Gm ipo

[RLJ676]

GM had global liabilities of $176.4 billion as of Dec. 31, 2008. Banks such as JPMorgan Chase & Co. secured GM’s revolving loan of about $4.5 billion with inventory, receivables and factories, also providing a $1.5 billion term loan. The face value of its bonds was $27 billion.


Chase was secured bonds.....



The Chapter 11 proceeding will slash GM’s consolidated debt to only $17 billion for the new entity, GM said in a statement. The number excludes liabilities such as its obligations to the employee health-care trust.


So, in other words, the rest of the world ate about $160 billion of debt and the government and union took the company from it's secured bond holders.....

The Union is an unsecured creditor by the way.

Of the 27B in bonds, 6B was secured credit lines I believe.

You are a little confused on the debt. The BK was the US operations only (not even Canada and Mx) included. Therefore, 160B WAS NOT wiped out. 27B was converted to equity in the new GM. Here's a decent article on it.

http://www.marketwatch.com/story/gm-bondholders-may-recoup-14-billion-group-says-2009529132400

So, while they didn't come out rosy, they can recover a good bit. You have to also rememeber these bonds have been trading at very low values for quite some time, so the "losses" aren't exactly as they appear. Their options in a BK which did not have gov't funding, AKA liquidation, would have been to collect way less money. Nobody's paying top dollar for any auto assets or capacity. So, in your proposed "not strongarmed" scenerio, they would have ended up with much less now, and no prospect for recovery in equity. Most people who actually know what's going on realize that the bailout helped the bondholders pretty well, compared to a very risky liquidation.

 

[RLJ676]

No a-hole in my book man- I'm learning a lot from you and not trying to act like a know it all by any means.

I'm glad they suppliers got paid. I was under the impression most of them were left high and dry. I don't know the terms- Tier 1, Tier 2, etc I think. Did only the top tier get paid and the rest SOL?

GM has been losing money for years IMHO- if not on the books then by skimping some place they shouldn't have like R&D and obtaining top secret info like the Japs were kicking their azz. They should have seen these problems coming- the rest of the world did- and changed their product/business model accordingly. Anyway- as far as prolong I am talking like 6 months ago should have let them fail, saving us countless billions and they would be turning a profit by now. In the end it is the same result that happened isn't it (sans the billions are gone)?

How were those dealers, legacy cost, "problems", etc made "gone"? I thought by going bankrupt? If so- why couldn't that have been done by well- going bankrupt $25B+ ago? This report says the autos may get a total of $97.4B by the time it is all said and done. I'm sure that is sensationalized to some extent (ok maybe even a lot) but $25B is still a lot of loot in my book.

And to address the fairness- I agree. Their hands were tied for a long time and they weren't one a fair level playing field but it is what it is. As long as one can mine a piece of steel in the US, ship it to China, have some thing made, ship it back, pay tariffs and sell it cheap and still profit more than they could make it for in the USA we will have a problem. We could have a whole new thread on all that stuff but the bottom line is GM was making Hummers while Japs were making hybrids.

I'm sorry to see people lose their jobs- to me that is all caused by the front office with the blue collar guy paying the price. BS! Every one always wants to take from the guy that showers at night than the one that showers in the morning.

I work for a phone company- walked in to work today to have them tell us any one hired after 2003 will be gone by the end of the year. 15% of the people in my group will be gone. One of those will find out when she gets back from maternity leave. We are feeling the pain and it sucks. Next round of cuts coming in Oct 09...

Your terms are correct (Tier I, etc). GM only pays the Tier I directly, and then they pay the downward tiers who supply them. GM paid all of their contracts with tier I's, and actually directly to some key tier II's. Everyone got paid basically for direct (car parts). Sort of like you buy something at Wal-Mart as a finished good, and aren't responsible for paying Wal-mart's supply chain.

