Finally, Standing Up To Obama's Plans For Chrysler and GM

Flashy

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Now, since none of the more blinkered Obama fans have actually commented on this particular issue, without screaming about Bush or excusing it in some way, let us hear the excuses now...

this is *OBAMA'S AUTO BAILOUT PLAN*

George W. Bush has nothing at all to do with it.

*NOTHING*

We all know Bush was one of the worst presidents in the history of the USA.

there. done and dusted.

now deal with this issue.

*NOW* justify this policy based on the facts about what Obama is doing, and the people he is hurting *WITHOUT* mentioning George W. Bush since his stupidity is completely irrelevant.


Here are the facts-

- Obama's "plan" for Chrysler is to wipe out 71% of the money American institutions invested in the company.

- Secured lenders, who were guaranteed more from a bankruptcy filing in court, rejected his "offer" of 29 cents on the dollar (so UAW could be given control of Chrysler with 55% of its shares) Obama accused them of being "unpatriotic", and having their own self-interest above that of Chrysler's workers (to whom he wanted to give control of the company)

"But while many stakeholders made sacrifices, some did not, in particular, a group of investment firms and hedge funds that hoped to hold out for a taxpayer-funded bailout. I don't stand with them. I stand with Chrysler's employees, management and suppliers. I don't stand with those who held out when everybody else made sacrifices."


- Since nobody feels any sympathy for these mean hedge fund managers who actually manage people's money who Obama was clearly trying to demonize conveniently, how abouyt having some sympathy for many of the *REAL* people getting screwed by Obama so he can pay back the unions?


two Indiana state pension funds --
Indiana State Teachers Retirement Fund,
Indiana State Police Pension Trust
and the Indiana Major Moves Construction Fund, own about $42.5 million of Chrysler secured debt


( representing teachers and state police officers -- and a state construction fund) Filed objections against Obama's plan to seize their money in contravention to bankruptcy laws.

The teachers' pension fund alone has said it would lose $4.6 million under Obama's proposal.

- The fact is, President Obama is in fact stomping on investor's legal rights. Cops and teachers are hardly greedy wall streeters, are they?

Secured investors are *LEGALLY* entitled to be repaid first, before other Chrysler bondholders are, and to receive an ownership stake in the company should it go bankrupt.

President Obama has *DELIBERATELY* circumvented those *LAWS* in order to give UAW more money, and control of the company by simply voiding all the legal documents that Chryselr had with its secured lenders.



NOW, On to Step 2...



President Obama is now attempting to do the *EXACT SAME THING* to GM...and worse...

these are *AMERICANS* who have *RIGHTS* for a market determined decision of what their investment is worth - not a decision by an Obama political fiat.

At least with Chrysler, it was easy to ride roughshod over the bondholders, because it had much fewer and they were much richer, but this is *GM*



As for how this will all shake out...take a look at how great a job Great Britain did of running their car companies when the government got involved.

the government will *OWN* 51% of GM under the Obama "plan".
the UAW will own 38%.

the bondholders who *SHOULD* by all legal rights, have the first claims to all the company's assets, get only *10 percent*

and the *CURRENT* stockholders...get *1%*

GM is going to be 90% (nearly) owned by the government and the UAW.

The UK tried it in the 70s and failed miserably, with the majority going out of businees....and now, we are doing the *EXACT* same thing, saving the unions at the expense of making good cars.

When it is all said and done, the GM deal will give UAW 3 times more equity as the bondholders, even though they hold 8 billion dollars less worth of GM's liability then the Bondholders.

there are over 100,000 Individual GM bondholders, and the majority of them are not these rich wall street meanies.

Those "greedy" bondholders who protested and wanted to meet with the administration to discuss it, were then rebuffed by the Obama adminstration...

So let us look at a couple of those greedy folks who Obama is about to destroy to pay back some of his most ardent supporters...roughly 25% of them are individual investors, and that does not account for the pension funds that hold a large portion of the remaining 75%.


Marjorie Holden, 81 years old, retired teacher, widow
Five years ago, paid about $40,000 for GM bonds, which generate interest ranging from 7.4% to 8.4%. Now the bonds are worth just under $10,000.

"The bondholders are not all rich," says the retired teacher. "I need to conserve my assets."


Chris Crowe, Denver, Co

I’m a retired electrician from Denver, Colorado. I’m not rich and I’m not a Wall Street bank. These bonds finance my son’s college tuition and my retirement. I’m actually very concerned about not getting a check on May 15 from my bonds because I need this money to pay my property taxes. When the administration refuses to meet with the bondholders or chooses to wipe them out, they’re wiping me out, and lots of others like me.


Gary Thomas, (retired mechanic) from Kingston, Tenn.


I spent a good portion of my life working on GM cars and decided to buy bonds in GM because I believed they would be a solid investment for my future. I use the interest from the bonds for everyday living expenses and I cannot afford to see GM go bankrupt. After doing the math, I have realized that if I were to accept the administration’s current offer, I would only have $10,000 per year to live off of. That is barely enough to live a decent life and I doubt anyone would deny that.

Harley VanDeloo, 69, (retired high-tech marketing representativ" Thousand Oaks, Calif., bought $20,000 in GM bonds a year ago, now valued at less than $3,000. "I thought GM was too big to fail."

Dennis Buchholtz,67, superintendent of a factory
who invested $98,000 in GM bonds and relies on the $150 a week he receives in interest to help fund his retirement. "That offer doesn't seem fair...We have invested twice as much as the government and we'll only get a fifth of what the government will."

"If this deal goes through, we're wiped out," sitting in his living room with Judy, 61. "We're too old to recoup. Who's going to hire me?"

John Milne, retiree
holds GM bonds with a face value of $20,000.
"I'm equally as mad at GM as at the government because GM has done nothing more than give the UAW and the government what they want,I came here because this is the only place where small bondholders can be heard," he added. "We've been shut out of this entire process."


