GM eyes Bankruptcy, sell company to US Government

[PapaG]

President Obama during his prime time news conference Wednesday night said he is hopeful Chrysler will remain a viable company--and that the federal government will be able to remove itself from the auto industry.

"I don't want to run auto companies, and I don't want to run banks," Mr. Obama said. "I've got two wars I've got to run already--I've got more than enough to do."

Chrysler faces a government-imposed deadline to finalize a partnership with Fiat SpA by this Thursday.

"I am more hopeful than I was 30 days ago that we can see a resolution," Mr. Obama said with respect to the deal, though he noted that the "clock is ticking."

In light of the news that the Obama administration will be hand-picking the new board of GM, I have no other option but to consider our President a bald-faced liar from this point forward.

 

[The_Lillard_King]

In light of the news that the Obama administration will be hand-picking the new board of GM, I have no other option but to consider our President a bald-faced liar from this point forward.

"I don't want to go to work" . . . so when I go to work, am I a bald-faced liar or is someone misintrepreting what I am saying?

Personally I would be very upset if the gov't gave all this money to GM and was not actively involved in their operations . . nothing would piss me off more than to give money to GM and learn about millions in bonuses going to GM top brass.

 

[maxiep]

Like I wrote in the previous post, it isn't clear to me where in the hierarchy the government sits. You claim they jumped the line. Based on what? Specifically where in the line do you think they belong, and why?

Um, based on corporate law. There's a whole field of it out there. Take some time to read some of it before commenting.

And yet some banks did turn down the TARP money, so the insisting must have been either spotty or not very, uh, insistent.

None of the big ones. They were put in a room and told to take it. I don't care about some local S&L.

Ford was too not bankrupt.

Neither was GM nor Chrysler when the Federal Government came into their lives. I look at how the Federal Government dealt with Chrysler in 1979 and how the Federal Government deals with them now, and I wonder why we've taken the road we have. Guaranteeing the loans and letting Chrysler turn itself around worked. The Federal Government coming in and dictating day-to-day business items has been a disaster.

Wait, you are saying they are a debtholder? Wouldn't that put them at the top of your hierarchy? So maybe they aren't cutting in line after all?

It's not my heirarchy, it's the heirarchy of corporate law. The Federal Government was given preferred stock which they converted to common stock. Now they're sqeezing out the shareholders.

Both good ideas, since clearly management at those companies had failed. Someone has to be the adult, and since GM's board failed to act...

I can't think of a bigger failure than the Federal Government. Year after year, they run massive losses. Legacy costs killed the US Auto Industry, forcing them to take shortcuts or price themselves out of the market. Who's to say Rick Waggoner did a crappy job? Who's to say Fritz Henderson is the right guy? One thing has been proven--advertising works. So when you come in and tell someone to cut their advertising, you're cutting their sales.

I'm baffled by the suggestion that we should pour money into failing companies and exercise no control over them. I can understand thinking that the bailouts were bad ideas to begin with, but given that we did the bailouts, it is incumbent upon us to maximize the value of the money spent. Leaving management which has a track record of failure in charge is not the way to do that.

I'm not surprised you're baffled. You can't understand simple heirarchy of debt and equity. Of course I think the bailouts were a bad idea. It was clear where those companies were headed. The Federal Government stepped in to help the UAW, not the companies. If you want to maximize the value of the money given to the auto companies, get out of their way and let them compete. Instead they tell the companies who should run them, how much they can spend on advertising and what kind of cars they can make. Mind you, there is not one senior member of the Administration who has ever run a large company. Not one. Yet these people are suddenly corporate experts? At least the Carter administration knew what they didn't know.

I pity the FOO!

barfo

I pity the American taxpayer. I pity the American auto worker.

 

[barfo]

Um, based on corporate law. There's a whole field of it out there. Take some time to read some of it before commenting.

Yes, your usual reply of "I'm not going to back up any of my claims, I'm just going to imply you are stupid".
Not very convincing. You claim they jumped the line, but you don't actually know.

Neither was GM nor Chrysler when the Federal Government came into their lives.

Utter nonsense. The government came into their lives because they went begging to Washington for a bailout, in a last-minute attempt to avoid filing bankruptcy. If you really believe they were just fine and the government forced money upon them, then... well, I don't believe you really think that.

I look at how the Federal Government dealt with Chrysler in 1979 and how the Federal Government deals with them now, and I wonder why we've taken the road we have. Guaranteeing the loans and letting Chrysler turn itself around worked.

The situation might just be a little different now.

