Skip to comments.Government, UAW To Own 89% Of GM In Restructuring
Posted on 04/27/2009 2:37:46 PM PDT by Michael Eden
Game, set, and match to the Statists and the big labor agenda. From this point forward, the government will be deciding what cars are made, and the unions will literally be negotiating with themselves to determine how much theyll earn making them.
The government was able to buy it's way into total control of the auto industry for only a few billion dollars. A tremendous day for Statism, a dark day indeed for the free market and for individual liberty.
From the Associated Press:
DETROIT General Motors Corp. could be majority owned by the federal government under a massive restructuring plan laid out Monday that will cut 21,000 U.S. factory jobs by next year and phase out the storied Pontiac brand.This is about as blatant of a case of simultaneously talking out of both sides of one's mouth as there is. The government has no interest in running GM; they just want to be able to fire the company's GM and have the power to decide who is on the board of directors. You've got to give the Obama administration points for sheer chutzpah. And millions of political cuckolds are literally choosing to believe him rather than trusting their own lying eyes.
The plan, which includes an offer to swap roughly $27 billion in bond debt for GM stock, would leave current shareholders holding just 1 percent of the century-old company, which is fighting for its life in the worst auto sales climate in 27 years.
GM is living on $15.4 billion in government loans and said Monday in a filing with the U.S. Securities and Exchange Commission that it envisions receiving an additional $11.6 billion....
GM said that it will ask the government to take more than 50 percent of its common stock in exchange for canceling half the government loans to the company as of June 1. The swap would cancel about $10 billion in government debt.
In addition, GM is offering stock to the United Auto Workers for at least 50 percent of the $20 billion the company must pay into a union run trust that will take over retiree health care expenses starting next year.
If both are successful, the government and UAW health care trust would own 89 percent of GM stock, with the government holding more than a 50 percent stake, CEO Fritz Henderson said in a news conference at GMs Detroit headquarters.
Henderson said that although the government would own a majority of GMs outstanding common shares, the Treasury hasnt demonstrated interest in running the company, but would have someone on the board looking out for the taxpayers interest. The task force has directed current board chairman Kent Kresa to replace several board members.
There's a story entitled, "The Devil and Daniel Webster" that describes what can happen when one foolishly makes a deal with the devil. Unfortunately, the Jabez Stone stand-in (GM) won't have any Daniel Websters to confound Mr Scratch (brilliantly depicted by Barrack Hussein). The lesson of this story is that it's bad enough to do a deal with the devil; but never, NEVER, NEVER do a deal with the government. You can't win, and you won't even be able to lose with dignity.
The shareholders, the VEBA (health care trust) and the government would want to have a someone on the board of directors, he said.The dealer closings are not included in the job loss numbers sited at the beginning of this article, which will easily add well over one hundred thousand more jobs to the low-ball total cited at the beginning of the article.
Deals with the UAW and the Treasury have yet to be finalized, he said.
The struggling automaker said it will offer 225 shares of common stock for every $1,000 in notes held by bondholders as part of a debt-for-equity swap. Henderson said the objective is to reduce GMs $27 billion of outstanding public debt by about $24 billion. The company estimates that after the exchange, bondholders would own 10 percent of the company.
That would leave current common stockholders with only 1 percent, GM said. Still, GM shares rose 34 cents, or 21 percent, to $2.03 in midday trading.
The plans, if successful, would reduce GMs debt by $44 billion from the present figure of about $62.4 billion.
We would be substantially less-leveraged as a company, Henderson said.
Kip Penniman Jr., an analyst with KDP Investment Advisors Inc., predicted the exchange offer would fail and GM will file for bankruptcy....
The company also said it plans to reduce its dealership ranks by 42 percent from 2008 to 2010, cutting them from 6,246 to 3,605. When asked how GM would accomplish that, Henderson would say only that the company would be making offers to the dealers in the coming weeks.
Mark LaNeve, vice president of North American sales and marketing, said a big chunk of the dealership reduction about 450 would come with the elimination or sale of Saturn, Hummer and Saab. GM would then look to end relationships with dealers that do only a small volume of business with GM, and then move on to other dealers, he said....
The same government that couldn't run a cafeteria without going millions of dollars into the red; the same government that still can't run a successful post office in spite of the numerous successful businesses that have sprung up all around it; the same government whose model for successful customer service is the Department of Motor Vehicles, is going to be teaming up with the very unions who ran the auto manufacturing industry out of business in the first place to build cars.
The auto industry today; the oil industry tomorrow. We don't need oil anyway. Just ask Senate Majority Leader Harry Reid: It's devil-juice, for sure.
I wrote an article around a youtube video entitled, "The Car That Will Save The Auto Industry (And The Planet!)." It's not a joke any more, given that we elected a bunch of totalitarian Statists to run our country.
Ever heard of the Soviet government-produced Lada? You haven't? Don't worry; you'll be getting a chance to own its American equivalent in just a few years.
I’ve heard of Win/Win..but this is Loose/Loose/Loose. The Gov’t looses, the taxpayers and the UAW
Give the whole damn thing to the unions. Let them experience their own unreasonable demands.
I bet it’s really “Lose/Lose/Lose”
Nice deal. The UAW contributes greatly to the destruction of GM. And as payback for some campaign contributions winds up having payback = given the company. Very scary.
So wait, the taxpayers are on the hook, the union is the owner? Jeez I can’t believe my tax dollars have gone to give this company to the union :(
It will be the first time in history that a union will make the initiative to suggest wage cuts. Otherwise they won’t survive and unlike the Soviet made junkers this company will have real world competition to deal with and competition creates quality.
Isn’t that ironic? Don’t you think?
The company that made my beloved Corvette, is dead to me.
And we now have a fuhrer too!(Barf!)
Lest we forget the contributions by taxpayers via bailouts being dumped into the unions lap....
What the heck? Why not hand them the keys to the factories and walk away? Then - they can reap what they sow.
Maybe Ford will put IFS on the Shelby at some point..I
1. Build a wall to keep taxpayers from fleeing the country
2. Invade France.
First off, at least taxpayers and the UAW both get screwed. I think it is time for consumers to finish off Government Motors....
Obviously the bondholders will insist on a bankruptcy filing, after which they will own GM, or its remains. What are these clowns in DC thinking?
What an interesting case study for future studies?
I’m sorry - what did you say? I’ve been too busy worrying about the Swine Flu and that Air Force One flyover in NYC.....
So what? Do they own the market? Do they think anyone will ever buy another GM vehicle if it is owned by the Gov and the UAW? I would never buy a GM product again. Period!
>Give the whole damn thing to the unions. Let them experience their own unreasonable demands.<
that is exactly right.
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