Teresa Durhone, retired early from her job as a paralegal to take care of her 83-year old mother in Ocala, Fla,


"To this day, if they told me GM would be OK, I'd hold them to maturity,It wasn't a speculative venture for me. It was an attempt to get a nice solid retirement income that would allow me to stay home with my mother."


She said the GM bonds, which have an original face value of $25,000, are about 10% of her savings, and an even greater percentage of her retirement income. She said she's still hopeful the company can survive without bankruptcy. But she's very worried.


"I try not to obsess over it but I do lose a little bit of sleep,"




Obama is offering the bondholders, who hold roughly 60% of the secured bonds, 10% of an insolvent company and saying that is "fair"

SO, tell us why these people should suffer, so Obama can pay back the unions?

If you cannot do this without attempting to draw the idiotic george w bush into it, then do not bother posting.

This is *OBAMA'S PLAN*

and we have not said anything about the future effects this is going to have on lending to highly unionized companies, like airlines, steel manufacturers etc...the risk priced in by the firms doing the lending is going to make it to expensive for these companies to seek loans...lenders, wary of being wiped out by an administration that does not care at all about lenders rights, will turn their backs on these unionized companies with underfunded liabilities...

anyway

do these folks look like Wall Street Sharks?

http://www.latimes.com/media/photo/2009-05/47037697.jpg

either defend the plan for what it is, or criticize it.
 

speshk

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Will you all please stop hating George Bush?

All he wants to do now is call his old friends for reassurances and work on his memoirs (in between hits of Scope in the loo).
 

Flashy

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What would YOU do? What's the alternative -- do NOTHING?

no, actually, the alternative is to give the bondholders, who hold roughly 60% of the liabilities, (27 billion) the largest share of the company, as opposed to giving the government and the UAW far more than what their share is.

that is the point of the whole problem.

Obama is wiping out the creditors, in this case, over 100,000 small creditors who, like the other 75% of institutional investors, own GM's debt...in favor of the UAW, who gave over 5 million to his campaign, giving them nearly 4 times what the bondholders receive, despite holding 33% less of the liabilities of the bond holders.

these people bought GM bonds...i.e. loaned GM money, and they have rights, that the Obama administration is trampling on in order to pay back the UAW.

Bankruptcy Court, would give the bondholders a much better deal, since they have the same rights as employees in bankruptcy court to repayment of liabilities(that is unsecured lenders, secured lenders have more rights than anyone)

Obama is trying to force a deal on these people, that does not give them equal rights to the UAW and the government.

the government is using *YOUR* money, (in the form of the 19 billion the government has already guaranteed to GM or roughly 63$ for every american) to hand the company over to the UAW and the government, giving them 90% combined of the company, even though combined, the UAW and Government have liabilities of 39 billion combined, and the bondholders have 27 billion.

they*OWE* these people the same fairness they would receive in bankruptcy court...

Obama does not have the authority to trample 100,000 small investors, who bought GM bonds over the last few decades, i.e. loaned GM money, and hand 38% of the company to them UAW, and only 9% of the company to the 100,000 individual bondholders, even though bondholders hold nearly 60% of the debt.

the point is, how would you feel, if you owned 60% of a companies debt obligations, and all its wworkers owned 40% of it...then, a big all powerful entity came in, and since that entity had received millions from the workers of that company, decided to completely trample your case to go to the time honored american laws regarding bankruptcy and creditors right, and said, you own 60% of the companies liabilites, and the workers own 40%, but we are going to give you 9% of the company, and we are going to give them 38%, and if you don't like it tough shit, because we are more powerful than you, law be damned.

you would not be very happy in that situation.

neither are these people...the majority of whom are very small investors, who invested in these great "workers" and this "great" company, who are now being raped by the government and these workers.
 

lucky8

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Get over it. While I don't agree with giving the UAW such a big share, you should remember that the free market already destined GM to bankruptcy. Without Obama,
GM would be forced to liquidate, which would bring the bondholders more money, but would end GM forever.

We don't need to bailout GM bondholders. If I were to make a bad investment, I wouldn't expect the government (your tax dollars) to pay for my mistake, so why should this be any different? It's the fundamentals of finance, risk vs reward. Risk means there's a chance you're going to lose your money, reward means there is a chance you're going to make money. Investments are never guarenteed, unless we're talking about t-bills. We shouldn't change the fundamentals of investing just because a bunch of wealthy people made poor investment decisions.

Let's face the hard facts here. Currently, GM has no creditors, and will have no creditors for some time to come, which is why they had to turn to the government for money. Why don't they have creditors? Because the market has determined that the company is a piece of shit, so no body will lend them money. The loss of bondholder money is much more Wagoner's fault than Obama's. Afterall, he's the reason GM is in the position it's in in the first place.

BTW, I think the UAW will destroy the company quicker than Wagoner and Obama put together. Might as well start the liquidation process now
 

D_Ireonsyd_Colonrinse

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Will somebody please teach Flashy how to write a simple, unadorned sentence?


Watch:

Flashy writes:

this is *OBAMA'S AUTO BAILOUT PLAN*... *NOTHING*... *NOW* justify this policy... the people he is hurting *WITHOUT* mentioning George W. Bush since his stupidity is completely irrelevant...

President Obama is now attempting to do the *EXACT SAME THING* to GM... these are *AMERICANS* who have *RIGHTS* for a market determined decision of what their investment is worth... the government will *OWN* 51% of GM under the Obama "plan"... and the *CURRENT* stockholders...get *1%*...This is *OBAMA'S PLAN*

--------------------

WHY is *FLASHY* resorting to so many "bells" and "whistles" and "quotation marks" and **ASTERICKS** and CAPS to "make" his ***points***??

What does this "look at me, look at me" style of writing accomplish?


*NOTHING* %#&F#WR*&(!!!!!!!!!!!)

