Automotive News [AN, sub] reports that GM won’t even try to make a $1b debt payment due on June 1st. The non-move virtually guarantees that the firm will enter bankruptcy protection. GM CFO Ray Young says the General is “hoping” for a successful debt-for-equity exchange with its bondholders. If that effort somehow fails (as every other GM debt-for-equity swap has so far), Young says GM will enter bankruptcy protection to reduce its unsecured debt load. My, we’ve come a long way from the Voldemort days, no? Meanwhile, AN also reveals that an Italian union official claims the Fiat-Chrysler deal is “90 percent complete.” In fact (or theory), it could be signed as soon as this afternoon—an assertion that Fiat has flatly denied.
“No agreement has been concluded between Chrysler and trade unions in the U.S. and Canada and the assertion that the overall agreement has been 90% defined is untrue. The talks remain completely open and it is not currently possible to predict the timing or the outcome,” goes the Fiat line.
Hilariously, Bruno Vitali, head of the automotive sector of the Fim-Cisl Italian union made his apparently erroneous statement immediately after a meeting with UAW boss Ron Gettelfinger. Gettelfinger officially denies leading Mr. Vitali on, but Ron can be quite the tease, can’t he?
Whether or not the Fiat deal goes through, it’s increasingly clear that Chrysler CEO Bob Nardelli is on the way out. The Wall Street Journal is running a vicious obituary of Bob The Builder’s career, exhaustively detailing the many missteps, shortcomings, snubs and embarassments that make up his recent professional history. Even Wagoner never got it this bad.
I just read in the Toronto Star,the government has given the CAW a midnight tonight deadline.
This $1b is to who?Can one of the B&B set me straight here.I’m a little confused.I understand GM owes money to everybody,including the US taxpayer,but who is first in line for a billion dollar payment?
Even Wagoner never got it this bad.
BUT he should have.
I wish I could fail like Bob Nardelli… With all those Home Depot millions, I would flop like a dead fish!
The shocking thing about Nardelli (and a lot of business leaders) is that they pop up everywhere. Anyone who denies the existence of a privileged class in North America has not taken a look at how incestuous the corporate/academic/governmental relationship is, and how often the same names show up again and again and again.
Yes, I’m a bit of a crackpot in these matters, but I find it really hard to believe that someone paid a quarter-billion to f_ck off could be seriously considered for any position that didn’t involve a mop and broom.
The shocking thing about Nardelli (and a lot of business leaders) is that they pop up everywhere. Anyone who denies the existence of a privileged class in North America has not taken a look at how incestuous the corporate/academic/governmental relationship is, and how often the same names show up again and again and again.
Seconded. And it’s been there even since the earliest years in the US. Some members leave, some members come into the fold, but generally these families stay in power for a long, long time. *cough* Rockefeller *cough*
@mikey:
Details seems scarce right now, but the $1B is a payment to whoever holds debt that either has a coupon payment or principal due on June 1st. It really doesn’t matter since once you miss a payment to any debtholder, the cross-default covenants in the rest of the debt are triggered and all outstanding debt is immediately due. At that point, it’s either bankruptcy or foreclosure.
I have mixed emotions on Nardelli. Part of me recognizes that Walter Chrysler himself could not have pulled Chrysler out of the death spiral that Daimler-Benz put it into.
On the other hand, Mr. Nardelli is one more example of the vanilla big-company management guy who was completely incapable of anything resembling a turnaround. One of those guys who is perfectly capable of flying a plane, so long as he is not asked to take off, land or perform any king of emergency maneuver. Just like Wagoner and anyone else at or from GM (Bob Eaton comes to mind).
psarhjinian & The Luigiian,
Of the 400 richest people in America 270 are entirely self made. You’re observations have little to no basis in fact. Indeed, “of the charter members of the first Forbes 400, only 32 remain today”
If the Chrysler/Fiat deal goes through, I hope the Chrysler SRT division starts to take notes from Ferrari and Maserati. A Ferrari-powered Viper… mmm… a Ferrari-tuned Grand Caravan… don’t laugh, it could be awesome…
Nardelli has made hundreds of millions, not bad for a guy who has suffered “many missteps, shortcomings, snubs and embarrassments”. Let’s see how well Heidi N. Moore, the beast who wrote the vicious obituary, does.
This $1b is to who?
To the bondholders.
This is a squeeze play, meant to get the bondholders to capitulate to the debt-for-equity deal. An announcement like this should lower the value of the bonds, which increases the likelihood that the bondholders will play ball.
Thank you sightline and pch101.So as I see it then,if Mr Young says”we can’t make the payment”then CH 11 is a given.
So as I see it then,if Mr Young says”we can’t make the payment”then CH 11 is a given.
I wouldn’t assume that.
It’s clear to me that the US government wants to avoid bankruptcy. It would prefer to have an alternative that gets a lot of the benefits of bankruptcy, such as debt writedowns, but without actually needing to file it.
