The US Treasury Secretary had a little chin wag with Reuters re: GM. It seem that Mr. Geithner is as pleased as punch with his minions’ work with Chrysler’s bankruptcy. So pleased, in fact, he sees ChryCo’s dissolution solution as a template for GM’s C11. You know “if”. “There is a range of ways to achieve [GM’s restructuring]. You saw what we did in the Chrysler context as one way to do it and if that proves necessary in the GM context, we’ll do that.” And then the aforementioned “if”. “But we’re not at the point where we need to make that judgment yet.” Sure. They’ve got 28 days to convince GM’s bondholders—a motley crew of “investors” looking at differing payout and maturity dates—to take a flyer on a company that hasn’t made a profit for . . . sorry, debt for equity swap. And here’s some fuel for those who see the government’s role in the US auto industry as reprehensible.
Peter Kaufman, restructuring expert and president of New York investment bank Gordian Group LLC, said GM would most likely follow Chrysler into bankruptcy.
“This is not playing by the rules, but the government has shown it’s not terribly interested in playing by the rules,” Kaufman said. “I think this will embolden the government to do what they’re already contemplating for GM.”
Let it happen already. Get it over with and let’s move on with the “new” GM.
I can’t see how the Chrysler “toe dip” into Ch11 can be a model for GM…
Chrysler could have completely avoided Ch11 if Chrysler’s secured bond holders hadn’t been total twits (they have now withdrawn their BS claim) and of course we had Fiat all ready to buy Chrysler…
On the “good news” almost all of GM’s debt is unsecured… and almost all of the secured debt is held by either the Fed or TARP banks… so we won’t have the “poor debtors” issue… But, who is lining up to buy GM?
Toyota?
They have to do a Chapter 11… Doesn’t matter what the bond holders do.
You can’t create a bad GM and void all those contracts without a judge.
The best part of the article is in the last few lines where Bob Corker suddenly developed a flash of light between his ears and is bemoaning the potential loss of his beloved Spring Hill assembly which is almost certain. I almost can’t contain myself
Here you go:GM operates a manufacturing facility in Tennessee and Corker has met with Henderson to discuss the future of that facility.
you can’t make this shit up.
“The blueprint from Chrysler” seems to be to offer some group of politically less fashionable creditors a deal just raw enough to assure they’ll howl, and then blame them for the trip to the courthouse.
Given a sufficiently starry eyed elecorate, that may, in fact, not be such a bad way to help the ‘new’ company shed obligations to constituencies you’d rather not be seen as shedding obligations to yourself.
Chrysler could have completely avoided Ch11 if Chrysler’s secured bond holders hadn’t been total twits (they have now withdrawn their BS claim)
BS claim or not (those who understand law will have to say “not”) – Chrysler had to go through C-11, and so does GM. No other way to dump the debt or dealerships.
Only question is – who will Obama pick to be the fall guy with the GM bankruptcy?
Peter Kaufman, restructuring expert and president of New York investment bank Gordian Group LLC, said GM would most likely follow Chrysler into bankruptcy.
“This is not playing by the rules, but the government has shown it’s not terribly interested in playing by the rules,” Kaufman said. “I think this will embolden the government to do what they’re already contemplating for GM.”
What does he know, he’s just a restructuring expert? Like the bankruptcy law prof who said that Obama’s turning New Deal bankruptcy reforms on their head.
Justa buncha rightwingnut hacks, right?
CamaroKid:
How are the banks involved with Chrysler, “twits”?
These guys bet on Chrysler at some point, and loaned them money. Even more so, these banks/funds did not take TARP money.
Now the government comes along and basically tells them, bend over, because we want to make sure the poor UAW workers get their due.
If standing up to that kind of abuse makes a person a twit, I guess, sign me up. Obama is not King, he is President, and he has to play the game on the same footing as everyone else.
What is the plan here?
GM is going to go belly up, ream their creditors, and be turned over to labor / bureaucrats in Washington? Ok.
How are they going to turn a profit? What’s new in this equation?
All I see is a commitment from the tax payer to continue to fund the excess of the unions. Private capital will be unaffordable (thanks to said reaming), leaving Uncle Sam as the only one to extend cash.
Assuming magic happens and GM actually produces competitive vehicles (something truly magical given their labor cost, reputation, and their creation of the Aztek), who is going to buy it in this economy? When Toyota is posting losses, GM doesn’t stand a chance.