Isn't this type of writing "fun"?

I mean **FUN**?

Or "**"FuN^^^^**************"""?
 

D_Tully Tunnelrat

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no, actually, the alternative is to give the bondholders, who hold roughly 60% of the liabilities, (27 billion) the largest share of the company, as opposed to giving the government and the UAW far more than what their share is.

Flash, totally agree with everything you have written. This and the Chrysler deal are all about political payback to the UAW. As much as I am for the working man, the UAW has not done him any favors, as this plan only forestalls the inevitable, which is a total dissolution of GM, or some such British Leyland muddle, ala '75.

As another motivating force, I am sure the US gov. does not want to take on the pensions of every retired GM/Chrysler retiree, or surviving spouse. They are hoping this action will avoid that. I am not so sanguine.

As a lawyer, Barack should have let the bankruptcy courts, which are seasoned in such affairs, even if this one is a doozy, handle the matter.

The irony, of course, is that the financial industry is getting bailed out without this kind of wealth destruction, unless you were a Lehman employee, or creditor, which is perhaps why the Admin is bending so far the other direction for GM, and Chrysler.

The biggest single stat on the US auto industry that stands out is that if the Big 3 could have purchased all the shares of every other automaker in '98 with the $200B they've since "invested" into the US auto industry. But then they might have ruined BMW, etc. too. What a waste.

Alternative energy, perhaps bouyed only by gov. fiat, will be the next asset bubble... IMHO.
 

lucky8

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Alternative energy, perhaps bouyed only by gov. fiat, will be the next asset bubble... IMHO.

Don't be so humble about that opinion...I'm right there with you on this one. If and when plug-ins dominate the roads, we'll soon have another problem on our hands because all we'll be doing is trading one natural resource for another. The cost of electricity is going to skyrocket over the next 15-30 years, especially with a carbon tax in place
 

BobLeeSwagger

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It's not so much about protecting the UAW as much as preventing a huge percentage of the auto industry's workers from being laid off at the same time. By keeping GM and Chrysler alive for a while, they at least prevent a complete collapse of that sector.

GM and Chrysler already ran their stock into the ground before any bailouts started, so their investors were already screwed.

I would argue that the real problem is how much is being spent on the bailouts as a whole. I suspect that the real plan is to let these various mega-corporations gradually fail instead of letting them all fail at once.
 

midlifebear

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Flashy, you ingorant slut! For once I almost completely agree with you. I can't completely agree with you, because I'm not privy to all the rickety financial agreements in place that were supposed to hold up GM and Chrysler. As for the bond holders, I'm in agreement that GM and Chrysler should have been allowed the old-fashioned means of exiting via bankruptcy, with the hope that the bond holders would receive substantially more than the 10% on their original investments. As for the UAW, fuck 'em. When was the last time you ever bought a quality American-made product produced by union workers? I'm not against unions, per se, but I learned the hard way that looking for the union lable did not ensure quality. Case in point: In 1990 I bought a Sylvania flat screen TV, the last television sets built in the USA (Tennessee, or so it said on the back of the case). It lasted a whopping two years. But enough about anyone in Tennesse being able to produce anything except for the possibility of a good race horse.

I'm probably wrong, but is seems there would be plenty of valuable manufacturing chunks and parts left over of Chrysler and GM which other automakers could pick up at bargain rates to refine, rebuild and reuse in their auto manufacturing processes. When Hudson was taken over by American Motors in the 1950's, people gasped. But AMC, which was on its own on slow road to nonexsitence, helped absorb much of what would have otherwise been a serious catasrophe in the first of two major recessions in the 50's. (However, there are some people -- my father included -- who would argue that the entire Eisenhower Administration was one, long snooze-fest of a recession.) And Studebaker, which was more American than apple pie bought a luxury car nameplate as well as the company behind it, Packard, for pennies on the dollar. Unfortunately, Studebaker's own problems with the UAW and contracts renigged on by US military started it's slide into bankruptcy. MotorTrend Magazine and their ilk insist is was Studebaker's unappealing, solidly engineered, mid-sized and compact cars that 'Mericuhns just didn't want. That may have been part of the proplem, but since when has dependable quality and reliability been a marketing problem? (I am the third owner of a 1963 Studebaker Lark which, except for new tires, having the wheels turned for a brake job and regular oil changes, seems to be in no need of any repairs. Even the paint remains in good shape. But I digress.) As a magical emblem of American fabulousness even Dinah Shore would have admitted to preferring Studebaker's (she owned two), but she had to pimp for GM telling 'Mericuh to hit the road for Chevrolet. By 1963 Studebaker was cold and life-less. Ironically, in 2009 it is still possible to buy a brand new 1963 Raymond Loewy-styled Avanti that looks like it just rolled out of Studebaker's plant. It hasn't. Some independent entrepreneur bought the rights to the Avanti and builds them to order. They look almost the same, but incorporate things like BMW suspensions, new Corvette engines, airbags manufactured in México -- you get the idea. Still, with the fall of Studebaker (and Packard), the USA continued to survive the loss of yet another car company.

As for Chrylser, it has been one of the most poorly managed US companies in history. I'm old (old old) and of all the car manufacturers in the 1950's anything produced by Chrysler from 1955 to 1965 was incredibly inferior to Ford and GM -- and that's not saying much. Sure, they had the "hemispherical" piston engines with lots of horsepower, but little things like dashboard wiring harnesses, brakes, transmissions, and power options rarely lasted long enough before the owner of a Desoto (remember them?) could trade in their purchase two-years later for a newer model that might last another two years without turning to a pile of rust. Chrylser could have died a quiet death in 1965 and 'Mericuh would have still remained safe from being overrun by commie pinkos hiding under rocks in everyone's back yards.

