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.

----------------------------------------------------

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.

This is all really so hard to gather in, espcially when you look at who we are talking about.... G M ............ That is a pretty big deal if they go under and are liquidated. Think about how big of a deal it is to have that big of a company put up the ole going out of busniness sign up. Get a new Yukon for 75% off. That would never happen, but dang Chrylser is next or first.. Ford is hanging onto a thread. Ok will maybe a few pieces of thread.
Things are changing, when i voted for a change not quite what I had in mind. But maybe this is what needs to happen. People we can survive without them, it may screw the market up forawhile, but it will come back. Maybe GM is our Tea to throw in the Harbor.... Maybe someone will set back and say what in the name of sour pork legs have we come to.
Again I am not as educated on the terms or the inner workings on what is happening as we speak as say VK or Steve or Bucco and others also BTK. I can only say it in terms all will understand. That Aint Right!! Change must take place, maybe it is time for the big 3 to hit the bricks, maybe they will all come together and make a stand under one name and battle the foreign auto makers. Will I have a Toyota, dont hold that against me.. Had a Ford, but kept taking it to the shop.
Point is, something has got to give and give fast.

What could be the worst to happen lets say if GM, CHRY and Ford wore to fold and run like a bad hand of Texas Hold Em at the OK Corral????? Is the Country going to fall apart, or maybe we will rebound and make people take responsiblity for the neglect of their jobs???????


Money Out

Originally Posted by GMONEY

This is all really so hard to gather in, espcially when you look at who we are talking about.... G M ............ That is a pretty big deal if they go under and are liquidated. Think about how big of a deal it is to have that big of a company put up the ole going out of busniness sign up. Get a new Yukon for 75% off. That would never happen, but dang Chrylser is next or first.. Ford is hanging onto a thread. Ok will maybe a few pieces of thread.
Things are changing, when i voted for a change not quite what I had in mind. But maybe this is what needs to happen. People we can survive without them, it may screw the market up forawhile, but it will come back. Maybe GM is our Tea to throw in the Harbor.... Maybe someone will set back and say what in the name of sour pork legs have we come to.
Again I am not as educated on the terms or the inner workings on what is happening as we speak as say VK or Steve or Bucco and others also BTK. I can only say it in terms all will understand. That Aint Right!! Change must take place, maybe it is time for the big 3 to hit the bricks, maybe they will all come together and make a stand under one name and battle the foreign auto makers. Will I have a Toyota, dont hold that against me.. Had a Ford, but kept taking it to the shop.
Point is, something has got to give and give fast.

What could be the worst to happen lets say if GM, CHRY and Ford wore to fold and run like a bad hand of Texas Hold Em at the OK Corral????? Is the Country going to fall apart, or maybe we will rebound and make people take responsiblity for the neglect of their jobs???????

Delta Airlines, United Airlines, Northwest Airlines, KMart, Texaco, Pacific Gas & Electric, Charter Communications and Yukos Oil all bankrupted. Yet, the nation continued along. If the "Bloated Three" go Chapter 11, the world will not end.

to go back to separate companies, ala pre GM. Get rid of the redundancy of models. Get rid of the so called massive corporate structure and it's built in allocated expense to the different divisions. Get ris of all the non value added organizations and structures. Results would be a smaller white collar and executive work force....there are too many.....so many of the non value added layers, that if they were all not there Monday morning....not a heart beat would be missed.

Get rid of the unions. They add no value either. In a secret ballot if the work force were given a choice to either have a job, for less money (like the non American car companies) with no unions VS higer wages and no job....what do you think they will vote for? I come from the school of a half a loaf is better than no loaf at all. It is time for it now!

Result....smaller overhead more efficient smaller companies.

I have been there....done it. It is painful but beats the alternatives.

By all means get the government out of it....they are the most expensive non value adder of all.

The new companies either pay their way or consolidate some more or shut em down. That does work.
Check the bankruptcy firms over the years of large entities and see what they do first....most of the above. As thy are successful, they grow share and the new company will grow with out the over head a the unjustifiable wages.

Chapter 11 and reorganization through the courts is the only way out. throwing more money at the existing structure will only allow the clock and calendar to pass. Then the above will happen anyway, but billions of dollars and months later.

GM unlike the US Government cannot sustain business as usual.

BTK

Originally Posted by SteveZ

Delta Airlines, United Airlines, Northwest Airlines, KMart, Texaco, Pacific Gas & Electric, Charter Communications and Yukos Oil all bankrupted. Yet, the nation continued along. If the "Bloated Three" go Chapter 11, the world will not end.

AMEN to you Steve !

You know, I am aware that I beat to death one subject, HOWEVER, everytime I look around at this early stage of this presidency I see all the earmarks of Saul Alinsky !

