Bloomberg reports that GM’s scheduled its Chapter 11 filing for Monday, June 1, 2009. And we were wrong about GM’s bankruptcy becoming the world’s largest. Thanks to Ex-CEO’s Rick Wagoner’s decision to throw all of GM’s “non core” assets into the fiery pit of the company’s endless cash burn, the American automaker’s C11 will only rank as number three. “GM’s bankruptcy will be the third-biggest in U.S. history after Lehman Brothers Holdings Inc. and WorldCom Inc., based on GM’s reported global assets of $91 billion and total liabilities of $176.4 billion as of Dec. 31.” Meanwhile, the company has pulled ahead its US white collar workers’ payroll. Apparently (unconfirmed), they’ve already sent out the checks for the week of May 25, 2009. “Other than the date change, all other payroll processes will remain the same in terms of paying employees at work or if they are on layoff,” a leaked memo from Marketing Maven Mark LaNeve reveals. According to the document, “This action is not an indication that GM plans to file for bankruptcy on or about June 1 . . . GM has determined this simple action — moving up the payroll pay date for this month — is the least the company can do to reduce any potential for disruption regardless of what happens.”
Category: Chapter 11
As GM augers-in for its Chapter 11 face plant, the Presidential Task Force on Autos (PTFOA) has been busy cutting back-room deals with bondholders. Reuters reports that the feds are getting their proverbial ducks in a row for a fast-track fustercluck—sorry, reenergized company. “Under the proposed deal, which is supported by major institutional creditors holding about a fifth of its debt, bondholders representing $27 billion in debt would be offered 10 percent of a reorganized GM — the same stake they had been offered previously. In a sweetener, bondholders would also receive warrants to acquire another 15 percent of the equity in the new company, provided they support a quick Treasury-backed sale process similar to one now being used for rival Chrysler.” GM has released a statement on the new plan, removing any last traces of doubt that it’s headed for the world’s largest bankruptcy proceeding . . .
Parts maker Visteon’s US operations have filed for bankruptcy. No surprise there. In the nine years since FoMoCo spun off its vehicle climate systems, interior parts, lighting and electronic systems maker, Visteon has never posted an annual profit. After losing $663 million last year, Visteon warned a few weeks ago that they may have to file if the creditors would not agree to concessions. Nobody conceded. Visteon filed along with some of its US subsidiaries in the US bankruptcy court in Delaware. None of its overseas subsidiaries or joint ventures outside the US are part of the filing. Not that they need any help with it: In March Visteon’s main UK subsidiary filed for reorganization.
In its C11 filing, Visteon listed assets of $4.58 billion against debts of $5.3 billion. This as April sales to Ford, Visteon’s biggest customer, fell 40 percent. Automotive News [sub] reports that the company’s creators will be there for their progeny. “Visteon said Ford has committed to ensure long-term continuity of supply and to support debtor-in-possession (DIP) financing for the restructuring efforts. Ford is still Visteon’s biggest customer and accounted for about 31 percent of its $1.35 billion of sales last quarter.” The question is, can Ford afford another mouth to feed? And with all those bailout billions flowing towards all the other local suppliers, can Ford resist dipping-in for Visteon? If Visteon suckles, does that taint Ford’s non-bailout (Ford family control related) political purity?
It was a long meeting that lasted into the wee hours of the Thursday morning. It ended with the German government throwing insults at the US government. Everybody went home or to their presidential suites with a headache and no deal. If there is no further movement, Opel will go down the drain with GM by Friday.
Before the meeting, there were rumblings that wrinkles had to be ironed out in a trustee plan that was supposed to be the basis for bridge financing provided by the German government. The money was supposed to keep the lights on in Rüsselsheim, while the proper groom for Opel is being groomed.
Mice and men impacted with US government greed. Or lack of their usual largess.
