Shocker! GM Will Default on Debt Payments
GM has confirmed that it will be unable to make its debt payments due on June 1st, 2009. The payment due on that date is $1 billion.
It’s a debt for equity exchange, so it’ll never have to be repaid. This is just posturing ahead of the June 1 deadline (that of course will never get extended…) to come up with a plan for viability. Trying to force the debt holders hand, as they have been the most recalcitrant in the negotiations.
There will be no ‘restructuring’ in bankruptcy court but rather liquidation…every bondholder and dealer in the world will sue. The GOP should stay out of this. Obama may be making his own bed with the GM/Chrysler situation. This will not be a pretty situation and Obama’s work around trying to force the bondholders’ hands is upsetting more and more people. He again, is making no effort to force the hand of the UAW to make concessions necessary to get the company back on track. As we know by now, Obama is beholden to the unions, the largest of which is the UAW. UAW’s stubbornness and corruption has now lead to the demise and ultimate loss of jobs for their people. Congrats UAW! I have written about GM, the UAW and GM’s mismanagement on several occasions: Here, here and here.
GM and Chrysler will be guided through bankruptcy court by the government and since Obama and the government wanted to trade debt for equity to purchase shares of GM to have more ownership and control in the company, I can guarantee you that GM will still exist but it will literally be Government Motors and both Chrysler and GM (which will probably combine) will have government mandates flowed down to them to manufacture “green” cars. We will probably see the Pelosi-mobile in a year or two – I wonder how well it will sell!
GM will also be closing a number of plants this summer to try and cut costs and save some money:
General Motors Corp. is planning to temporarily close most of its U.S. factories for up to nine weeks this summer because of slumping sales and growing inventories of unsold vehicles, three people briefed on the plan said Wednesday. Analysts say the company could be seeing sales decline because of talk about a potential bankruptcy.
The exact dates of the closures are not known, but the people said they will occur around the normal two-week shutdown in July when changes are made from one model year to the next. None of the people wanted to be identified because workers have not yet been told of the shutdowns.
GM spokesman Chris Lee would not comment other than to say the company notifies employees before making any production cuts public.
What’s really strange is that the stock price of GM was up yesterday. Upon hearing such bad news one would think investors would stay far away from GM stock. Unless of course, hedge funds are purchasing stock to only short it before GM confirms bankruptcy and files Chapter 11? or there is always the theory that someone like George Soros or a Warren Buffet who go after failing firms buy a bunch of stock to hold ownership in it and be a part of the rebuilding and restructuring phase… anything is possible here.
I also await the outcome of a forced bankruptcy by the government to see what they do with the UAW and how they handle the pension plans of the workers ~ will we be held accountable, as taxpayers, to pay for the union employees’ benefits?
And as a side note, I’m happy and appreciative that Ford did not ask for a government bailout and waste taxpayer funds, but I also do not think that Ford will be able to make it without having to file Chapter 11 either, they are still in debt and still struggling with the UAW. It’s unfortunate because they have some great concept cars in the pipeline.
“There has grown up in the minds of certain groups in this country the notion that because a man or corporation has made a profit out of the public for a number of years, the government and the courts are charged with the duty of guaranteeing such profit in the future, even in the face of changing circumstances and contrary to public interest. This strange doctrine is not supported by statute or common law. Neither individuals nor corporations have any right to come into court and ask that the clock of history be stopped, or turned back.” Robert A. Heinlein, _Life-Line_, 1939.
Does anybody know if we will get our taxpayer money back? The efforts were a waste and were all for naught (many of us knew that before the first bailout)… I know, I know – we will never see that money again!