Now you can say...on no there he goes again...but one of the tenets of Alinsky's CHANGE was that “The organizer must rub raw the resentments of the people of the community,” (constant Rich versus Poor scenarios..ACORN trips plus all the other groups) and "there has to be a crisis that we can solve to institute change." (GM and on and on) Why did we not allow them to go bankrupt in the first place as it now appears that is where we are going BUT now the government has their claws on and in them.

It just seems that we are always being emotionally challenged.....check this out...

"NANNY STATE: GOVERNMENT WEBSITE TO WARN OF SADNESS/CRYING OVER ECONOMY
Mon Mar 30 2009 18:43:56 ET

The U.S. government is set to offer an online emotional rescue kit!

"Getting Through Tough Economic Times" will launch Tuesday with a media push across all platforms.

The site is meant to help people identify health concerns related to financial worries.

The feds will warn of depression, suicidal thinking and other serious mental illnesses. It will raise warning flags for: Persistent sadness/crying; Excessive anxiety; Lack of sleep/constant fatigue; Excessive irritability/anger.

The guide will be available starting at midnight at http://www.samhsa.gov/economy."

http://www.drudgereport.com/flashns.htm


I honestly hope I am dead wrong but it has become almost a daily thing now...I know there are REAL problems and maybe I am just callous, but all of this was so predictable and those of you who were reading and posting during the campaign (AND the primary) recall me saying the same thing and now it is happening in real life.


Steve is right....this country has survived LARGE bankruptcies before without all the jangled nerves.

CNN had an alarming graphic on tonight. There are six states where over 100,000 people are employed by auto companies, suppliers and dealers. Another forty states employ more than 10,000 in directly auto-related jobs. The size of the auto industry makes the list of bankrupt companies listed by SteveZ look like peanuts.

Everyone can say all they wish about how bankruptcy will work best. I hope that they speak from first-hand experience in working thru a bankruptcy, although it doesn't appear that they have. As a retired banker I have. I know first-hand how bankruptcy works and why sometimes it doesn't.

Bankruptcy can work, if the taxpayers continue to provide debtor-in-possession loans--some of which will never be repaid-- and the stakeholders make a sincere effort to reach agreement on a Plan of Reorganization. The UAW and the bondholders have not negotiated in good faith in the months until now, so there is little reason to be hopeful that they'll suddenly become cooperative after bankruptcy is filed. The bankruptcy judge will not inject himself into the negotiations and create his own plan--that's a function that by law is the responsibility of the creditors operating within a creditors committee.

Examples have been provided of bankruptcies that have worked. How about Delphi Corporation? Delphi was formed from various component manufacturing businesses and spun off from GM in 1999. By 2005, Delphi found that it had to declare bankruptcy. The objectives of their reorganization within bankruptcy is exactly the same as GM's would be should they have to file--but on a much smaller scale. Delphi has been operating under the protection of the bankruptcy court ever since, almost four years, with no progress being made by the Creditors Committee in negotiating a Plan of Reorganization. The parties to the Delphi bankruptcy are the same parties that would be involved in a GM bankruptcy--the UAW, bondholders, materials suppliers, etc. If GM were to file and the parties performed the same way, the federal government could be pouring taxpayer's money in the form of D-I-P loans down that rathole for a long, long time while the members of the Creditors Committee sat on their hands, just as they're doing with Delphi.

The government doesn't want to own and run GM, but given the choice of a couple of million people being thrown onto the unemployment roles all at one time might require the government to own and run GM for awhile--maybe a long while. The alternative would be sudden chaos beyond what we can imagine. Frankly, that's probably the reason that the UAW and the bondholders are being so uncooperative. They know the chaos that would result from a failed reorganization and liquidation of an industry of this size. They appear to be betting that they'll win the "chicken" bet with the government.

If the industry does fail, with all the intended as well as unintended consequences, there will be plenty of blame to go around. But it will clearly start with the management, the UAW, and the banks and investment banks that provided financing to the car companies. The government, if it had much of a role over the years, clearly only played a tertiary role in the failure of this industry.

But before anyone here provides "expert" advice on how bankruptcy is the best alternative, I would hope that those that read those postings and form opinions based on them think about what is actually happening in this situation, how and why the parties are acting as they are, and what the real consequences might be if bankruptcy doesn't work.

Originally Posted by Villages Kahuna

CNN had an alarming graphic on tonight. There are six states where over 100,000 people are employed by auto companies, suppliers and dealers. Another forty states employ more than 10,000 in directly auto-related jobs. The size of the auto industry makes the list of bankrupt companies listed by SteveZ look like peanuts.

