White House tells GM boss to step down

[grumbler]

GM is going through a Chapter 11 reorg.  it is absolutely essential that the company continuing operating as best it can as a going concern during this process, and that it emerge as quickly as possible.

What I am hearing, though, is that the bondholders want to convert the Chapter 11 into a Chapter 7.  They can do it, as I understand, by refusing to accept the Ch 11 plan.

That would probably be the best thing, in the long run.  Viable elements of GM could be picked up and revived, without having to carry the burden of the non-viable portions.

[Berkut]

They provide no service to GM though. Nothing. Nada. Zilch. Zippo.

This is just silly.

GM employs over 60,000 workers, even after taking into account the huge cuts scheduled for this year.  Many of those workers have specialized skills as electricians, millwrights, designers, technicians, machinists, etc.  Many have extensive plant-specific knowledge of the existing factory layouts and equipment.  There is no way that a workforce of that nature and size can be replaced by placing newspaper want-ads.  Nor is mass recruitment of the greater Detroit lumpenproletariat as a kind of latter day Leninist "industrial army" a serious proposal.

You don't have to replace anyone though - just hire them right back. It's not like they have any real choice in the matter.

GM is going through a Chapter 11 reorg.  it is absolutely essential that the company continuing operating as best it can as a going concern during this process, and that it emerge as quickly as possible.

Even if that means it re-emerges with the exact same problems that drove it into bankruptcy to begin with?

  To break the union would take months and force a long shut-down of operations while the company, in the full throes of one of the most complex corporate reorganizations in history, attempts to reconstitute a massive 60K workforce from scratch

Again, not at all from scratch. Indeed, I would guess that bulk of their employees would be the exact same people.

(in the face of what would certainly be a very aggressive picket operation) It would be completely and utterly insane.  The reorganized company would die a dozen additional deaths before the union was broken.

I disagree. Who is going to picket? All the people who are out of jobs? Let them. They won't picket for long. And Obama is all about stomping on people rights, so he can just send in the National Guard to break them. After all, he is willing to demand that executives be fired, why not workers?

I am no great fan of the UAW, but one must take reality as one finds it and make the best of it. 

And the reality is that the UAW is being subsidized by the American taxpayer to the tune of billions, for no purpose other than to take care of the UAW.

If it cannot be done without selling out GM and the American taxpayer to the UAW, then it isn't worth doing. Let GM fail. Certainly cannot imagine how anyone would support letting the UAW blackmail not just GM, but me and you by threatening to destroy both the company and their employees jobs if they don't get a sweetheart multi billion dollar kickback.

[alfred russel]

GM is going through a Chapter 11 reorg.  it is absolutely essential that the company continuing operating as best it can as a going concern during this process, and that it emerge as quickly as possible.

What I am hearing, though, is that the bondholders want to convert the Chapter 11 into a Chapter 7.  They can do it, as I understand, by refusing to accept the Ch 11 plan.

That would probably be the best thing, in the long run.  Viable elements of GM could be picked up and revived, without having to carry the burden of the non-viable portions.

No chance that will be allowed to happen.

[The Minsky Moment]

You don't have to replace anyone though - just hire them right back. It's not like they have any real choice in the matter.

Of course they have a choice - they stick with the union and call the company's bluff.

Even if that means it re-emerges with the exact same problems that drove it into bankruptcy to begin with?

Is it seriously your contention that the UAW was the sole source of the GM's problems?  That is not even close to the truth.  It's not like unions in Germany (to take one example) are entirely comatose.  Hell - in Germany under law the union gets 50% of the supervisory board seats.  Yet somehow the executives of VW managed to avoid making horrible decisions and running their company into the ground.

[Berkut]

You don't have to replace anyone though - just hire them right back. It's not like they have any real choice in the matter.

Of course they have a choice - they stick with the union and call the company's bluff.

And GM hires someone else who is just as qualified and likely works a lot harder. Everyone wins! Except the lazy union pukes, of course.

The alternative (paying the lazy union pukes with my tax dollars) is considerably worse.

[The Minsky Moment]

What I am hearing, though, is that the bondholders want to convert the Chapter 11 into a Chapter 7.  They can do it, as I understand, by refusing to accept the Ch 11 plan.

That would probably be the best thing, in the long run.  Viable elements of GM could be picked up and revived, without having to carry the burden of the non-viable portions.

Generally speaking Chapter 11 reorgs conserve significantly more asset value than liquidations.  The main reason to prefer a Chapter 7 is if you are a secured or highly senior creditor who doesn't care if value is destroyed further down the capital structure.  Given that the taxpayer is a potential loser in this process, that doesn't seem that desirable to me.

