GM To Be “Chryslered”
I hesitate to call it bankruptcy when it is really a sham of a bankruptcy. In fact, it is the same sham that Chrysler has undergone:
The government previously indicated that it planned to take at least 50 percent of the restructured company, and likely would take the right to name members to its board of directors, as it has at Chrysler, where the government will control four of nine seats.
The United Auto Workers retiree health fund is set to own as much as 39 percent of the restructured GM, in exchange for giving up its claim to at least $10 billion that the company owes it. Yesterday, the union announced that it reached an agreement with GM that will reduce the company’s labor costs.
Still unknown is what part the Canadian government might play in the ongoing GM restructuring.
GM operates several plants north of the border. The Canadians agreed to invest about $3.5 billion in the Chrysler restructuring and control one of the nine board seats.
Sound familiar? So government will now have 5 of 9 board seats, the union has a huge share of the company and bondholders?
The chief obstacle to an out-of-court settlement for GM remains: There has been no agreement between the company and the investors who hold $27 billion worth of GM bonds.
Under orders from the Obama administration, GM has offered to give the bondholders a 10 percent equity stake in the restructured company in exchange for giving up their bonds.
That’s the offer made and, as you might imagine, bondholders are resisting this. That, of course, gives the administration the same excuse it used to take Chrysler to bankruptcy under its apparently newly written rules which gave government the lion’s share of ownership.
As you might imagine, not everyone is happy. And since this “bankruptcy” is now being politically managed, more politicians are getting into the act.
For instance, on the subject of cutting Chrysler dealerships:
There are also challenges outside court. Chrysler has moved to close 789 dealerships on June 9. But Sen. Kay Bailey Hutchison (R-Tex.) has introduced legislation that would withhold federal funding if the automaker does not give dealers an extra 60 days to close down operations and sell remaining inventory. Her amendment has won the backing of a number of other senators.
Should such legislation pass, you can expect something similar with GM.
And some Democrats aren’t particularly happy either:
Judiciary Committee chairman Rep. John Conyers Jr. (D-Mich.) said he hopes to meet with White House officials today to discuss changing Chrysler’s bankruptcy plan and GM’s future. Conyers did not outline what he wanted, but a nine-person panel he assembled for a hearing yesterday offered a hint. Liberal consumer advocate Ralph Nader, a conservative Heritage Foundation analyst and minority auto dealers all criticized the automakers’ restructuring.
Conyers and other committee members attacked the administration for abusing bankruptcy laws, unfairly eliminating dealerships and jeopardizing consumer safety.
Yup, looks like the political bureaucracy is kicking into high-gear and you can just imagine how well this is going to work out, can’t you? That and the fact that contracts will never be viewed in the same light again have to make you fear for our economic future.