The Detroit Bureau reports today that in a bankruptcy court document, CEO Robert Nardelli stated that Chrysler LLC offered for sale the Detroit Viper factory (and presumably the tooling and intellectual property to go along with it) for a mere $10 million dollars. The factory has been up for sale since this past August, but sadly there was “no purchaser interest.” 2008 Dodge Viper sales were 1,172, up 169 percent over the prior year. According to another bankruptcy filing, the operation was previously been slightly profitable, with a net $16 million in 2008 before taxes, interest, depreciation, and amortization. With those kinds of numbers a buyer would need to spend several times the purchase price just to keep the assembly line humming. We all know how challenging it is these days for a sports car manufacturer to stay solvent, SUVs or not.
With initial ($5 billion) attempts at bailing out struggling auto suppliers failing miserably, Reuters reports that Michigan Governor Jennifer Granholm is calling for another $8 billion in supplier aid. Granholm says the aid will be especially important if (when) GM files for bankruptcy. “We need to provide the (auto) suppliers with the means to get through the next 60 to 90 days,” says Granholm. And then? Meanwhile, despite reports that (at least some) GM creditors will not be crammed down, MI Rep. Sanders Levin fired a shot over GM investors’ bows at the same press conference. The Chrysler experience proved to lenders that “bankruptcy doesn’t provide any more relief and maybe less,” said Levin. “We’re also hopeful that bondholders of GM have also got that message.”
In sharp contrast to the nasty cramdown of Chrysler bondholders, GM’s secured lenders will receive full recovery on some $6 billion in debt, courtesy of your United States Treasury. According to the WSJ, Treasury will “inject a fresh $50 billion in various financings to back a GM workout,” which would result in a 70 percent equity stake in the “new GM.” Although the plan had been for GM to exit bankruptcy still carrying some $40 billion of its approximately $80 billion in debt, the bank payoff should help trim GM’s debt to a mere $10-$12 billion. To accomplish this, the Treasury will pay Citi, JP Morgan and other financiers of GM’s $4.5 billion revolving line of credit that comes due in 2011 and a $1.5 billion term loan due in 2013. In full. Which beats 29 cents on the dollar any day.
In the high states poker for Opel, GM did put the cards on the table, got up and walked.
Automobilwoche [sub] reports that GM handed over “all European plants, patents and access technologies debt free to the Adam Opel GmbH.” It’s official, the supervisory board of Adam Opel GmbH has acknowledged it. What’s more, the supervisory board of the GmbH (in reality, GM) “accepted the trustee model of the German government.” This clears Opel for a new investor, and keeps the company clear of the downdraft caused by the impending bankruptcy of the mother ship.
Tonight, there will be a meeting in Berlin that may decide who will take over Opel—with more than a little help of the German government. It could be a long night.
According to recent reports, the night most likely will be inconclusive.
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No surprise there. GM needs its former in-house parts maker to survive, and Delphi is as dead as a doornail. After almost four years in bankruptcy, no one in their right mind would invest in Delphi. In other words, you’re up! Automotive News [sub] reports the glad tidings (without once threatening to connect the dots): GM is to re-absorb five Delphi plants. “General Motors has agreed to assume ownership of five Delphi Corp. plants in the United States and operate the UAW-manned factories as a wholly owned subsidiary, according to union highlights of the tentative new contract between GM and the UAW . . . Delphi spokesman Lindsey Williams said announcing the deal is premature. ‘Any agreement regarding Delphi assets is subject to approval by lenders who have loaned money to Delphi in bankruptcy as well as approval by the court,’ he said.” Premature in the sense that adding to GM’s bailout bill is not to the most politic of maneuvers. Premature in the sense that Delphi was due in court on Thursday to hash out its impending implosion. But true, nonetheless.
GM bondholders have only tendered “a low-single digit percentage” of GM’s $27 billion debt-for-equity swap offerings, reports Reuters. This (along with unfolding government/UAW deals) sets GM on a crash-course for bankruptcy, and a filing is expected as early as tomorrow, according to another Reuters report. Both stories are replete with quotes arguing the inevitability of GM’s debt-swap failure, although with a 90 percent required participation it didn’t take a professional analyst to figure out that GM’s offer was DOA. Next stop, bankruptcy court.