It will file if pushed, but that isn’t the preferred alternative. Put it this way — if they were really all that hopped up for BK, they would have already filed it. They are going through this drama for a reason.
Of the 400 richest people in America 270 are entirely self made.
That’s not the point. Really, have a look at the number of interrelationships between corporate directorates. Per wikipedia (yeah, I know):
* of the 15 largest companies in the United States, 11 of them have two board members that sit together on another company’s board
* four of those 15 share at least two board members with another of the 15
* more than 1000 board members sit on four boards or more; 235 board members sit on more than six boards
* major banks are at the center of many of the overlapping ties
There’s even a fun, flash-based exploration tool for the same.
To your point, though: the archetype of the bootstraps billionaire is a really good one, right up there with “profits go to Japan” in terms of marketing spin designed to distract people from the real issue at hand. In this case, that for every poor kid from the slums who pulls him or herself up, there’s a lot more people from already-privileged backgrounds sliding into what is, really, an aristocracy in all but name.
These people are members of the same clubs, go to the same schools, sit on the same boards. And they’re employed to, ostensibly, keep tabs on each other? Really?
What is interesting (for me at least) is not that GM stock has dropped approx 10% today – rather that it did not flatline and start heading to double digits at best.
The only people buying GM stock right now are the speculators. To buy at anything more then about 10 cents a share means that they are betting on a Gov’t takeover of the existing company.
Re Pch101 comments (above) it definitely is a squeeze play on the bondholders, however they’re walking a fine line. Not enough pressure and the bondholders don’t go for a Debt/Equity swap, too much pressure and they have nothing left to save and go for the nuclear option – drawn out bankruptcy.
The only people buying GM stock right now are the speculators.
That has been true for awhile. A lot of the bad news got dialed into the stock price awhile ago.
Take a look at the stock chart, the story it tells ain’t pretty:
http://finance.yahoo.com/echarts?s=GM#chart5:symbol=gm;range=2y;indicator=volume;charttype=line;crosshair=on;ohlcvalues=0;logscale=off;source=undefined
jmo-Thanks.
Class envy/warfare gets tiresome.
It’s always eassier to convince yourself that “they” have an unfair advantage, or are crooks, or whatever…rather than face that you wish you were them without putting in the effort, or taking the risk/responsibility they did.
Personally, I’m trying to learn how to better things for my family rather than attack everybody above me based on the misbehavior of a few.
Just sayin’.
Cheerio, and here’s to personal wealth creation, let’s keep the socialists at bay.
;^D
Bunter
Personally, I’m trying to learn how to better things for my family rather than attack everybody above me based on the misbehavior of a few.
Dude, the SEC has raised concerns about corporate interlock. When accounting regulators are concerned about the aggregation (and incest) of power and influence, we’re no longer in “whiny pinkos” territory.
This afternoon’s WSJ MarketWatch says it best:
GM bankruptcy — or playing chicken with bondholders?
When the stock starts sliding below $1 that’s when (the market, at least) will start treating GM’s Bankruptcy as a done deal – and not just a negotiating threat.
May is going to be an interesting month in Motown.
BTW. Chrysler is toast. Don’t forget.
@MikeInCanada you mention a long drawn out bankruptcy.Why do we keep hearing about “soft Bankruptcy”or pre arranged or Bankruptcy light?WTF is that all about?
When the stock starts sliding below $1 that’s when (the market, at least) will start treating GM’s Bankruptcy as a done deal – and not just a negotiating threat
I don’t buy the underlying theory of the article. The only way that I see this as being important is if a large number of bondholders sell out to a vulture buyer who can buy the bonds for below liquidation value. I doubt that this is going to happen, especially in the timeframes being provided.
jmo-Thanks.
Class envy/warfare gets tiresome.
It’s always easier to convince yourself that “they” have an unfair advantage, or are crooks, or whatever…rather than face that you wish you were them without putting in the effort, or taking the risk/responsibility they did.
Personally, I’m trying to learn how to better things for my family rather than attack everybody above me based on the misbehavior of a few.
Just sayin’.
Cheerio, and here’s to personal wealth creation, let’s keep the socialists at bay.
;^D
Bunter
(;_;)
To be fair, all I said was that power tends to stay in a family for a long time.
The shocking thing about Nardelli (and a lot of business leaders) is that they pop up everywhere. Anyone who denies the existence of a privileged class in North America has not taken a look at how incestuous the corporate/academic/governmental relationship is, and how often the same names show up again and again and again.
Yes, I’m a bit of a crackpot in these matters, but I find it really hard to believe that someone paid a quarter-billion to f_ck off could be seriously considered for any position that didn’t involve a mop and broom.
To my mind, the more important point is the stunning level of incompetence. I don’t care how many are self-made men or how many are of an age-old aristocracy. Tens of thousands of people are going to loose their jobs because for 30 years or more the guys running the show couldn’t make good decisions.