So what? We’ve extended out GMs death for another half decade, while it continues to gobble through tax payer cash. And we all know what happens when GM is finally dead and in the ground: all those pension obligations? Going to be paid by us, the taxpayer. Mark my words…
A GM bankruptcy is more complicated than Chrysler’s. Chrysler does not have overseas operations of the size that GM does. And what to do with them is problematic. Perhaps not so much for the U.S., but for foreign countries. Take Germany for example:
http://news.bbc.co.uk/2/hi/business/8039499.stm
aqua225
How are the banks involved with Chrysler, “twits”?
Hint the answer to this question is in your very own post…
These guys bet on Chrysler at some point, and loaned them money.
Chrysler paper has had a “junk” rating since when?
And as for the whole “law” thing… Hmm a US Federal Bankruptcy Judge disagrees with you all who think that these guys have the law on their side…
But put that aside for a second… The Non-Tarp lenders (who BTW have folded up their tent and have gone home) based 100% of their case on Chrysler being worth more then 2 Billion. If it was worth more then 2 Billion they had a chance.
So what is Chrysler worth? For the non-tarps to win they just had to find one person (or a group of people) willing to buy Chrysler for more then 2 billion (whole or broken into chunks and pieces)… and how many came forward… (sound of crickets)
This group are twits ’cause they knew going into this that the 2 billion deal was on the table. They had more leverage outside of Ch11 then in it… They did not do their home work and did not plan for the inevitable.
If their fight was so just, so strong, so legal.. Why did it last for all of 72 hours? These guys collapsed faster then a Korean Shopping mall.
They hoped for public support…and for political pressure, even Fox news didn’t run with this story for more then one day… It became very clear that these “guys” were all “vulture speculators” trying to get a pound of rotting flesh from a dead body… Joe the Plumber leaving the Republican party was a bigger story and got more coverage.
Still doesn’t answer my initial question.. The Chrysler “template” is based on a “white knight” (AKA Fiat) riding in to save the car maker…
Who is going to save GM?
But, who is lining up to buy GM?
The hope is Renault-Nissan.
This group are twits ’cause they knew going into this that the 2 billion deal was on the table. They had more leverage outside of Ch11 then in it… They did not do their home work and did not plan for the inevitable.
I wouldn’t quite describe it that way.
I’ve personally been involved in these sorts of cases, in a position similar to that of the bondholders in that my side had the weaker case of the two parties.
When you’re the weaker party, you know that you probably can’t win. You’re not trying to win through the verdict, you’re trying to buy time and stall, and use the ability to stall in order to get the other side to give you a better deal outside of the court system. The verdict becomes irrelevant, because you work your deal before the court does it for you.
When you were in the bondholder’s position, your ability to negotiate will basically be determined by the judge’s decisions. If the decisions give you the chance to stall, you will be happy. If his decisions speed things up, you won’t be.
The bondholders had to try. They filed some papers, threw what they could up against the wall and hoped for the best. Unless they were morons, they knew that their odds were bad, but sometimes, you just have to use what you’ve got.
The emotion from some of the posters is astonishing to me. This whole thing is a game. Not every team goes onto the gridiron equally prepared to win. The bondholder case was just not very good, and although they had some defenses, they weren’t that great. In situations like this, you’re depending upon the capriciousness of the judge to potentially toss you a lifeline. Judges can be quite fickle and temperamental, and sometimes, you can just get lucky (or unlucky, depending upon whom he gave the advantage.) In this case, no such luck for the bondholders.
97escort says:
A GM bankruptcy is more complicated than Chrysler’s. Chrysler does not have overseas operations of the size that GM does.
GM will do what Delphi did, only file chapter 11 for the NA operations. Delphi is the test case, and Chrysler as well, that will get GM through this. Government supplying the funding to go through it and Chrysler is showing how it’s done. Economies of scale be damned.
jolo:
Delphi is a great model to work from…. They went into bankruptcy cleaned up quick and emerged a few months later stronger and better than ever…
You mean they didn’t? They still are? Seriously?
I’ll take this opportunity to totally reverse myself. GM is most certainly going to be put into CH11. I still find it hard to imagine that Obama will give GM to Renault/Nissan.