Legacy costs killed the US Auto Industry, forcing them to take shortcuts or price themselves out of the market. Who's to say Rick Waggoner did a crappy job?

The car-buying public, that's who.

Who's to say Fritz Henderson is the right guy? One thing has been proven--advertising works. So when you come in and tell someone to cut their advertising, you're cutting their sales.

That's a pretty broad generalization, don't you think? So the key to business is just to spend as much money as possible on advertising? It's not possible to spend too much? The relationship between sales and advertising is absolutely linear?

I'm not surprised you're baffled. You can't understand simple heirarchy of debt and equity.

Yes, yes. I'm so stupid and you are so smart.

barfo

 

[maxiep]

Yes, your usual reply of "I'm not going to back up any of my claims, I'm just going to imply you are stupid".
Not very convincing. You claim they jumped the line, but you don't actually know.

Like I said, read some corporate law. It's not my job to inform you that common stock is suboordinate to unsuboordinated debt. If you don't understand that, yet you somehow imply you have any idea what you're talking about, then you are stupid. Don't shoot the messenger.

Utter nonsense. The government came into their lives because they went begging to Washington for a bailout, in a last-minute attempt to avoid filing bankruptcy. If you really believe they were just fine and the government forced money upon them, then... well, I don't believe you really think that.

No kidding GM and Chrysler went to the Federal Government. They were expecting to work with the Federal Government the way Chrysler worked with them in the late 70s.

That's a pretty broad generalization, don't you think? So the key to business is just to spend as much money as possible on advertising? It's not possible to spend too much? The relationship between sales and advertising is absolutely linear?

The data is clear on this point. However, you continue to trust the Federal Government and their ability to run an auto company more than the auto company themself.

Yes, yes. I'm so stupid and you are so smart.

barfo

Someone sounds a little butthurt. Get over it.

 

[barfo]

Like I said, read some corporate law. It's not my job to inform you that common stock is suboordinate to unsuboordinated debt. If you don't understand that, yet you somehow imply you have any idea what you're talking about, then you are stupid. Don't shoot the messenger.

Not shooting the messenger, just pointing out that you can't back up your claims. You don't (apparently) know the nature of the bailout agreements, so you are assuming that the government has only the rights of a common stockholder.

No kidding GM and Chrysler went to the Federal Government. They were expecting to work with the Federal Government the way Chrysler worked with them in the late 70s.

And what? Then the government tricked them? What's your evidence for that? Let me guess, it's that I'm stupid.

The data is clear on this point. However, you continue to trust the Federal Government and their ability to run an auto company more than the auto company themself.

Nicely avoided. However, you'd need to show that the cut in advertising hurt Chrysler more than it helped, and you haven't come anywhere near the vicinity of even starting to address that point.

Someone sounds a little butthurt. Get over it.

Someone needs to argue for his point of view, instead of making ad hominem attacks.

barfo

 

[BrianFromWA]

we shouldn't pour money into failing companies.

But we should pour money into people with failing financial situations (Welfare), failing health (Medicare/aid), and failing youth (Social Security)?

 

[BTOWN_HUSTLA]

But we should pour money into people with failing financial situations (Welfare), failing health (Medicare/aid), and failing youth (Social Security)?

no.

 

[BrianFromWA]

Ok. Then we agree on that part.

 

[Denny Crane]

I've spent a few years in corporate governance. Common stock is subordinated by almost all other claims against a company.

Preferred stock can have any rights assigned to it that the company and shareholder agree upon. Typically, preferred stock is used to encourage a big investment by offering a better position than common when it comes to liquidation rights. The stock may have no voting rights (to elect board members, other shareholder issues/votes), or pay higher dividends than common. Conversion rights are often part of a preferred offering; that'd be the right to convert 1:1 or 2:1 (or whatever) some or all shares of preferred into common.

Sale of stock is authorized by the board of directors, shares available to be sold are authorized by shareholder vote.

There is a huge difference between how the govt. bailed out Chrysler and GM (and Chrysler). Govt. found a partner in Lee Iacocca and empowered him to turn around the business. Govt. did not force him out to put in a guy of their choosing, or demand that the unions become the lion's share owner, or squeeze out its existing shareholders and bondholders. Nor did govt. put harsh new regulations on its product.

The automobile is a household's 2nd or 3rd largest capital expense. That'd be behind a mortgage and perhaps educational loans. It's not at all surprising that people fear for their jobs and forego replacing their older but still servicable vehicles to buy something shiney and new. It has nothing to do with what GM and Chrysler made - sales of hybrid vehicles spiked for about a year during those high oil price days and have plummetted.