Everyone can say all they wish about how bankruptcy will work best. I hope that they speak from first-hand experience in working thru a bankruptcy, although it doesn't appear that they have. As a retired banker I have. I know first-hand how bankruptcy works and why sometimes it doesn't.

Bankruptcy can work, if the taxpayers continue to provide debtor-in-possession loans--some of which will never be repaid-- and the stakeholders make a sincere effort to reach agreement on a Plan of Reorganization. The UAW and the bondholders have not negotiated in good faith in the months until now, so there is little reason to be hopeful that they'll suddenly become cooperative after bankruptcy is filed. The bankruptcy judge will not inject himself into the negotiations and create his own plan--that's a function that by law is the responsibility of the creditors operating within a creditors committee.

Examples have been provided of bankruptcies that have worked. How about Delphi Corporation? Delphi was formed from various component manufacturing businesses and spun off from GM in 1999. By 2005, Delphi found that it had to declare bankruptcy. The objectives of their reorganization within bankruptcy is exactly the same as GM's would be should they have to file--but on a much smaller scale. Delphi has been operating under the protection of the bankruptcy court ever since, almost four years, with no progress being made by the Creditors Committee in negotiating a Plan of Reorganization. The parties to the Delphi bankruptcy are the same parties that would be involved in a GM bankruptcy--the UAW, bondholders, materials suppliers, etc. If GM were to file and the parties performed the same way, the federal government could be pouring taxpayer's money in the form of D-I-P loans down that rathole for a long, long time while the members of the Creditors Committee sat on their hands, just as they're doing with Delphi.

The government doesn't want to own and run GM, but given the choice of a couple of million people being thrown onto the unemployment roles all at one time might require the government to own and run GM for awhile--maybe a long while. The alternative would be sudden chaos beyond what we can imagine. Frankly, that's probably the reason that the UAW and the bondholders are being so uncooperative. They know the chaos that would result from a failed reorganization and liquidation of an industry of this size. They appear to be betting that they'll win the "chicken" bet with the government.

If the industry does fail, with all the intended as well as unintended consequences, there will be plenty of blame to go around. But it will clearly start with the management, the UAW, and the banks and investment banks that provided financing to the car companies. The government, if it had much of a role over the years, clearly only played a tertiary role in the failure of this industry.

But before anyone here provides "expert" advice on how bankruptcy is the best alternative, I would hope that those that read those postings and form opinions based on them think about what is actually happening in this situation, how and why the parties are acting as they are, and what the real consequences might be if bankruptcy doesn't work.

Damn great post!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! I need to do alittle bit of investigating. What you stated here seems logical. Just I wonder how much chaos there will be. Could this be the starting of My Tea Party again???

Now how can the CEO of GM get so much Money when the stretcher is there to pick them up?? Interesting article. Should all be taken, what do you think?

http://www.msnbc.msn.com/id/29960407/

Originally Posted by Villages Kahuna

CNN had an alarming graphic on tonight. There are six states where over 100,000 people are employed by auto companies, suppliers and dealers. Another forty states employ more than 10,000 in directly auto-related jobs. The size of the auto industry makes the list of bankrupt companies listed by SteveZ look like peanuts.

Everyone can say all they wish about how bankruptcy will work best. I hope that they speak from first-hand experience in working thru a bankruptcy, although it doesn't appear that they have. As a retired banker I have. I know first-hand how bankruptcy works and why sometimes it doesn't.

Bankruptcy can work, if the taxpayers continue to provide debtor-in-possession loans--some of which will never be repaid-- and the stakeholders make a sincere effort to reach agreement on a Plan of Reorganization. The UAW and the bondholders have not negotiated in good faith in the months until now, so there is little reason to be hopeful that they'll suddenly become cooperative after bankruptcy is filed. The bankruptcy judge will not inject himself into the negotiations and create his own plan--that's a function that by law is the responsibility of the creditors operating within a creditors committee.

Examples have been provided of bankruptcies that have worked. How about Delphi Corporation? Delphi was formed from various component manufacturing businesses and spun off from GM in 1999. By 2005, Delphi found that it had to declare bankruptcy. The objectives of their reorganization within bankruptcy is exactly the same as GM's would be should they have to file--but on a much smaller scale. Delphi has been operating under the protection of the bankruptcy court ever since, almost four years, with no progress being made by the Creditors Committee in negotiating a Plan of Reorganization. The parties to the Delphi bankruptcy are the same parties that would be involved in a GM bankruptcy--the UAW, bondholders, materials suppliers, etc. If GM were to file and the parties performed the same way, the federal government could be pouring taxpayer's money in the form of D-I-P loans down that rathole for a long, long time while the members of the Creditors Committee sat on their hands, just as they're doing with Delphi.