I do have sympathy for those citizens and former workers holding bonds in the car companies. But not much. First, none of them strike me as types who understand the risks of investing -- especially in bonds. Not long ago I, myself, was able to miraculously cash in municipal bonds at their maturity in two Texas cities without losing my total investment . . . and it was due to just dumb luck. Yes, cities go bankrupt, too.

As for Obama throwing money at Chrysler and GM? I do not believe he should have been advised (or strong-armed by the UAW) to do it. If possible, it should have been done so that the US government held those compan's executives testicles to hot coals until the original investors received a more equitable return on their losses and -- once again -- fuck the United Auto Workers Union.

In the next couple of years I will need to buy two 'Mericuhn auto-MO-biles to replace those on my ranch. Unless Toyoto or Honda start to fold, I'll unquestionably go to the dealers for those manufacturers and negotiate cash-discounted purchases. After all, the majority of those brands are manufactured in non-UAW controlled facilities in the USA and consistently earn higher marks for quality and excellent gas mileage than Ford.

However, during the next decade I am going to miss crawling into the back of a big, cushy triple-black Lincoln Town Car limousine when I'm futzing around Manhattan. It looks as though Ford has convinced New York that their mid-sized Ford Explorer hybrids will answer most of the needs of corporate businessmen, ladies from the upper east side out for a day of shopping, and kids on prom dates. Nope. It just won't be the same. Hell, I can make a more comfortable call with my TracPhone from my 1995 Jeep Wrangler (of course, the scenery is a lot different -- cows instead of crack heads).
 
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Flashy

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Will somebody please teach Flashy how to write a simple, unadorned sentence?


Watch:

Flashy writes:

this is *OBAMA'S AUTO BAILOUT PLAN*... *NOTHING*... *NOW* justify this policy... the people he is hurting *WITHOUT* mentioning George W. Bush since his stupidity is completely irrelevant...

President Obama is now attempting to do the *EXACT SAME THING* to GM... these are *AMERICANS* who have *RIGHTS* for a market determined decision of what their investment is worth... the government will *OWN* 51% of GM under the Obama "plan"... and the *CURRENT* stockholders...get *1%*...This is *OBAMA'S PLAN*

--------------------

WHY is *FLASHY* resorting to so many "bells" and "whistles" and "quotation marks" and **ASTERICKS** and CAPS to "make" his ***points***??

What does this "look at me, look at me" style of writing accomplish?


*NOTHING* %#&F#WR*&(!!!!!!!!!!!)

Isn't this type of writing "fun"?

I mean **FUN**?

Or "**"FuN^^^^**************"""?


actually, WT...the phrasing was rather simple...you said

"FLASHY WRITES"

I never wrote what you said i wrote. You removed considerable amounts of text from between the emphasized words.

What does this "selective editing" and outright lying about what i have written accomplish?

I wrote plenty of simple sentences and paragraphs...you removed text and inserted all the "adorned" words together.

If you are going to critique the post, you should be able to do it without lying about it.

selectively editing people's posts, removing key points and phrases, hardly reflects well on your writing skills.

Of course you could not take issue with the substance of the posts, either.
 

Flashy

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Get over it. While I don't agree with giving the UAW such a big share, you should remember that the free market already destined GM to bankruptcy. Without Obama,
GM would be forced to liquidate, which would bring the bondholders more money, but would end GM forever.
Exactly...going into Chapter 11 does not mean liquidation.

You should "get over it".

You obviously do not understand just what is going on.

Obama has stepped in to *KEEP* the GM bondholders from having the fair chance of recouping their money legally, instead of merely having hteir equity totally wiped out by the executive branch's "task force".

would you rather take your shot at getting your money back in a court of law? or would you prefer to have some task force tell you what you are going to get, especially when that task force has made it clear, you will getting peanuts compared to people you have equal legal rights to?


going into Chapter 11 does not "end GM forever"...many companies go into Chapter 11, they are either forced to *REORGANIZE* responsibly by...
- sell off losing divisions
- selling physical plants and assets
- firing workers
- cutting costs
- agreeing with workers to reduce their salaries and demands.


do some research.

Chapter 11 does not mean liquidation in the majority of cases...you do not know what you are talking about with regards to it.


Chapter 11 bankruptcy is a form of corporate financial reorganization which typically allows companies to continue to function while they follow debt repayment plans. The theory here is that otherwise viable businesses that are allowed to continue to operate will generate revenue, protect jobs, and be able to pay off creditors over time. Selling off the assets of the company to pay debts is a possibility, but it may not satisfy all of the indebtedness, and could force a business to close its doors. In many cases, a reorganization which allows for a repayment plan that everyone agrees to makes more sense. Chapter 11 bankruptcy filings may also be “strategic”. In other words, management may wish to reorganize for political reasons, not simply for the sake of balancing books.





We don't need to bailout GM bondholders. If I were to make a bad investment, I wouldn't expect the government (your tax dollars) to pay for my mistake, so why should this be any different? It's the fundamentals of finance, risk vs reward. Risk means there's a chance you're going to lose your money, reward means there is a chance you're going to make money. Investments are never guarenteed, unless we're talking about t-bills. We shouldn't change the fundamentals of investing just because a bunch of wealthy people made poor investment decisions.
you have made a very foolish statement. You clearly do not understand this.

1. They did not make typical equity "investments". They loaned money to a company. They were not speculators. They purchased *BONDS* and are guaranteed a return, by the promise of that bond.

2. The government should not pay for their mistake, but GM should go into Chapter 11, because, under the law, these bondholders are *ENTITLED* to recoup the money they have *LOANED*.

The government has stepped in to BLOCK the bondholders from receiving a fair LEGAL settlement of their bonds. There is a big difference between asking for a bailout which they are not asking for, and being allowed their legal rights to go to bankruptcy court.

You need to learn exactly what these people are entitled to. The government is forcing these people to accept its plan and denying them their right to recoup part of their investments, legally, in bankruptcy court.

3. Bonds *ARE* guaranteed. When you purchase them, you are guaranteed the rate of interest and to be paid back when the bonds come due.

