GM Bankruptcy In Bondholders' Hands

Report: Bondholders Want More Money In Exchange For Forgiving Automaker's Debt

(CBS/ AP)  We forgave billions in debt, now give us more money. This is the message General Motors bondholders have sent to the flailing automaker along with the threat of pushing the company into bankruptcy, according to a newspaper report.

All week, GM has been in negotiations with bondholders, who want the automaker to give them 50 cents on the dollar, instead of the 30-cent return currently offered in an effort to cut the company's unsecured debt to $9.2 billion, part of its requirement for accepting a $13.4 billion federal loan package, sources tell the Detroit News.

Should GM fail to reach a deal with its bondholders, along with United Auto Workers, the government could take back the $9.4 billion it has already dispensed, and force the company into bankruptcy.

The Detroit News sums up the bondholders' argument: "GM's hourly retiree health care obligations totaled $47 billion before the company and the UAW in 2007 agreed to reduce GM's liability to about $35 billion, to be paid into a trust to be run by the union. The company already has allocated $15 billion for that. GM wants to pay half of the remaining $20 billion in cash and half in company stock, which is a target included in GM's loan terms."

"GM is working diligently with all of our stakeholders as we restructure our business and work toward meeting the requirements of our loan agreements with the government," spokeswoman Renee Rashid-Merem told the newspaper.

The report follows Tuesday's news that GM will cut 10,000 salaried jobs, citing the need to restructure itself with a government deadline looming.

The automaker said it will reduce its total number of salaried workers to 63,000 from 73,000 this year. About 3,400 of GM's 29,500 salaried U.S. jobs are expected to be eliminated.

The company's statement said that the separations would be done through GM's severance plan, so there would be no buyout or early retirement packages as GM had offered in the past.

In its plan to Congress submitted late last year, GM said work force reductions would be necessary in order for it to be viable for the long term. Most of the cuts are expected to take place by May 1.

Meanwhile, the automaker would receive a tax break in the Obama administration's proposed $790 billion stimulus bill after arguing its government-led restructuring would unintentionally lead to at least $7 billion in tax liabilities.

General Motors, which received a $13.4 billion lifeline from the Bush administration last year, would have been required to pay additional income taxes from its government loans, potentially undermining its turnaround plan.

Lawmakers said several conditions in the Detroit company's loan agreement with the government could trigger an "ownership change" under the tax law. That tax law was designed to prevent companies from merging to avoid a hefty tax bill.

The loan agreement gives the government shares in the company in exchange for the financing and requires GM to convert outstanding debt into equity and make payments in the form of stock to a health care fund for retired workers.

All three of the provisions could trigger the ownership change clause. GM officials said a major part of the federal loans would have been used to pay income taxes instead of funding the company's restructuring.

[aubfmet]

GM will go into bankrupcy. In the reorganization, currect stockholders will get zero. The current debt holders ( bondholders ) will become the new stockholders, and it won't be worth much. I watched this happen with another minor stock, now the big one. They can argue and debate, but in the end this how it will turn out.

[summarex]

This is hat happens when the population doesn't replenish itself. We need thousands of octomoms and fast!

[thetireguy1]

Sell all cars in inventory at any price, stop building new ones, when the lots are full of cars!
Liquidate excesses in all areas and pray the American people still want to buy the cars that
your building!

[mcv57]

GM is a scussy, fow *** that needed to be flushed decades ago.

[dink217]

DID YOU KNOW THAT OUR CONSTITUTION SAYS TO ''''PROTECT'''' AGAINST ''''GLOBALIZATION''''?
HUH?
DID YOU?
WHAT ARE YOU AN IDIOT?

Why don''t you show us where the Constitution say that.
Posted by whitemale09 at 11:24 AM : Feb 13, 2009

[otiswestfall]

Folks. How about we share ideas on how to enjoy what time we have left before we all starve. Loews sells these biodegradable pots that come ready to plant, filled with good dirt and bulbs that are a couple weeks from blooming. Crocus. Daffodils. Tulips. I planted some last Spring and the Spring before. They come back quite well each year. I''m going to plant some more of those next month. After I starve to death in my own home, my bones will eventually deteriorate with my house. But the bulbs I planted may continue to bloom every Spring for years to come. That one of the ways I want to invest what is left of my life before America destroys itself from its own internal rot.

[whitemale09]

Including benefits, the actual hourly rate of an auto worker is $83.00 per hour. Very few businesses can sustain that level of cost for any length of time. GM needs to collapse, dissolve the union and start over again with strong management personnel that will run the company. The union goons need to go down the drain along with the spineless current management personnel.


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Posted by JackP32 at 10:42 AM : Feb 13, 2009


You are absolutely WRONG!

Your post is completely STUPID!

An American company can sustain these high paying wages if our government protected its economy against GLOBALIZATION!

DO YOU UNDERSTAND THAT?

DID YOU KNOW THAT OUR CONSTITUTION SAYS TO ''PROTECT'' AGAINST ''GLOBALIZATION''?

HUH?

DID YOU?

WHAT ARE YOU AN IDIOT?

[jackp32]

Including benefits, the actual hourly rate of an auto worker is $83.00 per hour. Very few businesses can sustain that level of cost for any length of time. GM needs to collapse, dissolve the union and start over again with strong management personnel that will run the company. The union goons need to go down the drain along with the spineless current management personnel.

