The NYTWheels blog reports that Judge Arthur Gonzalez has overruled pleas by consumer advocates and law professors by granting Chrysler’s request to exempt “New Chrysler” from any liability arising from “Old Chrysler.” Public Citizen, the Center for Auto Safety and Consumers for Auto Reliability and Safety have formally objected to the move on the grounds that current owners of Chrysler vehicles will have no legal recourse if they are injured because of a product defect. A lawyer representing these groups has said they will seek an appeal, the second objection to date to the Chrysler asset sale. According to testimony by Robert Nardelli, the idea of not allowing current owners to sue came up during the discussions between the Treasury and Fiat. Unlike the State of Indiana’s appeal of the Chrysler asset sale, this appeal has the potential to completely change the incentives for Fiat to take over Chrysler. If an appeals judge hears and approves this objection, Fiat could simply walk away.
Although Judge Gonzalez has so far given Chrysler-Fiat just about everything it has asked for, approval of the dealer cull still isn’t a done deal. The AP reports that: “U.S. Judge Arthur Gonzalez will hear arguments Thursday on the Auburn Hills, Mich.-based automaker’s motion to eliminate the franchises. Chrysler executives are also expected to testify. The motion was expected to be heard Wednesday.” In parallel actions, the Senate is holding hearing today on the very same issue. Again from the AP : “Lawmakers contend the dealership closings will put thousands of people out of work and offer few savings to GM or Chrysler, which have received billions in federal aid as they attempt to restructure and return to profitability.”
According to Automotive News [sub], the Second Circuit Court of Appeals has granted a stay of Chrysler’s asset sale, pending a hearing scheduled for Friday. The stay comes on a motion (PDF) filed by the Treasurer of Indiana, Richard Mourdock (motivation found here) on behalf of several Indiana funds which hold first-lien secured Chrysler debt. A panel consisting of Chief Judge Dennis Jacobs, Judge Amalya Kearse and Judge Robert Sack will hear Mr Mourdock’s appeal on at 2pm Friday, delaying the Chrysler asset sale which has already been approved by Chrysler’s judge Arthur Gonzalez. If the appeal delays the asset sale past June 15, Fiat could walk away. The appeal follows the arguments of earlier “hedge fund holdouts,” making the case that government is overturning bankruptcy law and screwing secured bondholders to move the UAW to the front of the line. Only the state of Indiana apparently isn’t scared of the alleged government strong-arming that squelched previous bondholder opposition. Hit the jump for selected quotes from their appeal.
Well, that’s how the Freep puts it. So will GM be leaving the toilet seat down? Will it apply for a separate credit card to pay for its extramarital liaisons? Will it be hiding its Playboy inside the latest Economist? Want to clear this up for us, CFO Ray Young? “As a privately held company, it’s likely we’re not going to disclose information except to the shareholders,” says Young. “We do not have to file all of the same documents that we do when we are a public company,” clarifies Chairman Kent Kresa. All of which creates more mind-benders than Will Shortz on a weeklong acid bender.
For the last ten years or so, the United Auto Workers (UAW) has pretended to make “concessions” to General Motors while doing nothing more than accepting pay-offs consisting of lump sums and promises to pay lump sums from fictional future earnings. Exhibit R: the fed’s recently promised $2.5 billion cash “top-up” of the UAW’s health care VEBA, ahead of other payment of other lump sums AND a slice of fictional future earnings. Automotive News [sub] reports that GM’s deep-sixed dealers are now playing grease my palm at wounded knee. “General Motors is offering some dealerships $100,000 to $1 million to wind down their businesses over the next 17 months, according to three sources familiar with the proposals.” Read More >
The—mind you, tentative—agreement of Government Motors to sell Hummer to China’s Sichuan Tengzhong Heavy Industrial Machinery has people worried. No, it’s not the Americans who are scared of military secrets escaping to China. “The deal has observers in China worried,” writes Forbes. And worried they should be. The deal as it is makes little sense for a Chinese manufacturer. Especially for a manufacturer that has never built passenger cars. Tengzhong makes heavy industry vehicles, highway and bridge components, construction machinery and energy equipment.
What worries the Chinese is exactly what made GM so happy: According to the Memorandum of Understanding, Tengzhong will keep Hummer’s core management and operations team and existing dealership network. Reuters reports GM saying that “the buyer of Hummer would contract to build the H3 model SUV and the H3T pickup truck at GM’s plant in Shreveport, Louisiana — through at least 2010.” Why, oh my? Read More >
Government Motors is expected to make an imminent announcement on the sale of its Hummer brand, says Reuters. Note that the revelation comes from Kevin Wale, president of GM China Group. Just another attempt to disseminate more feel-good news in its second largest market? Or an indication of the location of the buyer?