If the company goes under, you are *GUARANTEED* as a secured lender to have first priority of payment from the sale of the company assets and available equity. That is a guarantee...before unsecured creditors, before employees, and before stockholders.

that is guaranteed in US Bankruptcy law, and is one of the fundamental aspects in what makes secured lending an acceptable risk to people who loan money.

UNSECURED lenders, in the case of the small GM bondholder, do not have the same guaranteed rights that secured lenders do, HOWEVER, they have equal rights to the employees (i.e. the UAW) in this case, to recoup money in Bankruptcy Court.

4. You obviously did not read the OP. Those are not a bunch of "wealthy people who made bad investment decisions"

They are 100,000 *SMALL* bondholders...many of whom bought GM Baby Bonds (in denominations as small as $25)

Small investors, make up 25% of the bondholders, they are not rich corporations, or hedge funds.

They are average people, who bought $15,000 worth of bonds to help pay for their retirement, or 10,000 worth of bonds so their kids could have something when they die.

The government is saying that these people, who have legal rights on par with every UAW worker in bankruptcy court, must accept the governments deal, which treats them as only worth less than 25% of the rights of a UAW worker.

These are not "rich" people getting hurt. these are average folks...the type Obama said he "stood with"

Let's face the hard facts here. Currently, GM has no creditors, and will have no creditors for some time to come, which is why they had to turn to the government for money. Why don't they have creditors? Because the market has determined that the company is a piece of shit, so no body will lend them money.
Ummmm yes, GM has creditors.

What planet are you on? Do you know what a creditor is?

Creditor - One to whom money or its equivalent is owed.

An entity (person or institution) that extends credit by giving another entity permission to borrow money if it is paid back at a later date. Creditors can be classified as either "personal" or "real". Those people who loan money to friends or family are personal creditors. Real creditors (i.e. a bank or finance company) have legal contracts with the borrower granting the lender the right to claim any of the debtor's real assets (e.g. real estate or car) if he or she fails to pay back the loan.


their BONDHOLDERS ARE CREDITORS. BONDHOLDERS EXTENDED CREDIT, I.E. LOANS, in return for the promise of repayment, and interest payments on the money loaned

bondholders are owed 27 BILLION in liabilities.
the UAW also holds 20 billion in GM Liabilities.

you do not know what you are talking about in this post.


The loss of bondholder money is much more Wagoner's fault than Obama's. Afterall, he's the reason GM is in the position it's in in the first place.
nobody said that GM bondholder losses were Obama's fault.

What is at issue here, is Obama strongarming the bondholders out of their legal rights to go to chapter 11 to recoup as much as possible, under the law, AFTER the company has lost its money...

i.e. CHAPTER 11.

Obama and his task force, are trampling their legal rights to seek redemption of the most money possible, that is OWED to them under legal contract by the GM bonds they hold, in bankruptcy court.

He is trampling that right, in order to give more to the unions, who the bondholders have the same rights as.


BTW, I think the UAW will destroy the company quicker than Wagoner and Obama put together. Might as well start the liquidation process now
you don't say?

then what the hell are you blabbing about in this bizarre post, lucky?

the bondholders *WANT* to go to Chapter 11. You have pooh poohed their rights to do just that throughout this thread, and now you say they should start the process of liquidation.

Please re-read what you wrote.
 
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Flashy

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Flash, totally agree with everything you have written. This and the Chrysler deal are all about political payback to the UAW. As much as I am for the working man, the UAW has not done him any favors, as this plan only forestalls the inevitable, which is a total dissolution of GM, or some such British Leyland muddle, ala '75.

As another motivating force, I am sure the US gov. does not want to take on the pensions of every retired GM/Chrysler retiree, or surviving spouse. They are hoping this action will avoid that. I am not so sanguine.

As a lawyer, Barack should have let the bankruptcy courts, which are seasoned in such affairs, even if this one is a doozy, handle the matter.

The irony, of course, is that the financial industry is getting bailed out without this kind of wealth destruction, unless you were a Lehman employee, or creditor, which is perhaps why the Admin is bending so far the other direction for GM, and Chrysler.

The biggest single stat on the US auto industry that stands out is that if the Big 3 could have purchased all the shares of every other automaker in '98 with the $200B they've since "invested" into the US auto industry. But then they might have ruined BMW, etc. too. What a waste.

Alternative energy, perhaps bouyed only by gov. fiat, will be the next asset bubble... IMHO.

thank you duc...

as usual, you are articulate, incisive, and right.

and i also agree on alternative energy...unfortunately, since i am a huge proponent of it...i just think that once the government gets its hands too far into the production end, it will be a disaster...
 

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Flashy, you ingorant slut! For once I almost completely agree with you. I can't completely agree with you, because I'm not privy to all the rickety financial agreements in place that were supposed to hold up GM and Chrysler. As for the bond holders, I'm in agreement that GM and Chrysler should have been allowed the old-fashioned means of exiting via bankruptcy, with the hope that the bond holders would receive substantially more than the 10% on their original investments. As for the UAW, fuck 'em. When was the last time you ever bought a quality American-made product produced by union workers? I'm not against unions, per se, but I learned the hard way that looking for the union lable did not ensure quality. Case in point: In 1990 I bought a Sylvania flat screen TV, the last television sets built in the USA (Tennessee, or so it said on the back of the case). It lasted a whopping two years. But enough about anyone in Tennesse being able to produce anything except for the possibility of a good race horse.

