White House tells GM boss to step down

[Berkut]

aka kick the ball down the road. Haven't we done enough of that?

It's not kicking the ball down the road if we avoid the shortcuts we've been taking in the past and manage to not fuck it up. Even a partial success in that area has a higher likelihood of a positive outcome than a slash-and-burn treatment.  There's no magic "fix" button for this; what I'm pretty certain of is that with our economy at this point, we can't take crippling yet another industry.

But this entire plan is nothing more than a shortcut - a desperate attempt to circumvent the market consequences, and it isn't going to work anyway. It is just pouring good money after bad.

There is no slash and burn treatment - there is the do nothing, spend no hundreds of billions, and let the market sort itself out treatment. Government intervention is not the answer. Nancy Pelosi cannot run GM any better than the other failures who have been running GM. If she could, she would be making $20 million a year running some gigantic multinational, rather than screwing up the country.

[citizen k]

Why We Should Suspend GM Trading:

Cramer: Suspend GM Shares
Posted By: Tom Brennan  |  Web Editor
cnbc.com|  27 May 2009  |  09:14 PM  ET


You might think, with bankruptcy a virtual inevitability at this point, that General Motors shares would stop trading. After all, the stock's chance for recovery is slim, if not completely hypothetical. But that hasn't been the case. U.S. exchanges continue to peddle GM to glossy-eyed investors hoping for a dramatic turnaround. To say that this outraged Cramer would be an understatement.

He called GM stock "practically valueless," a "charade," a "pretend piece of paper" that may pay off "years down the road," but only "if GM ever starts making a lot of money." Owners of common shares are in "huge, gargantuan, probably indescribable trouble," Cramer said, adding, "there's basically no way for them to win."

"If ever there was a screwed-up game," Cramer said, "selling people shares of GM's current common stock is it."

General Motors on Tuesday saw what might have been its only chance of escaping bankruptcy disappear, as bondholders rejected the company's shares-for-debt offering. Now the government's June 1 restructuring deadline will be all but impossible to meet. Also, going forward the majority of GM's shares will be held by Washington – up to 69% – with the United Auto Workers union holding 17.5%. In the end, common stockholders would own just 1% of the company.

Why then does this charade continue? Because just like AIG , Fannie Mae  and Freddie Mac , GM boosts volume on the New York Stock Exchange. Put simply, brokers and exchanges benefit from the trading.

"And in their desire to make just a bit more money," Cramer said, "they've made a joke of the market."

Worst of all, the Securities and Exchange Commission is doing nothing to prevent this. Nor is any other government agency. That's no surprise, though, because Washington is "completely oblivious to the day-to-day trading of all stocks," Cramer said. Apparently it's not in anyone's interest to get rid of these zombie stocks, "except the public's interest." And the public is "duped daily in the market, as these stocks are fitting treats for investors who don't know what they're doing."We should be going out of our way to protect these investors, Cramer said, "if we ever want to get to a place where the market can be embraced by everyone, not just the...sharks that dominate it."

video link:
http://www.cnbc.com/id/15840232?video=1134838543&play=1

[MadImmortalMan]

Uh, yeah, that's what I'm saying.  MIM seemed to be arguing otherwise.

While not disagreeing with you gentlemen, I should point out that the rational method of ignoring sunk costs is almost never used. Ever. As in, I've never seen it happen. Somebody's reputation or ego is always sunk in with those costs, so they can't be allowed to sink. If you know what I mean.

[Zanza]

The suitors for Opel apparently want about 200-300k Euro per Opel employee from the German government.
At that price, we can also finance a couple years of unemployment.

[Alatriste]

It's a ridiculous demand, that's probably at least 4 or 5 years of salaries paid in advance!

According to Wiki, Opel has 25,103 employees. That would mean 5,020,600,000 euros at 200,000 per employee, or 7,530,900,000 euros at 300,000   

[Zanza]

Actually, I reread that article and that was only the first attempt by the suitors. Now they want much less.

But apparently the American and German governments don't cooperate well on Opel, so for now there is no solution.

Unless they find one, Opel will be insolvent together with GM on Monday.

[Alatriste]

Good old EU is entering the ring, it seems...

http://online.wsj.com/article/BT-CO-20090528-704822.html

BRUSSELS (Dow Jones)--Economy and industry ministers from European Union countries and E.U. commissioners will meet Friday in Brussels to discuss the sale of General Motors Co.'s (GM) unit Adam Opel GmbH, a spokesman for the European Commission told Dow Jones Newswires.

The meeting will take place at 1500 local time, the commission's industry spokesman Ton Van Lierop said Thursday.

"There has to be a good exchange of information and a level playing field of information and that is the purpose of tomorrow's meeting," Van Lierop said later Thursday during a press conference. The commission hasn't invited any representative from GM to participate in the meeting, he said.

The commission was called to action by the Belgian government, which Wednesday sent a letter to the commission, asking it to ensure any resolution to the future of Opel is fair to all European countries where GM has operations. Belgium is particularly concerned about the future of an Opel plant it hosts.

[The Minsky Moment]

You have this backwards - I am proposing no cure, it is the Administration that is doing so, and their cure is not just worse than the disease, it is a bloody catastrophe of Huge Chavez like proportions. Using the state to rest control of the company from the owners and hand it over to the union?

