Is GM finished?

balrog666 said:
The UAW Pension Fund is an unsecured creditor and it has no place at the table to begin with. And the "sweetening" of the offer, i.e., a slightly increased bribe, is insufficient for the real creditors to forgo their fiduciary responsibility without highly visible and significant political pressure, especially since they will be subject to the lawsuits of their investors.

. QED
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I don't think so. If the bondholders could show that they were worse off because the pension holders have been pushed ahead of them then I would agree. If the bondholders actually think that then they can a better deal they can just forgo the government plan and fight it out in court.

It just isn't unconstitutional for the government to transfer US taxpayer wealth to the union pension fund even if they decide not to implement a similar transfer of taxpayer assets to the bondholders. I might not like it. I might think it is unfair that the union which has worked steadfastly beside the corrupt GM management to destroy GM is now going to be rewarded by the government, but the fact is it just isn't unconstitutional for the government to give assets away. If you are a UAW pension fund holder you are going to get government help. If you're just an average joe whose company goes belly up you are going to have to rely on the government pension fund insurance program.
 
davefoc said:
I might not like it. I might think it is unfair that the union which has worked steadfastly beside the corrupt GM management to destroy GM is now going to be rewarded by the government, but the fact is it just isn't unconstitutional for the government to give assets away.
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You still don't get it do you? Still the same anti-union rhetoric after all this time. Even GM isn't blaming the union for its current economic woes.

You really need to take a look at what the federal mandates did to the industry, and what effect the price of gas has on the American buying public. To put it simply the government forced the companies to produce vehicles no one was buying because gas was so cheap. You combine that with the economic slow down and here we are.

Bloated CEO salaries and pension funds have nothing to do with the fact that people aren't buying cars.
 
3bodyproblem said:
You really need to take a look at what the federal mandates did to the industry, and what effect the price of gas has on the American buying public. To put it simply the government forced the companies to produce vehicles no one was buying because gas was so cheap. You combine that with the economic slow down and here we are.
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Are you saying the government forced GM to build all those SUVs that people suddenly stopped buying when the price of gas went through the roof last summer?
 
3bodyproblem said:
You still don't get it do you? Still the same anti-union rhetoric after all this time. Even GM isn't blaming the union for its current economic woes.

You really need to take a look at what the federal mandates did to the industry, and what effect the price of gas has on the American buying public. To put it simply the government forced the companies to produce vehicles no one was buying because gas was so cheap. You combine that with the economic slow down and here we are.

Bloated CEO salaries and pension funds have nothing to do with the fact that people aren't buying cars.
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Suppose GM had had the Caterpillar managers in charge. You know people that actually gave a crap about running a sustainable company. At some point there would have been a really terrible strike. The GM managers would have been vilified all over the country by the union-is-always-right-crowd and the managers might have had to take a year or so with little or no salary, but at the end of it GM might have had a business that provided wage and pension benefits that allowed it to compete.

That of course never happened. GM just burned through stockholder equity until there was nothing left and then it burned through taxpayer money until the government put the brakes on that little happy dance. You want to blame the demise of GM on market conditions, like somehow if the US never had a recession or if gas never went up in price GM would still be going strong. I doubt it. GM had been heading down for years. The only thing that negative market conditions did was to push a seriously wounded company over the edge. That doesn't mean that GM would have been OK if that hadn't happened, it just means it would have lasted a little longer until it failed.
 
davefoc said:
You want to blame the demise of GM on market conditions, like somehow if the US never had a recession or if gas never went up in price GM would still be going strong. I doubt it. GM had been heading down for years. The only thing that negative market conditions did was to push a seriously wounded company over the edge. That doesn't mean that GM would have been OK if that hadn't happened, it just means it would have lasted a little longer until it failed.
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I'm not, the experts are. I'm just telling you being here in the Detroit area we get both sides of the story and have been for years. I've been a recipient and critic of Union policy for years. I'm not trying to let them off the hook, I'm trying to lay blame where blame is due.

I can't think of another industry (this large) where the government has gotten involved and mandated a product be produced at a loss to the companies involved. People didn't, don't and won't buy small economy cars when gas prices are low. Do you remember what happened in the 70's? Do you remember how Honda and Toyota came to be household names in NA? The chevette? What happened in the early 80's as gas returned to the level it stayed at for almost 20 years.

You tell me; does the recession drive the price of gas up, or does the price of gas going up drive the recession? Take a close look at vehicle sales, the price of gas and the economic condition.
 