The airlines needed a bailout after 9/11. People similarly (out of fear) stopped (mostly) flying for vactations and business. Govt. loans and loan guarantees and bankruptcies and mergers held the industry together, the environment for their product improved, and they survived and even thrived. The guarantees were really all that was needed, not taking ownership positions, restructuring the companies by presidential edict, and that sort of thing.

7 years from now, every car has to get the mileage of a Toyota Prius. I don't know of more than 2 or 3 vehicles now, any automaker foreign or domestic, that gets that kind of mileage. The three would be Prius, Insight, and a 60 MPG diesel made by ford and sold in Europe. Good luck with that plan, folks.

The closing of auto dealers means death for the automakers. For a company that size (the size we want) to succeed, it needs to advertise, subsidize NASCAR, and have enough points of sales that people don't have to drive 500 miles to find a place to buy a car. And when times are good, an auto purchase can be an impulse buy.

You know our manufacturing sector is dead when it's govt. owned and you have to show up on tuesdays at some govt. warehouse to obtain product. That's the direction we appear to be heading.

 

[maxiep]

Not shooting the messenger, just pointing out that you can't back up your claims. You don't (apparently) know the nature of the bailout agreements, so you are assuming that the government has only the rights of a common stockholder.

Wow, you know nothing, are too lazy to look up anything, yet spout off anyway. President Bush extended GM loans with a three year payback. President Obama extended additional loans. Then the Obama Administration converted their loans to common equity by bullying GM. That allowed them to make line decisions and pack the board. They then had the chutzpah to cram down the bondholders for $0.10-$0.20 on the dollar. Mind you, in the case of regular bankruptcy, debtholders are put at the front of the line. Check the comments of the White & Case lawyer who was in the negotiations: http://www.cnbc.com/id/30515286

Who makes out the best? The UAW. In the words of Gomer Pyle, "Well, surprise, surprise."

Nicely avoided. However, you'd need to show that the cut in advertising hurt Chrysler more than it helped, and you haven't come anywhere near the vicinity of even starting to address that point.

I'm not your reference librarian. Look it up for yourself. Chrysler came back to the Federal Government showing that advertising positively corresponds with sales and the Federal Government said "so what? We're cutting it anyway." The bottom line is that you're comfortable with the Federal Government running businesses in which they have no experience and I prefer to leave their running to the experts.

Someone needs to argue for his point of view, instead of making ad hominem attacks.

barfo

Someone needs to stop taking things so personally. I don't care if your feelings are hurt. You're ill-informed on this issue and are arguing anyway. If that's not the definition of stupid, I don't know what is. It's not an ad hominem attack, it bears directly on the discussion. Don't you know the definition of ad hominem?

 

[barfo]

Wow, you know nothing, are too lazy to look up anything, yet spout off anyway. President Bush extended GM loans with a three year payback. President Obama extended additional loans. Then the Obama Administration converted their loans to common equity by bullying GM. That allowed them to make line decisions and pack the board. They then had the chutzpah to cram down the bondholders for $0.10-$0.20 on the dollar. Mind you, in the case of regular bankruptcy, debtholders are put at the front of the line. Check the comments of the White & Case lawyer who was in the negotiations: http://www.cnbc.com/id/30515286

An interesting article, but it's about Chrysler, not GM. They are two different companies. I'm surprised you don't know that.

I'm not your reference librarian. Look it up for yourself. Chrysler came back to the Federal Government showing that advertising positively corresponds with sales and the Federal Government said "so what? We're cutting it anyway." The bottom line is that you're comfortable with the Federal Government running businesses in which they have no experience and I prefer to leave their running to the experts.

Oh, well, if the Chrysler management says it, it must be true! They obviously know how to run a business, they've been so successful at it.

Someone needs to stop taking things so personally. I don't care if your feelings are hurt. You're ill-informed on this issue and are arguing anyway. If that's not the definition of stupid, I don't know what is. It's not an ad hominem attack, it bears directly on the discussion. Don't you know the definition of ad hominem?

I don't care whether you care about my feelings, so why don't we discuss the topic instead of my feelings?

Feelings, nothing more than feelings...

barfo

 

[Mr. J]

For some odd reason I was thinking the GM of the Blazers.

 

[maxiep]

For some odd reason I was thinking the GM of the Blazers.

Well, given what Isiah did to your team, you might be eligable for TARP money.

Here's hoping that D'Antoni and Walsh make the Knicks worth watching again.