I'm probably wrong, but is seems there would be plenty of valuable manufacturing chunks and parts left over of Chrysler and GM which other automakers could pick up at bargain rates to refine, rebuild and reuse in their auto manufacturing processes. When Hudson was taken over by American Motors in the 1950's, people gasped. But AMC, which was on its own on slow road to nonexsitence, helped absorb much of what would have otherwise been a serious catasrophe in the first of two major recessions in the 50's. (However, there are some people -- my father included -- who would argue that the entire Eisenhower Administration was one, long snooze-fest of a recession.) And Studebaker, which was more American than apple pie bought a luxury car nameplate as well as the company behind it, Packard, for pennies on the dollar. Unfortunately, Studebaker's own problems with the UAW and contracts renigged on by US military started it's slide into bankruptcy. MotorTrend Magazine and their ilk insist is was Studebaker's unappealing, solidly engineered, mid-sized and compact cars that 'Mericuhns just didn't want. That may have been part of the proplem, but since when has dependable quality and reliability been a marketing problem? (I am the third owner of a 1963 Studebaker Lark which, except for new tires, having the wheels turned for a brake job and regular oil changes, seems to be in no need of any repairs. Even the paint remains in good shape. But I digress.) As a magical emblem of American fabulousness even Dinah Shore would have admitted to preferring Studebaker's (she owned two), but she had to pimp for GM telling 'Mericuh to hit the road for Chevrolet. By 1963 Studebaker was cold and life-less. Ironically, in 2009 it is still possible to buy a brand new 1963 Raymond Loewy-styled Avanti that looks like it just rolled out of Studebaker's plant. It hasn't. Some independent entrepreneur bought the rights to the Avanti and builds them to order. They look almost the same, but incorporate things like BMW suspensions, new Corvette engines, airbags manufactured in México -- you get the idea. Still, with the fall of Studebaker (and Packard), the USA continued to survive the loss of yet another car company.

As for Chrylser, it has been one of the most poorly managed US companies in history. I'm old (old old) and of all the car manufacturers in the 1950's anything produced by Chrysler from 1955 to 1965 was incredibly inferior to Ford and GM -- and that's not saying much. Sure, they had the "hemispherical" piston engines with lots of horsepower, but little things like dashboard wiring harnesses, brakes, transmissions, and power options rarely lasted long enough before the owner of a Desoto (remember them?) could trade in their purchase two-years later for a newer model that might last another two years without turning to a pile of rust. Chrylser could have died a quiet death in 1965 and 'Mericuh would have still remained safe from being overrun by commie pinkos hiding under rocks in everyone's back yards.

I do have sympathy for those citizens and former workers holding bonds in the car companies. But not much. First, none of them strike me as types who understand the risks of investing -- especially in bonds. Not long ago I, myself, was able to miraculously cash in municipal bonds at their maturity in two Texas cities without losing my total investment . . . and it was due to just dumb luck. Yes, cities go bankrupt, too.

As for Obama throwing money at Chrysler and GM? I do not believe he should have been advised (or strong-armed by the UAW) to do it. If possible, it should have been done so that the US government held those compan's executives testicles to hot coals until the original investors received a more equitable return on their losses and -- once again -- fuck the United Auto Workers Union.

In the next couple of years I will need to buy two 'Mericuhn auto-MO-biles to replace those on my ranch. Unless Toyoto or Honda start to fold, I'll unquestionably go to the dealers for those manufacturers and negotiate cash-discounted purchases. After all, the majority of those brands are manufactured in non-UAW controlled facilities in the USA and consistently earn higher marks for quality and excellent gas mileage than Ford.

However, during the next decade I am going to miss crawling into the back of a big, cushy triple-black Lincoln Town Car limousine when I'm futzing around Manhattan. It looks as though Ford has convinced New York that their mid-sized Ford Explorer hybrids will answer most of the needs of corporate businessmen, ladies from the upper east side out for a day of shopping, and kids on prom dates. Nope. It just won't be the same. Hell, I can make a more comfortable call with my TracPhone from my 1995 Jeep Wrangler (of course, the scenery is a lot different -- cows instead of crack heads).

thank you MLB...your post was enjoyable, as usual.

I am not anti-union either...but my problem with the unions, is one of a problem that affects all enterprises...how much is enough?

When Unions were started, the focus and ideals was to protect workers from unfair exploitation, terrible conditions, chronically low pay, scarce benefits, and very limited protection.

I am all for that...exploitation is unacceptable to me. That is not how you build a good company.

A good company is built by taking care of employees...being generous, but not recklessly so. Being inventive and open to new ideas...(helping employees by having a daycare center *AT* work, performance bonuses, etc.) a happy and loyal employee is a productive employee.

But somewhere, the Union creedo became less about protection, and more about exploitation themselves.

ultimately though, unionized workers in very blue collar industries in the USA are becoming dinosaurs as the two bells that have been tolling their death knell continue to clang:

1. Automation
2. Foreign Workers who work harder and for less money and make better products that can be sold cheaper.


unions like UAW have become as corrupt, stubborn and as exploitative as the very institutions they were founded to protect themselves against.

I do not feel badly for them at all.
 

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Flashy, I fully understand what is happening. I'm arguing that if the adminstration hadn't stepped in as a creditor for GM, the company would be forced into liquidation, not reorganization, which I fully believe.

Purchasing bonds is a form of investment, you cannot argue against that. GM bondholders all had the option of putting their money elsewhere. The interest they receive from bond payments is derived from risk, MRP. This risk stems from the fact that there is always a possibilty the investor will lose his or her money, ie, capital risk. This risk is derived from several things: maturity risk, business risk, financial risk et al. Poor investment decisions, I don't feel bad for people who make poor decisions.
 

sparky11point5

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1. Automation
2. Foreign Workers who work harder and for less money and make better products that can be sold cheaper.

Flashy --

I am not convinced that this is really true. Do you have any references?

Here is what I know, but am too lazy to google.

-- Pay generally correlates to productivity worldwide. US workers (both union and non-union) are paid roughly in line with higher productivity.
-- US workers put in far more hours than workers in other countries.
-- Other countries have a high labor cost driven by workforce rules, paid vacation, and other social safety net programs. These costs are generally company-paid and not reflected in gross or net pay.
-- Car-guy friends tell me US cars are similar in quality now to foreign makes built here. The quality problems of the 80s and 90s were largely resolved by adopting JIT manufacturing, lean techniques, other QC etc.