The Wall Street Journal reports the terms of the United Auto Workers (UAW) deal with the feds re: their payoff to join post-bankruptcy “good” GM. Uncle Sam will “contribute” $10 billion worth of stock to the union’s Voluntary Employee Beneficiary Association (VEBA) health care superfund, paying off half of GM’s unfunded obligations in one fell swoop. The Treasury Department will also give the UAW a $2.5 billion promissory note. GM (i.e., the federal government) will pay off the note in cash, in three installments (2013, 2015, and 2017). And just in case that’s not enough to entice the union to join “good” GM, the UAW will also receive 17.5 percent of the new post-C11 GM (no longer a controlling interest) AND stock warrants for an additional 2.5 percent of the reorganized company. The $6.5 billion in preferred stock includes a nine percent cash dividend—that will pay out $585 million annually. Saying that, this is all subject to a federal bankruptcy judge’s approval.
It’s pretty quiet today, news-wise. We’re picking-up dribs and drabs from here and there, but it’s the calm before the storm. The big news is, of course, GM’s forthcoming bankruptcy filing. As the Brits would say, it’s all over bar the shouting. Final confirmation arrives at midnight tonight, when the deadline expires for GM’s bondholders’ to swap $27 billion in debt for a 10 percent equity stake in a new GM.
TTAC’s Best and Brightest spent some time this weekend examining the question of whether or not Chrysler and GM needed to terminate nearly 2000 dealers between them, both pro and con. We didn’t look at WHICH dealers got the axe, for two reasons. First, despite receiving nearasdammit $20 billion in taxpayer money (so far), GM has steadfastly refused to release a list of the 1100 dealers emailed their walking papers. The Huffington Post blog (of all people) has a partial tally, but GM ain’t gonna spill. Which, if you think about it, protects car dealers at the expense of taxpayers, who might not know they’re buying a car from a dead dealer trading. Bastardos! That said, when GM’s Marketing Maven, Mark LeNeve, announced the cull, he claimed that the business brains who made the cut based their decisions largely (if not exclusively) on volume. Chrysler, in contrast, produced a list of the dispossessed—and it’s all over the show. Urban, suburban, large, small, medium; the logic underpinning their choices is an enigma wrapped in a “Dear John” email. Or is it? The internets are abuzz with the tin foil hat-wearing theory that the cuts were made based on partisan politics. Check it out . . .
The Hoosier State is trying to throw a monkey wrench into Chrysler/Fiat/Uncle Sam’s plan to create a born again American (ish) automaker. Indiana’s State Treasurer, Richard Mourdock, filed papers with judge Arthur Gonzalez, asking the federal bankruptcy court to appoint an examiner to, um, examine ChryCo’s books. Mourdock also wants Gonzalez to take ChryCo away from the Presidential Task Force on Autos (PTFOA) and hand it to an independent trustee. Mourdock claims to be protecting pension funds for his state’s retirees. Chrysler claims his actions would throw the company into liquidation, which would eliminate four thousand Indiana jobs and endanger the incomes of those self same nine thousand pensioners. So there, nuh. The chances of Indiana slowing down the PTFOA fast track strategy are roughly nil; Chrysler accounts for less than one percent of the state’s pensioner fund. So what gives? Make the jump for the real reason Indiana wants to make Chrysler’s life miserable . . .
Automotive News [AN, sub] reports that ex-GM CEO Rick Wagoner missed out on a $39.2 million payday. We already knew about Red Ink Rick’s as-yet-unpaid $22.1 million pension fund. (The Presidential Task Force on Autos (PTFOA) won’t sign the company killer’s pension check for fear of an epic bailout backlash.) We now learn that the GM Board of Directors—an august body so deep in Wagoner’s pocket it nearly suffocated in lint—could have “awarded” Wagoner an additional $17.1 million in severance pay. Bailout regulations put paid to that bonanza. Wagoner also saw the value of his stock plummet from $93.62 a share to nearasdammit niente. Are we feeling sorry for Rick? During the GM lifer’s 17-year tenure as a senior executive, he banked some $9 million via stock options. I’ve yet to read about Rick’s total salary to date (he’s currently earning a buck a year) or the perks he will continue to enjoy into his dotage. As the Brits would say, I’m sure Rick’s not short a bob or two.
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