Nor is it clear to me how a Chapter 7 would work in this context.  Who would want to buy a single GM plant for example?  It's not like a retailer where the principal assets consist of unsold inventory or real estate that can be fairly easily and quickly monetized.  There are a bunch of lumpy assets with limited potential buyers.  And via collateral pledges, the control of so-called "viable portions" of the business may be scattered. 

[Berkut]

Is it seriously your contention that the UAW was the sole source of the GM's problems?  That is not even close to the truth.  It's not like unions in Germany (to take one example) are entirely comatose.  Hell - in Germany under law the union gets 50% of the supervisory board seats.  Yet somehow the executives of VW managed to avoid making horrible decisions and running their company into the ground.

So as long as there is some union somewhere that hasn't run a company into the ground, it cannot be the case that the UAW has a significant role to play in running GM into the ground?

The "horrible" decisions made by GM mostly have to do with bending over for the UAW time and time again.

[The Minsky Moment]

And GM hires someone else who is just as qualified and likely works a lot harder.

If GM had the magic wand to make things like this happen, they wouldn't have needed government aid in the first place.  They just could just built those neat flying cars from the Harry Potter books and made a mint.

[Berkut]

What I am hearing, though, is that the bondholders want to convert the Chapter 11 into a Chapter 7.  They can do it, as I understand, by refusing to accept the Ch 11 plan.

That would probably be the best thing, in the long run.  Viable elements of GM could be picked up and revived, without having to carry the burden of the non-viable portions.

Generally speaking Chapter 11 reorgs conserve significantly more asset value than liquidations.  The main reason to prefer a Chapter 7 is if you are a secured or highly senior creditor who doesn't care if value is destroyed further down the capital structure.  Given that the taxpayer is a potential loser in this process, that doesn't seem that desirable to me.

That is so *perfect*!

GM sucks hind tit (largely because they cannot compete on labor), so we bail them out. Now the taxpayer is a stockholder, so we are a "potential loser" in the process, so of course we have to pour in billions upon billions more so as to avoid this potential losing, and of course a large portion of that money ends up in the pockets of the UAW, who somehow manage to come out of the entire deal with their cherry contracts intact AND a huge ownership in the company, because we all know how well the UAW can run GM, and how it is in the taxpayers best interest for UAW to get tens of billions of dollars.

And all the people who invested in GM? Why, fuck them. As long as the union doesn't lose any money, who cares about the people who actually own GM?

There is no possible problem that can be worse than this solution.

[Berkut]

And GM hires someone else who is just as qualified and likely works a lot harder.

If GM had the magic wand to make things like this happen, they wouldn't have needed government aid in the first place.  They just could just built those neat flying cars from the Harry Potter books and made a mint.

No, they couldn't, because they are locked into the union Obama is sacrificng the American taxpayer for and their idiotic contracts that pay people $80k/year to sweep the floor. Or not sweep the floor.

[grumbler]

No chance that will be allowed to happen.

You may be right, unfortunately.  As a taxpayer, though, I have to hope that those trying to liquidate the corporation have a better handle on the situation than you.

[crazy canuck]

No chance that will be allowed to happen.

You may be right, unfortunately.  As a taxpayer, though, I have to hope that those trying to liquidate the corporation have a better handle on the situation than you.

From the point of view of the secured bond holders there is no real incentive to convert to unsecured shareholdings.  If AR is correct the US government will not allow GM to fail and the investment of the bondholders will remain secure and if there is a liquidation of assets they will likely recover their investment.

[The Minsky Moment]

UAW, who somehow manage to come out of the entire deal with their cherry contracts intact

They are getting nothing of the sort.  The union health care trust is taking a $20+ billion hit, and there are big cuts in retiree health benefits, active worker fringe benefits, COLA suspensions, eliminations of bonuses, and loss of vacation time.  Plus a 6 year no strike pledge.

And all the people who invested in GM?

The nature of risk capital is that there is risk.  I read the papers.  And sure, I noticed a couple years ago when GM bonds were paying huge fat interest premiums over solid AAA corporates (not to mention treasuries).  I watched as that yield premium widened and widened.  Did I buy?  No because I didn't want to take the default risk. Others were willing to run that risk.

You place your bets and you takes your chances. 

[Berkut]

You place your bets and you takes your chances. 

Unless, of course, you are a UAW employee. Then you get billions from the government to protect your sweetheart deal, at any and all expense.

[alfred russel]

No chance that will be allowed to happen.

You may be right, unfortunately.  As a taxpayer, though, I have to hope that those trying to liquidate the corporation have a better handle on the situation than you.

:lol:Obama has said he is committed to making GM work--ie, no liquidation. If he offers the right price, he can get the creditors to go away. The company will not liquidate--it is just a question of what parts emerge, what the structure of the company is coming out of bankruptcy, and how much the creditors get paid.