hundreds of millions to the Dems during elections.” Both parties are corrupted at the highest levels of our government. That’s how you get elected. (and more importantly, RE-elected)
Let’s not forget that TARP was hatched by Paulson and Bush. The original auto bailout was enacted by Bush. Last time I checked, W was and is a Republican.
Tex
p.s. For the record, I am an Independent voter. I choose based on issues and individuals, not party affiliation.
it pays to give hundreds of millions to the Dems during elections.
I think your analysis is slightly flawed given the huge losses of union membership in recent years. As for ‘investing’ in politicians, the UAW came up with $2M in contributions. Compare this with the $43.9M from the insurance industry (54% to republicans, the $59.6M from agribusiness (61% to republicans, the $131M from communications and electronics (29% to republicans), etc. In ’08 the democrats did much better than in recent years due to the expectations of their winning everything. The ‘contributors’ don’t like betting against likely winners.
Is the car czar still a go? If so, I don’t have any problem waiting til that person is on board and up to speed assuming it’ll be soon. It’s important to do this right, if there is such a thing in this situation. We’re in such a mess that nobody really knows what will work, so they’re just throwing stuff against the wall to see what, if anything, sticks.
Paulson was obviously lost, and Volcker, Summers, etc. are making informed guesses as well. We’re dealing with a lot of emotion here on the part of the public, investors and corporate managers with the fast money guys circling above to see how they can manipulate things for their own quick kills.
Given the horrendous effects of seeing the car companies, suppliers and dealers all go down, which of us would be quick to pull the plug if we were in the Whitehouse? Not me.
It still burns me that the TARP bailout of the banks is 40 times the size of the auto bailout, has no requirements for viability, accountability, repayment, anything. Hell, we have to beg the banks just to tell us what they did with the money!
And the govt is committed to putting money into that system for ever, without limit, as long as it takes.
Are we really getting all bent out of shape about a measly $20M to Detroit? Are we really getting all upset about saving the jobs of a few un-deserving union workers?
Have you ever SEEN an investment banker? A more repulsively un-deserving segment of America doesn’t exist.
Jobs bank? How about whining that your $4M bonus got cut to $2M. How about whining that you can only rent a house the Hamptons for 1 month this summer, not 2…
Cry-co and Gimme More will get a “bad dog” from Uncle Barry and then get their Milk Bonz at our expense.
Bunter
I’ll agree that a plan to have a plan is not a plan.
It is time to play hardball with any further tax payer funding. No acceptable turn around plan should mean no further tax payer funding, period.
Hope is not a strategy.
RetardedSparks-
The problem with this “well they gave the banks all that money, why not GM?” arguement is simple.
Since when does one stupid act justify another?
I don’t see many (any?) people here defending TARP either.
The focus on the auto-bailout might just be that this is not “The Truth About Banks”.
And making wild generalizations about bankers (no, I’m not one) is as lame as generalizations about union workers. They are humans, some good, some bad, most probably in between.
I think TARP was a bad move and that the stimulus package may just put us back on the road to “crack credit” again.
This doesn’t make keeping GM and Chrysler on a lung machine a brilliant idea.
My thoughts.
Best regards,
Bunter
Retarded Sparks, let me say a little on your point about the bailout of GM and Chrysler as opposed to the bailout of the banks.
They are different. I personally don’t believe either bailout will be worth what they will cost. But the bank bailout is just one more example of something that most economists feel comfortable with. These bailouts are often done, in both the United States and other countries. The carmaker bailout is not. It’s very unusual, and has no economic justification. It’s just political.
I’m oversimplifying here, but the difference is in what the bailout funds are used for. Banks use the bailout funds as capital. Carmakers use the bailout funds to pay operating expenses. That difference is a big one.
With the banks, the money goes out in loans or to buy assets. The money might still be lost. But in most cases, it is not. Most of it, at least, can be recovered. The bank uses the bailout funds to make money, which is then used for operating expenses. The bailout funds themselves are not used.
With the carmakers, the money goes to operating expenses. The money is spent, and you have nothing left from it. No assets have been purchased that can be foreclosed on. The carmaker uses the funds to cover its operating losses.
A simple example is giving someone money to buy a house as opposed to paying for living expenses. In the former case, the money goes to buy an asset. Something of value is left. In the latter case, the money goes to stores and restaurants. Nothing of value is left.
There are other differences as well. But whether you support one bailout or the other, or neither or both, you should recognize that they are not the same.
“Note to the DetN and our elected representatives: a plan to have a plan is not a plan. Not really. Not if you think about it.”
[modest chuckle] Minimally witty, but untrue.
“Plans are nothing. Planning is everything.” — Dwight D. Eisenhower.
The battlefield is changing faster than the plans can be drawn up. If one cannot see this, then one has not been watching.
The plans WILL change because they reflect a changing reality. Anything else would be irresponsible.
tesla deathwatcher-good points, I had not thought about that difference.
Bunter