So, it tuns out that in spite of the government's demands that GM negotiate with it's stakeholders to create a financial plan that shows it is a viable enterprise, in the months since the initial Fed loan(s) were made to GM, they have accomplished nothing. Therefore, they are in default to their loan agreement with the Fed. The original loan agreement stated the following...

The Loan and Security Agreement of December 31, 2008 between the General Motors Corporation and the United States Department of the Treasury laid out various conditions that needed to be met by March 31, 2009 including:

(a) Negotiation and approval of Labor Modifications (Compensation Reductions, Severance Rationalization and Work Rule Modifications) by the members of the Unions;

(b) Receipt of all necessary approvals of the VEBA. (VEBA is the voluntary employee benefit plan that was negotiated between GM and the UAW in 2007 which shifted responsibility for the payment of employee and retiree health insurance costs to the VEBA fund which would then be managed by the UAW. However, the VEBA still required detailed agreements between the union and the company regarding funding--negotiations which have been ongoing between the Company and the UAW for two years now--as well as regulatory approvals of their agreement.) The loan agreement required that the negotiations on the funding of the VEBA be completed between the UAW and GM, leaving only the regulatory approvals to be sought. The agreement required that GM must have filed and be diligently prosecuting applications for any necessary regulatory and judicial approvals; and

(c) The commencement of an exchange offer to implement a Bond Exchange. (This refers to the exchange of new bonds as the result of a successful negotiation between GM and it's bondholders to an agreeable discount to the face value of the bonds representing GM's debt obligations. To give some idea on how big a haircut the market thinks will be necessary, those GM bonds are currently trading at 17 cents on the dollar.)

As of March 31, none of the above steps has been completed. As a result, General Motors has not satisfied the terms of its loan agreement and is in default.

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So, GM, the UAW and the bondholders have made no progress in negotiating an acceptable settlement between the parties since they agreed to do so when GM was given the initial bailout payments by the Fed. Why am I not surprised?

Now they've been given an additional 60 days in the form of a waiver of their default and members of the President's task force will "assist" in further negotiations between the parties. Does anyone have any expectations that they will actually reach agreement in the next two months? Or will the eventual settlement be dictated by a bankruptcy judge somehwere? Or will GM simply file for bankruptcy and be liquidated?

I'm betting on bankruptcy. And if filed, I think it's still only a 50-50 bet that the creditors (principally the UAW and the bondholders) will reach agreement on a Plan of Reorganization, as opposed to simply liquidating the Company.

It looks to me like the UAW and the trustee for the bond holders are fully prepared to run this bus right off the cliff, regardless of the desires of the politicians and the public. If they do, there will be no doubt that the reason for the demise of GM and the US. auto industry had little to do with politicians, regulations, the price of gas, or anything other than some really dumb management decisions followed by the greed and stupidity of the United Auto Workers and the Trustee for the company's bond holders.