Also, as to the product planning you question, I'd disagree as well. Although GM/Ford had far too big of a reliance on trucks/SUV's, they are what people want/wanted (other than last summer) and are very profitable. We've also been transitioning to more fuel efficient crossovers before gas spiked, along with improving cars, working on Volt, hyrdrogen fuel cells.....the list goes on. Actually, the imports have been introducing more, larger vehicles and trucks (think huge Tundra investments) while we've been becoming the LEADERS in fuel efficiency (check it out if you don't believe, Malibu/Fusion and more). Remember it's a 4 year development, so this has been in the works since long before last summer.

As to why BK couldn't happen without gov't money? Simple, nobody else could provide that kind of debtor in possesion financing and it would have quickly become a liquidation where everyone loses (as I mentioned above). Further, without gov't backing of warranties, and the companies in general, nobody would have kept buying gauranteeing liquidation. That would have destroyed all value in the company basically so the investors get pennies on the dollar at best, and cost the gov't a fortune by deepening this recession with mounting job losses, etc.

 

[Ratickle]

Your terms are correct (Tier I, etc). GM only pays the Tier I directly, and then they pay the downward tiers who supply them. GM paid all of their contracts with tier I's, and actually directly to some key tier II's. Everyone got paid basically for direct (car parts). Sort of like you buy something at Wal-Mart as a finished good, and aren't responsible for paying Wal-mart's supply chain.

Also, as to the product planning you question, I'd disagree as well. Although GM/Ford had far too big of a reliance on trucks/SUV's, they are what people want/wanted (other than last summer) and are very profitable. We've also been transitioning to more fuel efficient crossovers before gas spiked, along with improving cars, working on Volt, hyrdrogen fuel cells.....the list goes on. Actually, the imports have been introducing more, larger vehicles and trucks (think huge Tundra investments) while we've been becoming the LEADERS in fuel efficiency (check it out if you don't believe, Malibu/Fusion and more). Remember it's a 4 year development, so this has been in the works since long before last summer.

As to why BK couldn't happen without gov't money? Simple, nobody else could provide that kind of debtor in possesion financing and it would have quickly become a liquidation where everyone loses (as I mentioned above). Further, without gov't backing of warranties, and the companies in general, nobody would have kept buying gauranteeing liquidation. That would have destroyed all value in the company basically so the investors get pennies on the dollar at best, and cost the gov't a fortune by deepening this recession with mounting job losses, etc.

I understand all that, but the root cause has not been dealt with.

Ford, GM, and Chrysler built SUV's and Pickups people wanted, and built them in the US mostly. They made money on them.

Ford, GM, and Chrysler built cars nobody wanted, they had to BECAUSE THE GOVERNMENT TOLD THEM THEY HAD TO, to meet gas standards and lost money on every one they sold.

Toyota, Honda, Kia, Huyandai, etc. Assembles some cars in the US mostly made of import parts, imports cars into the US mostly made of import parts, and sells cars at a profit because the government allows them to do that. Then, they bi tch at our companies wanting to send work out of the country so they WON'T GO BANKRUPT.....because they don't have to meet the high taxes, high anti-pollution costs, high safety standards etc.

Hasn't been changed, actually made worse, will need more money or go bankrupt again.

 

[cuda]

Total frickin BS IMHO!

I could go make $10-$15 per hour more starting Monday but I choose to work where I work for things like free medical and dental- now and for life! We have a tiered contract so I should have it for life as they promised; anyone hired after 2003 doesn't have the same plan. That is fine- they were hired knowing what they were being compensated- to back out of the promise after someone put their time in and retired is frickin BS!

That is called golden handcuffs. I'd rather be in charge of an extra $10 to 15 hours myself, than trust a company to do a better job with it. On a 40 hour week, that's $400 to $600 dollars a WEEK. I imagine the worse money manager in the world could handle you retirement fund. Just does not sound plausible.

 

[RLJ676]

I understand all that, but the root cause has not been dealt with.

Ford, GM, and Chrysler built SUV's and Pickups people wanted, and built them in the US mostly. They made money on them.