I’m wondering if there isn’t a fundamental problem with American schools of business.
I’m with Bunter and JMO. It’s perfectly fine to voice concern at some of the things the upper 2% get away with, but when that concern devolves into envy that’s where a line needs to be drawn. That envy has a nasty way of seeping into legislation.
I’m wondering if there isn’t a fundamental problem with American schools of business.
It’s not the schools of business, its the accountability, or rather, the lack thereof, in the boardroom.
These people are supposed to be vetted and checked by boards of directors, who are thusly responsible to shareholders, who are interested in the viability of the enterprises in question. What is actually happening is that the boards are responsible to (or even staffed by) the people they manage and oversee, and that the overseer and overseen will often swap places in multiple boards.
Done right this can be a good thing: you end up with whole corporate communities that can move in lockstep (think keiretsu) toward a common goal. The problem is that it isn’t being done that way: the common goal is that of the executives and directorate, not the enterprises they are responsible for.
This isn’t class envy. That people think it is points to the successful hoodwinking that the corporate West has managed with regards to critical insight into the problem of interlock. By passing it off as leftist bitterness, they get to deflect criticism.
I’m with Bunter and JMO. It’s perfectly fine to voice concern at some of the things the upper 2% get away with, but when that concern devolves into envy that’s where a line needs to be drawn. That envy has a nasty way of seeping into legislation.
I’m not sure this is an issue of envy, so much as it is of fairness and ethics in business. There is a clear line between using all the tools at your disposal and being an aggressive, successful competitor versus taking unfair/immoral advantage of your position and winning at any expense (no bid government contracts, BoD of GM sitting on its hands, Nardelli and Cerberus actions, etc.)
Envy….Right the same envy that creates the animosity directed to well paid autoworkers.Yes indeed envy can be directed up,and down on the socio economic ladder.
The Chrysler-Fiat deal is insanity. Fiat gets control and no cash contribution. We get cars that are crap. There will be no Ferrari-powered Dakotas and Grand Caravans. Why is PTFOA so hell bent on pushing this deal and giving taxpayer money to a foreign company? Fiat has no money.They should put up some dough or stay in Italy and make pizzas. (hopefully they would be better than their cars). Daimler raped and bled CHrysler and then dumped it on Cereberus, who really has no business owning a car company. And neither does Nardelli, just look at his track record of companies he has run into the ground. I think I want a career of running companies into the ground because it seems pretty lucrative – millions in bankruptcy proof golden parachutes and bonuses – and then the government bails it out with no questions asked. Sure beats having to pay your bills on time like the rest of us small business owners (with no bailouts).
Fairness… Geesh. That word is just as dangerous as the phrase “common good”. Not just because some tyrant promising sunshine and flowers can get elected and strip away rights for “the common good” and “fairness”, but because those words can be interpreted in so many different ways. “That guy was born to wealthy parents and I wasn’t. That’s not fair! Perhaps if I elect (insert canidate here) he’ll tax that guys wealth to be redistributed to everyone! It’d be for the common good.” The choices that every voter since our forefathers have made have fostered this environment. Considering the alternative (socialism) I’m satisfied. We the people should be the only deciding factor in what is “fair” and what the “common good” is. It’s becoming painfully obvious that the majority is deciding that maybe spreading the wealth is “fair”. While I strongly oppose this, I’m proud we had the chance to decide. To summarize this rant: No one person here (or anywhere) has sole knowledge of what “fair” is. It’s a collective decision by everyone.
I personally think its great!
its about time we got a taste of affordable European cars!
BMW,Porsche,Mercedes,and Audi are really not representative of what most Europeans drive!!!
Lets give the ‘working mans’ car a chance!
It would be fantastic if Chrysler could become THE ‘foreign car store’..offering us Citreon,Lancia,Puegot and the likes.
GONE FOREVER THE CHOICE OF ONLY JAPANESE,PREMIUM GERMAN AND ITALIAN EXOTICS!!!!!
I can only hope!!!
Alfred P, Billy Durant, Ransom, the Fisher bros….they are all spinning in their graves right now.
@ derm81…..You got that right!
In all fairness, Nardelli must have performed for the 30 years he was at GE. And my guess is that he won’t benefit too much from his time at Chryler. My suspicion is that he got a piece of the action instead of a salary and the action is worth zero. I also guess is that if he was probably worth way over 30 mil before he went to Home Depot and 150 mil after that (taxes, you know!) he’s probably down to his last 75 million or so with the market crash. Rich, but not Bill Gates territory given almost 40 years hard work.
I was informed yesterday that the chryco deal with Fiat has been already signed on Tuesday, and it should be made public anytime now….
Alfred P, Billy Durant, Ransom, the Fisher bros….they are all spinning in their graves right now.
I’ll give Durant one thing: he never went begging to the government to bail out his strategic gaffs. Otherwise, the parallels between him and many GM leader since are striking.