Someone Other than the Government Should Step Up to Restructure GM

I've had a lot of pieces very critical of the government preserving union contracts at the expense of senior secured debt holders. I think the Unions held both General Motors (GM) and Chyrsler to contracts that did not reflect economic realities and preserved benefits in health care and pay without work that are not realistic.

Despite my unhappiness with the Unions coming in senior to Senior Secured Creditors there really are no other bidders or consortium coming in to bid. GM is a pretty big deal and it sounds like the government is going to be putting in $50 billion or so. Chrysler is a bit more perpelxing though since it's relatively bite sized.

If there isare no competing offers, its really simply, the guy with the gold makes the rule and there is nobody else stepping up. In those instances, the government can make any capital structure it wants even if it's a blatantly unfair one. If you don't like the capital structure then, complain to your Congressmen since it's all political not financial like a normal bankruptcy. The real question though is whether the governments involvement is scaring off others from coming in and proposing a structure.

If these companies had gone bankrupt back in October when they should have, do you think the Unions would have had any kind of a deal whatever? There would not even be a union contract anymore for Chrysler or GM. Anybody coming in to bid would have simply just had those contracts nullified.

But who on their right mind wants to go up against the Administration and be criticized for canceling that Union contract. Until someone steps in (materially unlikely given the tens of billions required and no financing available), those union workers are going to go ahead of debt every time, and unlike every other American will never be at risk of losing their pensions or health care benefits. Actually the Union Members did make deep and big concessions in health care to get this deal done, retirees gave up their free Viagra to show their willingness to sacrifice for America. What a bunch of patriots.

Comments

[User 418933:]

He is right. We have watched our auto industry go to nothing as we have un-skilled labor individuals all the way down to the janitors making much much more money than our teachers, nurses, and many engineers.

May 23 05:18 PM

[cmos4:]

This one needs to get a job!!

May 23 07:45 PM

[John Eickholt:]

To many talk and write about things and benefits at GM that they don't know anything about. GM employees have co-pays. The writer of this story must have been watching CNBC. They also talk about things they know nothing about. Its time the media has to back up what they print and talk about.. This country the people is lead like Sheep by our media.

May 23 08:22 PM

[THofler:]

Oooo! Copays. What a bunch of patriots!

May 23 11:17 PM

[fcountry:]

Just more BS from someone who "hasn't a CLUE".
With "Seeking Alpha"...talk is cheap...

May 23 11:40 PM

[PeteK:]

When a business failed anyone in it will be blamed.
Depends on which side you are on, usually all of them
were doing something stupid or wrong.
Workers and employers almost like a marriage, must work
together for the benefit of the company, otherwise, nobody and nothing
can help except breaking up like a marriage. It's that simple !!

May 24 12:18 AM

[fireball:]

g.m. had bad management and unaffordable contracts. like the banksters they should have died and made room for something better run,with more innovative products. government motors is not the right direction. the washington directives will be another money pit.
business has one goal, to make a profit. if they can't they are something else. g.m. seems to be about to become a social engineering device.
the uaw has been no help to this company. they have been a hindrance. let them enter the competition to find a job. it is a tough one. if a new innovative company should rise to compete with ford and the foreign companies they should be able to avoid the unions.
ford is an amusing situation. how will the government p.c., poorly made, overpriced, company compete with one that is trying to produce what americans want to buy.

May 24 09:21 AM

[L.A. Driver:]

Many many taxpayers will no longer buy a uaw assembled vehicle. After finding out about their ridiculous wages and outrageous benefits, not too many people will want to finance the lifestyles of the lazy, greedy, uneducated, and unskilled labor. It was very big of the uaw to give up Viagra, as well as 3 minutes of break time...what a great outfit that many will no longer finance by purchasing their poorly assembled and resulting overpriced shoddy merchandise.

May 24 09:52 AM

[d4winds:]

The blogger is full of opinion and empty of facts. Secured creditors have no protection in bankruptcy beyond the liquidation value of the secured assets--close to zero for Chrysler and GM. Further, under section 1114 of the bankruptcy code, retiree benefits must be made if possible. There has been no unfairness except that felt by those who have been bailed-out, the secured creditors receiving more than the value of their security due to the government's deal, but then complain about not having been bailed-out enough.

May 24 10:02 AM

[Old Rick:]

At least 5 comments to this story were obviously written by union shills. Guys, you are real easy to spot. The truth of the matter is that the UAW gave their all to elect a socialist/marxist for this very reason and they are now getting their payoff (the mine) while the taxpayer gets the shaft!

May 24 05:23 PM

[henarl:]

The bankruptcy court should decide this according to the letter of bankruptcy law WITHOUT interference by the government. If that means withdrawing all government financing and paying back the govt. loans first, then so be it. When government can usurp established law by throwing taxpayer money around for a political agenda we are no longer a country of laws, but rather a corrupt country of payoffs and paybacks. Sadly, it may be too late and that is what we have already become.

May 24 05:34 PM

[Adirondack:]

The outrage should not be with the unions. They have in our former free market economy done very well negotiating very lucrative contracts for their rank and file. That's what they do. The Anger should be directed at the government for picking and choosing which contracts are to be thrown out the window, and which ones have to be honored in a bankruptcy situation. ALL contracts must be treated equally. Particularly ones that contribute in part to the companies demise. Upholding union benefits while disregarding secured debt is wrong. Blame the government, not the union. They are getting the best deal possible for their members. Unfortunatly it's the administration paying them back that's giving them the opportunity. Let GM go bankrupt. Renegociate EVERYTHING.

May 25 11:16 AM

[Dubious Bro...:]

Nobody in their right mind would buy a GM or Chrysler product now. Let's hope that Ford can properly handle what has to be a once in a lifetime dream situation. As GM, Chrysler and the UAW get all of the attention for totally screwing up, Ford almost quietly moves forward.

May 25 10:20 PM

[Hot Richard:]

"Demonizing organized labour is like demonizing affordable healthcare or demonizing a sound regulated financial system."

It IS just like that because I'm demonizing all three.

To be fair to myself, I'm just demonizing a state regulated financial system (which has absolutely nothing to do with a "sound regulated financial system").

Actually it is the special statist priviledge and massive corruption that labour "enjoys" that I'm demonizing as well.

Oh, and it is government health care that is the devil--and that has nothing to do with "affordable health care".

Yup, all three stink.

May 27 07:56 PM