Ford, GM, and Chrysler built cars nobody wanted, they had to BECAUSE THE GOVERNMENT TOLD THEM THEY HAD TO, to meet gas standards and lost money on every one they sold.

Toyota, Honda, Kia, Huyandai, etc. Assembles some cars in the US mostly made of import parts, imports cars into the US mostly made of import parts, and sells cars at a profit because the government allows them to do that. Then, they bi tch at our companies wanting to send work out of the country so they WON'T GO BANKRUPT.....because they don't have to meet the high taxes, high anti-pollution costs, high safety standards etc.

Hasn't been changed, actually made worse, will need more money or go bankrupt again.

Well said. I'm still a little more optimistic that we're profitable now though. Shedding 100 years worth of legacy costs helps level things off.

Now, we (Japanese, Europeans, etc) all may be screwed in 10 years if "Americans" accept Chinese cars as readily as they have all their other goods.:ack2:

 

[MarylandMark]

Further, without gov't backing of warranties, and the companies in general, nobody would have kept buying gauranteeing liquidation. That would have destroyed all value in the company basically so the investors get pennies on the dollar at best, and cost the gov't a fortune by deepening this recession with mounting job losses, etc.

Thanks for sharing RLJ.

Nobody buying?
Destroyed all value in the company?
Investors get pennies on the dollar?
Deepening this recession with mounting job losses, etc?

From my eyes all those things have and are happening right now. I don't know anyone that would buy a Chevy unless it was discounted enough they couldn't refuse. I don't mean a good deal- I mean a new F-350 diesel King Ranch type $50K sticker (I know that is a Ford but that is all I know- I don't buy Chevys..) for $30K out the door at 0% for 4 years type deal.

That is called golden handcuffs. I'd rather be in charge of an extra $10 to 15 hours myself, than trust a company to do a better job with it. On a 40 hour week, that's $400 to $600 dollars a WEEK. I imagine the worse money manager in the world could handle you retirement fund. Just does not sound plausible.

I know... It is a battle I fight every month or so when I get unsolicited offers for a job. It's a gamble but if I "win" and all that is promised is there when I retire the payoff is much greater staying put than leaving. I feel pretty good- lifetime medical, dental, pension plan, etc are all fully funded and held by the union; not the company. The company could go bankrupt tomorrow and those already retired would still be paid what was promised- my problem is I am not retired yet so I wouldn't get squat (well some thing but not like them). If the company were behind on payments or they kept promising this to new hire (unsubstainable business plan) I'd most likely get another job but for now I'm keeping the faith.

 

[cuda]

Thanks for sharing RLJ.

Nobody buying?
Destroyed all value in the company?
Investors get pennies on the dollar?
Deepening this recession with mounting job losses, etc?

From my eyes all those things have and are happening right now. I don't know anyone that would buy a Chevy unless it was discounted enough they couldn't refuse. I don't mean a good deal- I mean a new F-350 diesel King Ranch type $50K sticker (I know that is a Ford but that is all I know- I don't buy Chevys..) for $30K out the door at 0% for 4 years type deal.



I know... It is a battle I fight every month or so when I get unsolicited offers for a job. It's a gamble but if I "win" and all that is promised is there when I retire the payoff is much greater staying put than leaving. I feel pretty good- lifetime medical, dental, pension plan, etc are all fully funded and held by the union; not the company. The company could go bankrupt tomorrow and those already retired would still be paid what was promised- my problem is I am not retired yet so I wouldn't get squat (well some thing but not like them). If the company were behind on payments or they kept promising this to new hire (unsubstainable business plan) I'd most likely get another job but for now I'm keeping the faith.

The problem being it's all promised to you. Companies can, and do, change what they give, compared to what they promise. Even the federal government does that. My dad said he thought the government wouldn't take away the things they had promised him. This was several years ago, when peace dominated the world. Dad said what we needed was a good war so the military would give more stuff to the military. Don't think that a cable company is exempt from changing their minds.

If you ain't the lead dog, the view never changes.