⭐🔥 Click here to check Latest Celeb News & Celebrity Gossip in 2022! 🔥⭐
The Washington Independent
The Washington Independent

A New Chapter for General Motors

Specifically, Chapter 11. General Motors’ creditors have rejected the latest offer extended to them to facilitate an out-of-court restructuring -- a swap of

Adaline Fritz
News
Last updated: Jul 31, 2020 | May 27, 2009

Specifically, Chapter 11. General Motors’ creditors have rejected the latest offer extended to them to facilitate an out-of-court restructuring — a swap of some $27 billion in GM debt for a 10 percent equity stake in the new, reorganized company. Creditors are complaining that union stakeholders were offered a much better deal than they were (true) and that an equity stake is unlikely to be worth much (also probably true). Evidence for the latter comes from the deal struck between United Auto Workers and the company; the union pushed hard for inclusion of preferred shares, which pay an annual dividend of 9 percent. The between-the-lines message is that they want some cash in hand, because they don’t anticipate being able to sell common shares for much down the road.

What does this all mean? Well, it means that GM is headed for bankruptcy. The government will try to push for a speedy reorganization and sale, but the company is a big, complicated beast, and so a standard Chapter 11 process, taking several years, could instead be the result. It’s difficult to sell cars while in bankruptcy (one presumes), so  a protracted process could ultimately lead to liquidation — that is, selling off GM assets down to the last lugnut-affixing robot.

The main problem is that the government is providing the bulk of the bankruptcy financing (some $50 billion), which could give it as much as a 70 percent stake in the new automaker. This is tricky business. For one thing, it means that if the reorganized company doesn’t do well, the taxpayers take a big hit. It also means that the government has a big interest in keeping the reorganized firm afloat, which increases the likelihood of political meddling in the industry and continued cash infusions or subsidies. But the real rub is that GM’s obligations are large while its potentially successful sub-units are small. And those potentially successful sub-units will not be successful if they are saddled with too many of GM’s large obligations. So, for this to really work, the government has to swallow a lot of GM’s baggage and let free a new, trimmed down, unburdened GM. If that new company does well, the equity stake will have value and taxpayers will get back some or most of their investment. If it doesn’t — and in this economy, it will be swimming up a waterfall — then the government will have shelled out tens of billions of dollars just to prop up GM for a matter of months and delay the inevitable reallocation of workers and capital away from an utterly failed enterprise.

High risk, tiny chance of breaking even. What’s not to like?

Adaline Fritz | Adaline's upbeat, can-do attitude and nurturing disposition make her perfect for understanding each client's wants and needs and skillfully directing them toward their real estate objectives. Adaline has experience in all facets of the real estate process, having started in the administrative sector and progressed to operations before achieving success in real estate sales. She earned a Bachelor of Science degree in Psychology from San Diego State University and Western Oregon University, and returned to the Portland area in 2011 to pursue a career in real estate. She also loves traveling, working out, and spending time on the water during Portland's beautiful summers.

Related

$1.3 trillion in federal spending unaccounted for, report finds

Despite calls for independent bodies to keep government accountable, the Sunlight Foundation’s most recent Clearspending report has found the federal

$1.89 billion given to states to fight HIV

The federal government Monday announced more than $1.89 billion in funding to states to fight the HIV epidemic with access to care and with more cash for the failing AIDS Drug Assistance Program. According to an HHS press release , $813 million of that money will go directly to the ADAP programming. An additional $8,386,340 will be issued as a supplement to 36 states and territories currently facing a litany of unmet needs and access issues.

1 Brigade and 1 Battalion

ISTANBUL – It’s 10 p.m. in the lowest level of the Istanbul airport. In 20 minutes I’ll be allowed to board my plane to Kabul, bringing me to the

1. Brian Schweitzer

As governor of Montana, Schweitzer doesn’t represent one of the most highly populated, high-profile electoral states in the country. But this

#1 in Conspiracy Theories

Andrew Young’s tell-all biography of John Edwards, hitting shelves next week, is surging in one Amazon.com category in particular. #1 in Conspiracy

$1 Million for Toomey

Pat Toomey, the former Club for Growth president and leading Republican candidate in Pennsylvania’s 2010 Senate race, has announced a $1 million haul in the

$1 Trillion for Fannie and Freddie?

That is the worst-case scenario, according to Egan-Jones Ratings Co., quoted in a Bloomberg article making the rounds. The agency says that if home prices

$1.3 Million for Brown

The GOP’s candidate in the Massachusetts special election raised more than one million dollars -- double the goal -- in a 24-hour moneybomb on the Ron Paul

Ten Loopholes That Can’t Make It Into FinReg

Dan Pfeiffer, the White House communications director, wrote a blog post that lists the loopholes lobbyists most want inserted into Sen. Chris Dodd’s (D-Conn.)

Bachmann uncomfortable over earmarks ban

Republicans appear to have boxed themselves into a corner with their portrayal of earmarks as wasteful spending, as many of them have backed a moratorium on

Troubled mine holds hope for U.S. rare earth industry

China currently controls 97 percent of the world’s rare earth production. The Mountain Pass Mine could change that -- if it can overcome serious environmental concerns.

© Copyright 2022 The Washington Independent All Rights Reserved

Terms & Privacy | twi.news@washingtonindependent.com

⭐🔥 Click here to check Latest Celeb News & Celebrity Gossip in 2022! 🔥⭐