Blue Mountain said:
Are you saying the government forced GM to build all those SUVs that people suddenly stopped buying when the price of gas went through the roof last summer?
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No, the consumer demand for SUV's "forced" GM to build them. The price of gas rising stopped people from buying them. (the fact that the loans dried up didn't help either)

It's pretty easy to figure out, if the price of gas is low people buy big stupid cars. If the price of gas is high, people buy little fuel economy cars. (take a look at what happened from 1973-1983 in the NA market)

Crazy how the price of gas dictates what kind of cars people buy, and not what the government policy forces companies to make.
 
davefoc said:
I don't think so. If the bondholders could show that they were worse off because the pension holders have been pushed ahead of them then I would agree. If the bondholders actually think that then they can a better deal they can just forgo the government plan and fight it out in court.

It just isn't unconstitutional for the government to transfer US taxpayer wealth to the union pension fund even if they decide not to implement a similar transfer of taxpayer assets to the bondholders. I might not like it. I might think it is unfair that the union which has worked steadfastly beside the corrupt GM management to destroy GM is now going to be rewarded by the government, but the fact is it just isn't unconstitutional for the government to give assets away. If you are a UAW pension fund holder you are going to get government help. If you're just an average joe whose company goes belly up you are going to have to rely on the government pension fund insurance program.
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Aw, gee, that's not taxpayer wealth, that's someone else's private property.
 
3bodyproblem said:
No, the consumer demand for SUV's "forced" GM to build them. The price of gas rising stopped people from buying them. (the fact that the loans dried up didn't help either)

It's pretty easy to figure out, if the price of gas is low people buy big stupid cars. If the price of gas is high, people buy little fuel economy cars. (take a look at what happened from 1973-1983 in the NA market)

Crazy how the price of gas dictates what kind of cars people buy, and not what the government policy forces companies to make.
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How is it that "foreign" car companies have been able to make money on small, fuel efficient cars all these years, but GM and Chrysler couldn't?
 
ZirconBlue said:
How is it that "foreign" car companies have been able to make money on small, fuel efficient cars all these years, but GM and Chrysler couldn't?
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Because they didn't want to?! Designers responding to bad management? Stupid regulations? The UAW? Take your pick ....
 
davefoc said:
In the end, I think the people who said that GM should just be allowed to enter bankruptcy have been vindicated.
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The GM and Chrysler bailout plans looked Gnomish.

1. Give Car Company Billions of Bridge Loan Money
2. ????????
3. Profit
 
balrog666 said:
Because they didn't want to?! Designers responding to bad management? Stupid regulations? The UAW? Take your pick ....
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Some of this is true. I'm not sure how you could pin it on the UAW. Saturn was profitable and the UAW was heavily involved. If i remember correctly Saturn was a Union concept at first (the mangement style at Saturn is a departure from the typical Big 3). The Union presented the idea and got it worked into the contract in the early 80's. The Union has always taken pride in the NA product and didn't like seeing people buying Toyota's and Honda's in the late 70's and early 80's any more than the company liked losing market share.

@ Zircon-I'm not sure if you're aware of this, but it takes time to take a car from concept to production. Longer than it takes to change the sign at the gas station, and a lot longer than it takes for people to change their buying habits. By the mid 80's the price of gas had dropped and people weren't buying small fuel efficient cars. Don't forget, the reason Chrysler survived the first bankruptcy in 1978 was because of the Dodge Omni, car of the year. The Omni and the K-Car basically carried Chrysler until the minivan. To say Chrysler couldn't do it is wrong. They did until the price of gas dropped and people stopped buying them. The few that did bought Japanese. Honda and Toyota were doing it well by that point. To continue to compete in a market that isn't going to make you money and isn't you strong point would be foolish. Chrysler and the rest were doing what they had to to meet fuel standards (remember the Colt?) but trying to make money were they could, the minivan. Ford had the Escort and sold plenty of those. GM had the Cavalier, they sold tons of those as well. But you and I both know those were cars you had to buy, not the ones you wanted to buy. That is until gas prices shot through the roof.
 
3bodyproblem said:
Some of this is true. I'm not sure how you could pin it on the UAW. Saturn was profitable and the UAW was heavily involved. If i remember correctly Saturn was a Union concept at first (the mangement style at Saturn is a departure from the typical Big 3). The Union presented the idea and got it worked into the contract in the early 80's. The Union has always taken pride in the NA product and didn't like seeing people buying Toyota's and Honda's in the late 70's and early 80's any more than the company liked losing market share.