I think the main problem is that GM and Chrysler have had 30+ years of designing and building bad cars -- too little innovation, too little styling, just OK quality.

Here is the major one though.

-- *Annual increases in health care costs of 15%* Japan, Germany etc have public health care, and we should too.

As for bankruptcy, I think the most likely course for Chrsyler would have been Chapter 13, since without government intervention, they had no operating cash. Some operating cashflow is a *requirement* for Chapter 11. The bondholders would have gotten zero.

I think Obama's logic is similar to that for the banks -- avoid a cascade of failure that would push the US into a far deeper recession. In other words, it was about preserving the jobs, even if just for a few years.
 

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Flashy --

I am not convinced that this is really true. Do you have any references?
It is true. GM already has plans under consideration to move a hefty part of its production *OVERSEAS* to China! (how is that for a bizarre twist in the bailout!)

China is GM's largest market & will get bigger

GM sales in Asia are huge, outstripping US sales.

GM is tied with Volkswagen as the #1 car seller in China. They cannot get enough GM cars over there.

in 10 years it will be GM's largest market.

As such, making the cars over there, is a far cheaper alternative.

It is a fact, that their employees work cheaper & longer.

that is why, in GM's plans, they want to start shipping cars to the US from Shanghai starting in 2011.

GM China, plans to export 17,000 vehicles in the 1st year & 50,000 by 2014.

it makes far more sense. GM already has 21,000 jobs in China & importing components is far cheaper.

They are already planning another massive factory in China, even as they cut the work force here, for obvious reasons.

as for proof that you requested (from TIME Mag)

"While China keeps its data on labor costs under lock and key, analysts estimate that wages and benefit payments per factory worker are less than a tenth of what they are in North America."



-- Pay generally correlates to productivity worldwide. US workers (both union and non-union) are paid roughly in line with higher productivity.
well, not really. not if you are in China, or other nations where there are less rights for workers. That is why Asian economic strength has become so pronounced.

-- US workers put in far more hours than workers in other countries.
yes, in certain countries (like western europe & even there it is because of limitations like the french 35 hour work week laws)

below are 2004 numbers

http://upload.wikimedia.org/wikipedia/commons/6/64/Yearly_working_time_2004.jpg


obviously, when you look at the countries listed, in terms of productivity, we are not getting our asses kicked by the French or italians. we are outstripped by the Japanese, Koreans, Chinese etc.

They work longer hours & in most mass production technology fields, (electronics, automobiles, etc.) are more productive, cheaper & produce higher quality & it reflects in the sales of products like Cars, TVs, etc.



-- Other countries have a high labor cost driven by workforce rules, paid vacation, and other social safety net programs. These costs are generally company-paid and not reflected in gross or net pay.
yes, but those are mainly in western europe.


-- Car-guy friends tell me US cars are similar in quality now to foreign makes built here. The quality problems of the 80s and 90s were largely resolved by adopting JIT manufacturing, lean techniques, other QC etc.
i'd say yes, you are right, they have come up in standards. still, I have not owned an american car in 20 years & have no intention of owning one (unless they can produce a better product then what i can get from Lexus)


I think the main problem is that GM and Chrysler have had 30+ years of designing and building bad cars -- too little innovation, too little styling, just OK quality.
I agree.

total lack of imagination.


Here is the major one though.

-- *Annual increases in health care costs of 15%* Japan, Germany etc have public health care, and we should too.
true, but we also do not know how the unions will react when it begins affecting their plans.

UAW has 464,000 members

at some point, how do you shift that burden, from corporations, to the government?

at what point, does the worker (in this case UAW) look at the plan he used to get through GM or Ford, then at his potential government plan, which he/she will have to pay through increased taxes (income, sales tax, other means to raise revenue) & begin worrying?

As a UAW member, you are likely happy with the coverage you have now. for 464,000 members with similar plans, this is going to be a massive overhaul & we will need to see how this shakes out before seeing how it is going to affect workers, who are actually covered, as opposed to unfortunate americans, who don't have the benefits of coverage.

This is a rather difficult issue. people do not like changes to their standard of living/comfort zone. that goes for the average UAW worker, up to the stockbroker making $500,000 a year. Nobody wants their comfort messed with.

but that is another debate altogether :wink:
As for bankruptcy, I think the most likely course for Chrsyler would have been Chapter 13, since without government intervention, they had no operating cash. Some operating cashflow is a *requirement* for Chapter 11. The bondholders would have gotten zero.
actually, given the choice, most of those bondholders in the Chrysler situation preferred Liquidation. I know i would in their case. but that is where the government stepped in & did not allow for what, in normal (not the extraordinary circumstances of the past few months) circumstances, would have been the end of Chrsyler. just like alot of others like Pan Am, Braniff, Eastern, Montgomery Ward,

Those 20 Chrysler lenders, (who refused Obama originally before he castigated them as evil for wanting their contracts honored) had specific legal rights.

It was those secured creditors, who Obama asked for most of the sacrifices & they agreed to many of them

Those secured lenders or "holdouts" were willing to take 60 percent losses on their loans.

They are the highest priority creditors, with the highest legal standing & contracts, yet, that was not good enough.

the Unions & suppliers which have lower legal rights due to the loan agreements, were given 50% recoveries (more in some cases) & also allowed to take billions of the company assets to "ease' their "sacrifice"

This would still not have been that bad, but that's when Obama went after them

He said that was not good enough (that whole "I don't stand with them" nonsense)


What was really infuriating, was, that these lenders all had specific legal deals, stating that in the event of a liquidation, they get paid 100 cents on the dollar (first dollars out) before any of the junior creditors got a penny

So not only could they have received all their money back in a liquidation, but they did not insist on that course of action. So that is already a sacrifice they have made.

