I am seriously disappointed in GM

Actually that should read: I am seriously disappointed in GMs current bondholders.

Are these people so arrogant to think they are going to get a better deal through bankruptcy court when the Chrysler folks just got stuffed for the same thing?

I read that this morning. I am not surprised, I think a lot of those people are the ones that got us into this mess in the first place

You know what? They (the bondholders) kind of deserve it. Berkeley them.

I don't think we're seeing the whole picture here. If I understand it, these "bond holders" had secured debt. Like the people who loaned you money for your car. It's secured by the car. You don't pay, they take the car. Compare this to unsecured debt, like your credit card. You don't pay and the credit card company will send you nasty letters, tell everyone you're a dead beat and call you up until 9PM. If you stop paying all your debt, the car goes to the lender and the credit card people get jack. The bond holders had debt secured by the worth of the company: real estate, equipment, "good will", etc. GM don't pay and the bond holders can repo that. Now, Uncle O comes along and says too bad, you are now going to get jack because I'm giving my buddies in the Union with unsecured debt an equal share in whatever is left to repo and you no longer have first rights on getting anything back in a total meltdown. The bond holders think that they can get a better deal by going to court and (ha ha) expecting the bankruptcy judge to follow bankruptcy law, which says the bondholders get paid first. Now, the stockholders, they are just berkeleyed in this. They get nothing at all.

So, Esquires, is that about the way it's going down?

My issue is if you just watched the same thing play out at Chrysler and they got hosed by Obamaco, why do you think the outcome will be different for GM?

Dr- actually, I'm not so sure- it didn't dawn on me until it was suggested on another car board- but here's an alternate version, not much difference in the whole socalism thing if that's what you are playing on... but.

It's quite possible that the bond holders who are holding out have insurance on the bonds they hold (one of the many "evils" of the recent crash aka- credit default swaps). So as a bond holder, realistically, you know that no judge will actually liquidate GM, and you may be left holding the recently closed plants as part of the settlement.... OR. You have insurance, and since when GM goes to bankrupcy- they default on the bond, thus rewarding you with the insurance you paid for. More than likely, that insurance money is more than the stock swap being offered.

And looking toward the future- ignore the short term while the govenment changes them, and look farther to 2016. While it it's quite likely that GM will come up with very viable solutions to the upcoming challenges, the profits will probably be non-existant or very thin for quite a while. Therefore you hedge your bets, and just take the insurance settlement.

the final point- more than likely, the insurance money will be paid by TARP money.

Basically, everyone "wins", the bond holders get their money, the government gets someone to blame for the bankrupcy (the bond holders), and GM gets restructured.

Eric

I didn't think of the insurance angle. Could be. Of course, all the "insurance" out there on things like this is totally bogus, as we've found out and all to be paid by TARP, which would be the US tax payer or the Chinese, Middle Eastern and European US bond holders. Like the colapsed home loan industry. All those loans had insurance on them (PMI) paid for by the debtor, so that if the debtor defaulted, the lender got paid by the insurance company. Well, turned out the insurance companies didn't ever really plan on paying off so all that money paid by the debtors for insurance was actually stolen from them and TARP (us again) picks up the bill.

Yeah, I think the bankruptcy thing is a face saving for all parties. The O can say to the union: Hey, the judge cut your pension and beni's, not me. I can't do anything about it. GM can tell the dealers: Hey, the judge wiped out your dealership and debt, not us. We can't do anything about it. The bond holders get their money from TARP which we can pay for by inflating the dollar another 50-100%. Almost everybody wins.

I don't really see going into bankruptcy as a win. I see it as a major disruption and the death of GM as we know it.

Yeah, you need to think about the insurance in the form of credit default swaps and other instruments and contracts. The press likes to beat the socialism thing b/c it gets lots of eye-balls vs telling a balanced story. Shock journalism. Can't really trust the press anymore - or at least you need to take what they say with a grain of salt (or skepticism).

Bankruptcy is a major win. GM as we currently know it needs to die. Hopefully they new GM gets it E36 M3 together and hopefully there is some fresh blood and ideas that don't keep it from making forward progress.

Entrenched management, cronyism and bad ideas is a common problem in older companies and is well documented in various business texts. Similar issue in the old telcos and other companies.

amg_rx7 wrote: Bankruptcy is a major win. GM as we currently know it needs to die.

DING DING DING!

The only thing that sucks is that we could have let it happen 6 months and $30B ago, and they'd already be on the road to recovery.

jikelly wrote: I don't really see going into bankruptcy as a win. I see it as a major disruption and the death of GM as we know it.

Certainly not a win all around (especially to those who are owed money by GM), but the death of GM as we know it certainly is not a bad thing.

And yes, wasting all that money to let them die a little latter is Fing absurd!!

Hmmm, one of the largest manufacturing entities in the world is now owned by some combination of the govt and the labor union? traditional bankruptcy would've been better for capitalist democracy as we know (knew) it.