The government doesn't want to own and run GM, but given the choice of a couple of million people being thrown onto the unemployment roles all at one time might require the government to own and run GM for awhile--maybe a long while. The alternative would be sudden chaos beyond what we can imagine. Frankly, that's probably the reason that the UAW and the bondholders are being so uncooperative. They know the chaos that would result from a failed reorganization and liquidation of an industry of this size. They appear to be betting that they'll win the "chicken" bet with the government.

If the industry does fail, with all the intended as well as unintended consequences, there will be plenty of blame to go around. But it will clearly start with the management, the UAW, and the banks and investment banks that provided financing to the car companies. The government, if it had much of a role over the years, clearly only played a tertiary role in the failure of this industry.

But before anyone here provides "expert" advice on how bankruptcy is the best alternative, I would hope that those that read those postings and form opinions based on them think about what is actually happening in this situation, how and why the parties are acting as they are, and what the real consequences might be if bankruptcy doesn't work.

I agree with GMONEY...great post, and I have some research to do.

I will say that the Delphi example and the current one have a common theme...UAW !!

Also, I think that an important part of getting through the bankruptcy process is being able to get credit. Have we got that in place yet ? Hey, we the taxpayers have a lot of pull with the banks, right ?

You see VK...I really am investigating and trying to learn but gotta stop for today, HOWEVER wanted to share something.

My first thought about this GM thing was WHY NOT FORD....WHAT DO THEY DO DIFFERENT.

I went to the Detroit Free Press website and lo and behold there is an article there today concerning the same thing...

"How Ford stays one jump ahead"

http://www.freep.com/article/2009033...one+jump+ahead

Not a real detailed article but three comments struck me and when I return this evening will check more on it....

ONE WAS..

"This year, Ford also has made major strides -- ahead of its rivals -- with the UAW and with its debt holders.

"I think it really speaks to the relationship we do have" with union leaders, Bill Ford said, "that we could do this without a gun to their heads ... absent any external pressure, i.e. the government."

AND...

"Mulally said one of the most important decisions that the company made to get to this place -- where Ford is increasingly calling itself "different from GM and Chrysler" -- was setting the Toyota-like goal several years ago to be best in class, not just competitive."

AND FINALLY...

"But they also are dead serious, especially about keeping Ford free from the political influence with which General Motors Corp. and Chrysler LLC are now contending."

Originally Posted by Bucco

**snip**
My first thought about this GM thing was WHY NOT FORD....WHAT DO THEY DO DIFFERENT.

Ford went outside of their corporate execs and hired Mulally, an automotive outsider, and then the Ford family actually gave him the reins.
Shaking up the company culture was a great start, but Ford is still on shaky ground.

he told me last week that an announcement has been made that they will all become GM employees again by June 1st. The y were told not all would be retained...both white/blue collars will be pruned back BEFORE being taken back into the GM fold. Now why hasn't this come out in the news (or I missed it).

There will be an automotive industry with or without the American owned auto makers. The industry will not fail.

I am a staunch advocate of the chapter 11 scenario for GM, having been with a major corporation that went through it. Repeating...get rid of the CEO, get rid of the existing board of directors, disenfranchise the unions, decentralize controls and measurement points, generate a plan that specifically accomplishes the intended goal to come out of chapter 11, work the plan, get rid of anybody or any part of the organization that does not add value.

One cannot address fixing GM. Surgery must be performed on the individual elements that make up GM. Decentralize. Winners stay...losers go...entities as well as people.

Having to report periodically to the courts on the accomplishment of the goals is built in. For those companies and employees serious about making it work, failure is not an option. Work the plan, meet the numbers/objectives....keep the government out!!!

It is no different than talking about changing the government of the USA for the better and keeping the same structure and the same losers in the same jobs that have taken it to where it is today. Proof positive....it does not work.
And most of all words and fancy speeches don't get it either...roll up the sleeves, get the scalpel out and go to work. And oh by the way, bring a cot to sleep on when you get a chance, because by necessity the days for the survivors are long and arduous, the rewards at the end are well worth it.

My personal perspective. I am not tolerable of speeches...only plans and results...all else is secondary (and political).

BTK

Thankfully so, as my oldest son has a middle-level executive position at Ford.

I think Mulally is a more foresightful CEO than some others. He began his administration at Ford with a better portfolio of cars that will be introduced in the next couple of years. He also arranged for a huge commitment of debt financing for use in the tough times being experienced now. Ford's fleet will have comparable fuel economy statistics to any other car maker in the world. Their product quality has also been "up there" for several years. In fact, I believe they were ranked higher than Toyota in initial product quality by the Powers Survey.

But they still live under the threat of the failure of a couple of key suppliers. If a GM and/or Chrysler failure results in their shutdown, Ford will suffer as well.