Then when they agreed to take 40% recovery, OBama ripped them to shreds & gave creditors who had less legal rights (UAW) more.

That was still not enough & he forced them to take 33 cents on the dollar, while giving the UAW 50 cents and more, even though the UAW is a junior creditor while the funds were senior creditors with "first dollar" rights in a liquidation.

I have never seen anything like it.

it is despicable.

ultimately,what Obama did, in one speech where he demonized the creditors, was insure that no lenders in their right mind are going to get in bed with loaning to Chrysler or GM ever again, (as such, they will remain on the government teat forever, or till they die) & they certainly are not going to take chances helping the Govt by buying up other toxic assets now

I think Obama's logic is similar to that for the banks -- avoid a cascade of failure that would push the US into a far deeper recession. In other words, it was about preserving the jobs, even if just for a few years.
Well, i would like to believe that, but frankly, i think it is the fact that UAW donated 5 million bucks to him that is more likely driving him.

“I stand with Chrysler’s employees and their families and communities."

was what he said, when he tore their lenders to pieces for asking that their legal contracts be honored.

that is the problem. as you said, correctly "just for a few years". this is nothing but delaying the inevitable & this delay & the continuing money we will spend on this shit company is going down a black hole. we, the taxpayer will not get it back.

The difference with the banks, is there is substantial capital flow, not to mention large assets guaranteeing the government will be able to be repaid at some point. many firms are already able to begin paying back TARP loans.

Chrysler & GM, will never be able to pay these "loans" back. This is just throwing good money into a coffin & lowering it into the ground

The taxpayers actually get a good return on many of the tarp loans to the banks and financial services firms.

we are not getting shit out of Chrysler & GM. we(the taxpayer) will own 53% of GM and 8% of Chrysler. neither of which will succeed.

even more upsetting is we are bailing them out and *THEY* get the company!

When the original Chrysler bailout was approved by Jimmy Carter in 1980 (carried out/managed during the reagan years) it wound up with taxpayers being paid back without the US government or any unions taking any ownership stake in the company. PERIOD.

That is good.

This is bad.

What Obama has done, is essentially, torn up the proper legal & principal framework of bankruptcy law, which is absolutely essential to the proper functioning of credit markets.

One thing is for sure, when GM fails or succeeds, we the taxpayers will own 53% of it & we damn well better be paid back every cent *PLUS* massive interest by UAW. (who also just happen to get the pension fund!)

It's our money & if GM fails, then we damn well better get secured rights ahead of UAW or i will go nuts!!! We've put in 19 billion dollars (and soon more, as losses mount). if it succeeds, we should be paid handsomely, at the expense of UAW.

if it fails, UAW should not get shit in the liquidation until after *WE* have been paid back. :mad::mad::mad:
 

sparky11point5

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Flashy --

A few points. First, the fact that GM is expanding in China does not necessarily prove that it is cheaper to produce cars there. Lower unit labor costs does not directly impute into lower production costs. (I'll find the right productivity numbers over the next few days.) Remember this is GM, so no management decision is really proof of anything sensible.

Second, my take is that almost every manufacturing or consumer products company has wanted to expand in China (a few have been clients of mine) and this was driven by the current and potential market size. And, of course, no labor protection, environmental protection, and enormous government subsidies. I don't think this has always been beneficial, but similar to offshoring US jobs, has been the trend.

If the price of having a manufacturing sector is to act like China, then the US should find other ways to produce goods and services of value.

Let's save your prediction, and see if there are any Sino-GM or La Chrysler bond holders in two years. I just cannot get too worked up over hedge funds rights. At the end of the day, the UAW needs the jobs more than the financial services class (that includes me btw, so I will put my money where my mouth is) needs the 100% return on principal.
 

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I think Flash is correct in pointing out that Obama's way of handling the creditors, which includes mom and pop investors as well as hedge funds, has been to ignore existing Ch. 13 bankruptcy law. Anytime any Administration changes bond financial rules mid transaction, you are going to create a poor group of bond holders, and in this case there were a lot of blue collar pensioners in the mix too. I have a family member who worked for GM for 30+ years, and they fall into this group.

Although buying any financial debt is a calculated risk, senior bond holders usually get, at minimum, equity $ for debt. Often they get 100% on the dollar. In this case, they got a major haircut in the Chrysler deal. Obama should have let both companies go through the Ch. 13 bankruptcy process. I rarely hear of anyone, at least prior to last fall, going the Ch. 11 path. If Obama had let experienced judges handle the restructuring of the companies, the taxpayer infusion would have been less.

China has a distinctly unfair trade advantage since their currency is artificially linked to the dollar, so any comparison to their flooded labor markets is not fair. Cheaper labor doesn't necessarily make for a cheaper product, as Spark points out, but it does make for an unlevel playing field. However, a carbon tax, properly adjusted against a US consumption, or flat tax would begin to offset China's cheap labor costs.

Toyota, Honda, Nissan, Hyundai, etc. also lost money during this downturn, so one cannot simply fault the GM/Chrysler workers. Factory workers, who started straight out of high school, and put in twenty five or thirty years on the line, are living into their 80s, outstripping defined compensation retiree benefits negotiated back when life expectancy was in the 67-77 range. Health care costs have increased 10 fold since then as well.

To be sure management of both entities has been atrocious, but that has largely been the case since the 70s. One story I read about how Toyota starts off their MBAs strikes me as apt here. Instead of being given a big cushy office, and an assistant, they are put on the factory floor for several months. Their first task is to take an assembly line process, and eliminate 30% (or so) of the process. The first 10% come easy, the next 10% are hard, and the final 10% very difficult. I cannot imagine Ford, Chrysler, or GM doing the same. I think it illustrates that in order to be more gain competitive advantage, you have to be willing to change, and change is hard. Something everyone associated with GM, and Chrysler are now realizing.