@ Zircon-I'm not sure if you're aware of this, but it takes time to take a car from concept to production. Longer than it takes to change the sign at the gas station, and a lot longer than it takes for people to change their buying habits. By the mid 80's the price of gas had dropped and people weren't buying small fuel efficient cars. Don't forget, the reason Chrysler survived the first bankruptcy in 1978 was because of the Dodge Omni, car of the year. The Omni and the K-Car basically carried Chrysler until the minivan. To say Chrysler couldn't do it is wrong. They did until the price of gas dropped and people stopped buying them. The few that did bought Japanese. Honda and Toyota were doing it well by that point. To continue to compete in a market that isn't going to make you money and isn't you strong point would be foolish. Chrysler and the rest were doing what they had to to meet fuel standards (remember the Colt?) but trying to make money were they could, the minivan. Ford had the Escort and sold plenty of those. GM had the Cavalier, they sold tons of those as well. But you and I both know those were cars you had to buy, not the ones you wanted to buy. That is until gas prices shot through the roof.
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Gosh, I'm sure that all sounds true ... if you are under 30.

:rolleyes:
 
I found this article about the last months leading up to GM's bankruptcy:
http://www.bloomberg.com/apps/news?pid=20601109&sid=ao0Me6MBXFAY&refer=home

This account of the government’s overhaul of the automaker is based on interviews with dozens of company executives, public officials, analysts and auto dealers over two months.
[...]
“We were told from the start to impose the same commercial rigor on this restructuring as we would have done in the private sector,” Rattner said in an interview.
[...]
A so-called surgical bankruptcy was always viewed as the most likely outcome, people familiar with the situation said.
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It seems the purpose of the bail-out was merely to make the eventual bankruptcy proceedings as quick and painless for the rest of the economy as possible. An expensive way to buy time, but it may very well have been worth it.
 
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balrog666 said:
Slight correction: They will use this to sluff off the bondholders shareholders.

Of course, if another rogue bankruptcy judge decides to abandon the law, as was done with Chrysler, they could just give the whole company to the UAW, which would be the ultimate kiss of death for GM.
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LOL! That's funny!!!

:dl:

(For those not in the US, the law was not "abandoned" by a "rogue" judge in the Chrysler case, which is what makes this post so funny. The claim that something happened which didn't actually happen!)
 
corplinx said:
The GM and Chrysler bailout plans looked Gnomish.

1. Give Car Company Billions of Bridge Loan Money
2. ????????
3. Profit
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As I noted in the other thread on this topic I think you are right about this. This set of facts doesn't fit well with the partisan analysis of the situation by either side.

Right now the knee jerk partisan Republicans are blaming the Obama administration for the destruction of bondholder holdings.

The truth seems to be that when the Bush administration loaned GM money without forcing the kind of concessions that would have been made in bankruptcy court GM just continued to burn through money at an unsustainable rate and when the Obama administration finally put the brakes on GM, whatever value that the bondholders might have recovered from GM in bankruptcy court had been essentially transferred to the government that now held notes that had priority over the bondholders and that were probably for more than the liquidated value of GM thereby putting the actual value of the bondholder assets at zero.

My guess is that by the time that the process put in place by the Bush administration was finished there was no actual bondholder value left and that the facts are that unlike what is being claimed by the Republican partisans the bondholders are getting more out of the GM bankruptcy than the current value of their holdings would have provided.

None of this is to say that what the Obama administration did with regard to this was particularly wonderful. The UAW pension holders were treated differently than all other people in the US that have worked for a company that's pension fund has been destroyed in a bankruptcy. This strikes me as very unfair, especially to the taxpayers that were forced to fund this naked cronyism.

It is also possible that if the Obama administration had acted more quickly to shutdown the GM fiasco set in place by the Bush administration that billions of dollars in taxpayer and possibly bondholder assets would have been saved. This was unlikely to happen. The Bush administration had given the Democrats cover for what was essentially a scheme to transfer billions of dollars to the UAW and the UAW pension funds and no Democratic administration would have been expected to shut down something like that all that quickly.
 
balrog666 said:
But we still have all of this afternoon for Obama to ride in on his white horse to save the day with another unconstitutional decree!

:rolleyes:
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Unconsitutional??????
There are sound reasons for thinking that Obama's actions in this are a mistake, but I don't see where it violates the Constitution.
 
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