[andor3]

if you blame the UAW for GMs problems... well let us just say you are looking in the wrong place. CEO is a better TLA for blame.

[whitemale09]

Blame America first? Yes, when it comes to Globalisation, Climate change and the collapsing worldwide economy we ARE to blame first, sorry. And may the Lord and our grandchildren forgive us for what we all, not just GWB, have done to this world!


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Posted by ballpen1 at 01:00 PM : Feb 12, 2009--

Well I agree that we should take responsibility but I always lay blame towards those who have allowed this corrupting British influence of ''free markets'' and ''globalization'' to infiltrate our political system.

We do have a responsibility to the world and the first thing we can do is to allow them to be sovereign by ending ''private-central-banking'' systems.

That way nation-states around the world can use their own sovereign credit to develop and sign long term treaty contracts for materials, supplies and even labor to help them develop a real ''physical economy''.

We can help them without loans to build mag-lev transportation, nuclear power plants to desalinate the sea and irrigate the desert.

We owe this to them, will you use your frustration and join us to repay back the world withoug Wall Street/City of London profiteers?

[talk2chief]

What good is a union, if your can''t sell cars?

[smt451d]

At what point will GM be small enough to fail? Aren''t they already there?

[rickwar]

May I advise you to go to Vanguard''''s website and look up any one of their numerous bond mutual funds and they will all say the same thing - Investing with bonds carries the risk that the bond will not be paid back and you can lose part or all your investment. Don''''t trust Vanguard, then go to Fidelity or T. Rowe Price and you will see the same warning.

Moral is, if you want your money to grow you will have to take a risk and that risk doesn''''t always pay off. If all you want to do is save, then use your cash to buy gold and silver. But don''''t confuse saving with investing and then complain about the results afterwards when you did not do your homework.

And as a side point - if anybody out there thinks that buying U. S. Government Securities when the government is already $10 trillion in debt is an investment (or a SAFE investment), then I have a bridge in New York City you may be interested in.


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Posted by swin5 at 12:18 PM : Feb 12, 2009

Yep, get a 100% on that answer

[ballpen1]

Posted by whitemale09 at 10:47 AM : Feb 12, 2009

I am sorry, but you got your methapher all wrong.

WE were the one who wined and dined the world into sleeping with US, the big Globalisation sugar daddy. One might even say we offered monetary incentives to the lady. What we now have is a STD leading to ED, and it couldn''t have happend to a nicer guy...

Blame America first? Yes, when it comes to Globalisation, Climate change and the collapsing worldwide economy we ARE to blame first, sorry. And may the Lord and our grandchildren forgive us for what we all, not just GWB, have done to this world!

[rickwar]

Big whoop if GM just quit paying laid off workers 90% of pay. The laid off workers need a taste of what it''''s like in the real world by only receiving nominal unemployment benefits then maybe they''''d wake up to their foolish greed.


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Posted by forty5ford at 11:48 AM : Feb 12, 2009

Might want to check out actal job bank numbers---far lower than you might have been led to believe.

[rickwar]

Thw UAW is part of what is killing the auto industry. The mob wants their slice too. Auto workers make $30 an hour. That''''s the problem.


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Posted by excelsior9 at 12:30 PM : Feb 12, 2009

No, that''s not the problem. Right wing BS would let you believe that. The actual % of the total business dollars that go to the assembly worker is pretty much inline with what non union is paying. The largest problem in labor is the retirement and health benefits that continue on. The non union and imports haven''t paid out virtually any retirement yet. That said the labor costs as a % of the companies total expenses are within normal guidelines for manufacturing.

The biggest problem at the moment? Sales and financing ability, both on product and loans to the makers.

[antoniof123]

Thw UAW is part of what is killing the auto industry. The mob wants their slice too. Auto workers make $30 an hour. That''''s the problem.

Posted by excelsior9 at 12:30 PM : Feb 12, 2009

Anotehr right wing lie go check out the contract in fact Honda pays $30.00 per hour in Ohio the UAW contract is like 28.31 per hour.

Why can Honda pay more? Because the top 10 exec''s at Honda make less than 1 exec at GM.

There is your problem last year the Ford CEO made $27,000,000.00 dollars Ford lost money. See if the Honda would have even paid them anything.

[swin5]

''The rulers of the exchange of mankind''s goods have failed, through their own stubbornness and their own incompetence''
''Their efforts have been cast in the pattern of an outworn tradition. Faced by failure of credit they have proposed only the lending of more money. Stripped of the lure of profit by which to induce our people to follow their false leadership, they have resorted to exhortations''
''There must be strict supervision of all banking and credits and investments; there must be an end to speculation with other people''s money, and there must be provision for an adequate but sound currency.''
Franklin D. Roosevelt - First Inaugural Address

[antoniof123]

What will the bondholders get if they go under

Posted by m-e-t-w-o at 11:48 AM : Feb 12, 2009

A judge will decide that. Maybe more maybe less they are much higher up on the food chain then the stock holders you know the fund managers and rich how own most of the stock.

[antoniof123]

The right wing just isn''t getting it they think that by attacking they will gain the advantage.

That idiot Newt even told them it doesn''t work anymore and the American are not only turning away but getting angry at them.

Yet they continue to try to blame unions and say that CEO''s are worth it.

Go figure on that logic they say no cap for CEO''s yet all businesses cap wages for the worker.

Goes to show you the monkey logic of a right winger.