Our man on the ground has passed along a few documents from GM’s first day filings in bankruptcy court. And it seems that Fritz Henderson’s “Faster, Pussycat Kill! Kill! Kill!” strategy is for real. This looks to be one mother of a fast bankruptcy. As the sale agreement states, “Consumers must have confidence in GM’s products, i.e., that a new GM will exist in the future so that it can stand behind its products. It is in this context that the timing of the transformation of the assets, in connection with the approval of the sale, becomes critical.” The fact that GM is filing a sale agreement on its first day shows that speed is the critical factor. Even Chrysler’s relatively rapid sojourn in Chapter 11 didn’t start with a sale proposal on the first day. Debtor-In-Possession financing has been lined up as well (big hand for your US taxpayers), including an expected $950 million “wind-down” loan. The lawyer carve-out is also limited to $20 million. Hit the jump to find out how it all could go wrong (but probably won’t).
Dan Neil’s April 2005 review of the Pontiac G6 ended by calling for fresh blood at the top of GM. His comments triggered the GM advertising boycott that inspired TTAC’s General Motors Death Watch. As you might expect, the Pulitzer-prize winning carmudgeon has a few things to say about GM’s bankruptcy. But I bet you wouldn’t have guessed that GM’s most famous (and talented) nemesis would mark the occasion by suggesting that failing to fully support Al Gore’s bid for the U.S. presidency was the company’s ultimate undoing. No really. Writing in the LA Times, Neil claims that “by backing Gore, who had the support of organized labor, GM would have gained enormous goodwill with the United Auto Workers, goodwill it desperately needed as it attempted to downsize in the new century. Gore also argued for universal healthcare, a program that, had it become reality, might have relieved GM and the other domestic carmakers of that burden . . .
TheDetroit Free Press is reporting that GM supplier Delphi will emerge from its three-year bankruptcy by selling itself to L.A.-based private equity firm Platinum Equity, for $3.6 billion. The bad news? Delphi will terminate its salaried pension plan, which covers 20,000 workers and retirees.The Pension Benefit Guaranty Corp will take over Delphi’s pensions, a move which will “cap the annual payments to $54,000 a year for salaried retirees age 65 years or older.” Delphi’s hourly retirement fund “will be addressed by GM.” Or not. Whichever.
“It’s not something we would bring up on our own, and we don’t know enough about the restructuring plan,” Toyota’s President Katsuaki Watanabe told a small group of reporters, one of them writing for Reuters. Ever so polite, they would never suggest something like that on their own. But . . . “If some talk about supporting GM comes up, we would like to consider it earnestly.” Fritz Henderson, two magic words: Tasukete kudasai. Help me, please.
One of our contacts at the sharp end reports that General Motors has suspended payments to its dealers for warranty costs until the federal bankruptcy court can approve said payouts. This despite the President’s assurance that Uncle Sam is backing-up customer claims, and a $361 million dollar payment to GM for same. Even though it’s clear that this is a bureaucratic snafu, it’s not the kind of bureaucratic SNAFU that GM can afford. I mean, you, as owner of 60 percent of the Government Motors.
President Obama has made his case for his government’s purchase of a restructured GM. We’re still working to get a full embed of the speech. Meanwhile, if you can forgo the rhetorical flourishes for a moment, check out Obama’s fact sheet on GM’s restructuring. The first subheading is “General Motors Restructuring: Shared Sacrifice.” Hit the jump for more details.
The New York Times introduces 31-year-old Brian Deese, a near graduate of Yale Law School, as President Obama’s pick to re-shape General Motors—and American capitalism along the way. As a special assistant to the president for economic policy, he was pretty much the only full-time member of the Presidential Task Force on Automobiles from November 4 through mid-February.He comes to the job with no automotive experience, or business experience, or much experience at all, if you put his resume up against the insanely vast and critical task before him.Making him perfect for the job. Maybe a real outsider is just what the General needs.Deese seems to have earned the president’s ear with competence.By all reports, he sees the challenges of GM’s tumble holistically, in terms of the effect on the economy in general, Medicaid and unemployment insurances in the specific, and understands the political ramifications of every thing he eats, reads or wears from here on out.No one older than 31 would want this job.And you’d be hard pressed to find anyone younger.So he’s perfect.
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