Hey alphadriver, The POTW (President of the World), Soros agrees with you: http://money.cnn.com/2009/06/12/news/economy/soros_swaps.reut/index.htm?postversion=2009061206

POTW said: But the potential damage that CDS could do was not limited to financial firms, Soros added. He pointed to the bankruptcy of North America's largest newsprint maker, AbitibiBowater Inc, and the pending bankruptcy of General Motors (GMGMQ). "In both cases, some bondholders owned CDS and they stood to gain more by bankruptcy than by reorganization. "It's like buying life insurance on someone else's life and owning a license to kill," he concluded. Soros' criticism echoes fellow investor Warren Buffet's description of derivatives in 2003 as "financial weapons of mass destruction."

aircooled wrote: And yes, wasting all that money to let them die a little latter is Fing absurd!!

Hey, it's kind of like (expectations of) the American medical industry.

jikelly wrote: I don't really see going into bankruptcy as a win. I see it as a major disruption and the death of GM as we know it.

But, I don't like GM as it is.

DILYSI Dave wrote:

amg_rx7 wrote: Bankruptcy is a major win. GM as we currently know it needs to die.

DING DING DING! The only thing that sucks is that we could have let it happen 6 months and $30B ago, and they'd already be on the road to recovery.

Exactly. While I don't endorse everything Obama's doing, I also don't like the implication that "therefore" McCain's approach would be better. Did McCain say he wasn't going to bail out anyone - no. If anyone had the political balls to have said that I'd have voted for them.

kb58 wrote:

DILYSI Dave wrote:

amg_rx7 wrote: Bankruptcy is a major win. GM as we currently know it needs to die.

DING DING DING! The only thing that sucks is that we could have let it happen 6 months and $30B ago, and they'd already be on the road to recovery.

Exactly. While I don't endorse everything Obama's doing, I also don't like the implication that "therefore" McCain's approach would be better. Did McCain say he wasn't going to bail out anyone - no. If anyone had the political balls to have said that I'd have voted for them.

You couldn't possibly post this and think Ron Paul wasn't going to come up.

Dr. Hess wrote: Hey alphadriver, The POTW (President of the World), Soros agrees with you: http://money.cnn.com/2009/06/12/news/economy/soros_swaps.reut/index.htm?postversion=2009061206

POTW said: But the potential damage that CDS could do was not limited to financial firms, Soros added. He pointed to the bankruptcy of North America's largest newsprint maker, AbitibiBowater Inc, and the pending bankruptcy of General Motors (GMGMQ). "In both cases, some bondholders owned CDS and they stood to gain more by bankruptcy than by reorganization. "It's like buying life insurance on someone else's life and owning a license to kill," he concluded. Soros' criticism echoes fellow investor Warren Buffet's description of derivatives in 2003 as "financial weapons of mass destruction."

Doc If you are going to go out of your way to find someone who agrees with one of my theories (which I have zero evidence of, just an idea), you could at least get my spelling right.

It's an acronym, not a letter.

Better get it right, since Chriat/Phisler is going to start brining Alfas into the country again.

Eric

canoe

In reply to P71:

Berkeley them? Berkely you! Do you not realize who make up the largest segement of bondholders (either directly or indirectly)? Those who use the interest for income, such as retirees, pension funds, etc.

Most GM bonds were unsecured general obliagtions of GM. (Lending was done by GMAC - now ALLY bank which always had a separate capital structure from GM even when GM owned GMAC. The same relationship exists between Ford and Ford Motor Credit). Wh benefitted (relatively speaking) from the so-called cram-down of GM creditors? The UAW who were GM stock holders (other stock holders were wiped out by the way). Holders of common stock were supposed to be subordinate to bond holders, but Obama said no way and challenged bondholders to contest this.

Chrysler creditors were secured lenders and were really hosed. Stop thinking of investors as eveil people who liev off of others. In reality, they provide capital private enterprise, even small businesses. One has to be a 17-year-old or extremely ignorant not to know this.

MrJoshua wrote:

kb58 wrote:

DILYSI Dave wrote:

amg_rx7 wrote: Bankruptcy is a major win. GM as we currently know it needs to die.

DING DING DING! The only thing that sucks is that we could have let it happen 6 months and $30B ago, and they'd already be on the road to recovery.

Exactly. While I don't endorse everything Obama's doing, I also don't like the implication that "therefore" McCain's approach would be better. Did McCain say he wasn't going to bail out anyone - no. If anyone had the political balls to have said that I'd have voted for them.

You couldn't possibly post this and think Ron Paul wasn't going to come up.

The choice between Obama and McCain was a false choice. They were and are the same and it was clear before the election if you were paying attention.

I think they are a long way from being the same, but neither was a good choice.

Personally, I think GM was on the right track before all of this occurred. Pontiac was putting out some decent cars, the Malibu was on target, the new Corvette awesome, interior materials were upgraded all around, etc. All this upgrading and new products were part of the not showing a profit problem, and part of why I thought their previous CEO was doing ok. When O took over, he killed off some of what I thought were positive steps, and giving what he did to the unions in my opinion boarders on criminal. Had this been done in real life, people would be going to jail.

From a car guy point of view, I want GM to die. They seem to be getting it and major restructure would most likely help them round the corner into respectability.

Then there is the rest of the story.

If and when they go tits up, there will be a huge number of folks who worked their whole lives who will suddenly find their way of life, everything they worked for, income, health care, all of it... gone.

Worse yet these are folks who live in areas that have already been some of the hardest hit by job errosion over the last 30 years and this loss of stability will have a huge and reaching impact.

In short, this is a hidden cost involved in the death of huge old companys... its not going to be pretty no matter what.