The state did not wrest control from the owners.  The owners went begging cap in hand to the state to rescue them from their giant hole of an investment.

Let's not forget that if the Feds had taken a hard line, pretty much all these investors would have been wiped out and there would be no one to complain about preferential union treatment now.

If you need someone else to pay the piper, you lose the ability to call the tune.

[Berkut]

You have this backwards - I am proposing no cure, it is the Administration that is doing so, and their cure is not just worse than the disease, it is a bloody catastrophe of Huge Chavez like proportions. Using the state to rest control of the company from the owners and hand it over to the union?

The state did not wrest control from the owners.  The owners went begging cap in hand to the state to rescue them from their giant hole of an investment.

Let's not forget that if the Feds had taken a hard line, pretty much all these investors would have been wiped out and there would be no one to complain about preferential union treatment now.

The Feds are taking a hard line  - the only people they will rescue is the precious, precious members of the UAW.

Frankly, I could not care less about the investors - they took their chances, and tough shit if they lose their money - as long as they lose their money as a result of the market, rather than as a result of the government stepping in and snatching whatever equity they ahve left in order to hand it over to the union, along with a hundred billion dollars or so of our money.

I don't think the UAW deserves protection anymore than the investors. I don't think the Fed should bail out the investors or the Union. If they mut bial out the company, then do so in a fashion that shows you really want to save the company, which means telling the UAW to shove it. What they are doing makes it clear they are not there to save GM, they are there to save UAW. And the means to doing that is siezing the comany from its current owners and turning it over to the workers.

Lenin would love this. We don't even need to shoot anyone this time around though - the masses will cheer on Obama as he nationalizes the auto industry.

[alfred russel]

You have this backwards - I am proposing no cure, it is the Administration that is doing so, and their cure is not just worse than the disease, it is a bloody catastrophe of Huge Chavez like proportions. Using the state to rest control of the company from the owners and hand it over to the union?

The state did not wrest control from the owners.  The owners went begging cap in hand to the state to rescue them from their giant hole of an investment.

Let's not forget that if the Feds had taken a hard line, pretty much all these investors would have been wiped out and there would be no one to complain about preferential union treatment now.

If you need someone else to pay the piper, you lose the ability to call the tune.

To be fair, the owners (shareholders) were basically wiped out by market forces, so their representatives (management) going to the government begging for help shouldn't necessarily infringe on the rights of the creditors who are in a position to inherit the remains of the company. They still have a basis to complain about preferential union treatment and the de facto nationalization of the company.

[Zanza]

along with a hundred billion dollars or so of our money.

For $100 bn you could buy Honda. I bet that would be a better investment for the American taxpayer. 

[grumbler]

The Feds are taking a hard line  - the only people they will rescue is the precious, precious members of the UAW.

Frankly, I could not care less about the investors - they took their chances, and tough shit if they lose their money - as long as they lose their money as a result of the market, rather than as a result of the government stepping in and snatching whatever equity they ahve left in order to hand it over to the union, along with a hundred billion dollars or so of our money.

I don't think the UAW deserves protection anymore than the investors. I don't think the Fed should bail out the investors or the Union. If they mut bial out the company, then do so in a fashion that shows you really want to save the company, which means telling the UAW to shove it. What they are doing makes it clear they are not there to save GM, they are there to save UAW. And the means to doing that is siezing the comany from its current owners and turning it over to the workers.

Lenin would love this. We don't even need to shoot anyone this time around though - the masses will cheer on Obama as he nationalizes the auto industry.

I must admit that, in all of this ranting about "bailing out the UAW" I have never caught sight of the actual complaint that you have about the UAW trading $20 billion of so in GM obligations to the union pension and medical fund for a 20% or so stake in GM for said funds.  This is pretty much exactly the same deal that the bondholders turned down.  The union accepted such a shitty deal because it had little option, not because it was so powerful.

While I oppose the continued investment of taxpayer funds in the life support costs for a corpse, it isn't because the union is a minority beneficiary of the largess.  I am far less happy about losing my own money than I am about the unions getting a tiny piece of what I lose.

[The Minsky Moment]

To be fair, the owners (shareholders) were basically wiped out by market forces, so their representatives (management) going to the government begging for help shouldn't necessarily infringe on the rights of the creditors who are in a position to inherit the remains of the company. They still have a basis to complain about preferential union treatment and the de facto nationalization of the company.

Absent federal intervention, both Chrysler and GM would have gone into liquidation simultaneously, and the creditors probably would have struggled to get pennies on the dollar. 

[grumbler]

Absent federal intervention, both Chrysler and GM would have gone into liquidation simultaneously, and the creditors probably would have struggled to get pennies on the dollar.

So, the buyers would have gotten better bargains and been much more financially healthy as a result.  Seems to be a good thing.

[alfred russel]

To be fair, the owners (shareholders) were basically wiped out by market forces, so their representatives (management) going to the government begging for help shouldn't necessarily infringe on the rights of the creditors who are in a position to inherit the remains of the company. They still have a basis to complain about preferential union treatment and the de facto nationalization of the company.

Absent federal intervention, both Chrysler and GM would have gone into liquidation simultaneously, and the creditors probably would have struggled to get pennies on the dollar.

I don't disagree--but there is a minority of creditors claiming they would have gotten more.