What does this mean for racing and performance cars of the future?
04-28-2009, 06:04 PM
#1
Team Owner
Thread Starter
What does this mean for racing and performance cars of the future?
Tuesday, April 28, 2009
GM's latest plan would cede control to U.S.
Bondholders remain stumbling block to deal
David Shepardson / Detroit News Washington Bureau
Washington -- The U.S. Treasury Department would own a majority of General Motors Corp. and have the right to appoint all of its directors, under the company's turnaround plan unveiled Monday -- the latest sign of the government's growing role in the automaker's restructuring.
The administration also told the Detroit automaker it wouldn't support giving bondholders any more than 10 percent equity in the company.
That hard-line offer could be a major factor in bondholders rejecting the exchange and forcing GM into bankruptcy, analysts said. The Obama administration has boosted the percentage of debt it wants the automaker to write off to at least 90 percent, up from two-thirds.
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GM's bondholders came out swinging, saying the company's offer of just 10 percent equity in exchange for $27.2 billion in bonds was inadequate.
"This offer demonstrates that the company and the auto task force, unfortunately, are pinning their hopes on an extremely risky and legally questionable turnaround in bankruptcy court, instead of engaging its lenders and workers in the very type of negotiations that could avoid such a fate," an ad hoc committee of GM's bondholders said.
Shelly Lombard from Gimme Credit, an independent bond research firm, wrote in a research note that "the exchange offer that General Motors announced this morning must look to bondholders like something Tony Soprano dreamed up. It's pretty heavy-handed and doesn't offer much in the way of options."
The Obama administration, which has been heavily involved in GM's restructuring since rejecting its viability plan in late March, said it hadn't agreed to GM's plan ahead of a June 1 federal deadline and brushed off suggestions it wanted to run GM's day-to-day affairs. "It is not our desire to either own or run one of the auto companies," White House spokesman Robert Gibbs said.
Task force weighs in
But the administration has been flexing its muscles for months, pushing out GM Chairman and CEO Rick Wagoner, setting up shop in a suite of offices in the Renaissance Center's 300 Tower and ordering GM to replace a majority of directors.
The task force has weighed in on every aspect of the business, including GM's brand strategy. On Monday, GM reversed course and agreed to kill its 83-year-old Pontiac brand by next year; it previously said it would be a niche brand of one or two vehicles.
It also moved ahead to this year plans to end production of its Saturn brand cars.
The bondholder offer remains a significant hurdle, though.
Barclay Capital auto analyst Brian Johnson said the bondholder offer likely will fail because bondholders would recover up to 5 cents on the dollar compared to a 50-cent to 60-cent recovery for the United Auto Workers union, which will own up to 39 percent of GM with the deal it has agreed to with the company.
"Unless the offer is revised before May 8, GM could potentially file for (Chapter 11) protection by the end of next month," Johnson wrote.
Under GM's revised plan, the U.S. government would have the right to call all of the shots -- as part of its $15.4 billion in loans to GM to date. GM said it expects to receive another $11.6 billion in loans from the government by Dec. 31 -- a big infusion of taxpayer money that might give the Obama administration a greater incentive to take a more hands-on role.
"As a result of its ownership of GM common stock, the U.S. Treasury will be able to elect all of our directors and to control the vote on substantially all matters brought for a stockholder vote," GM said in a statement. "The U.S. Treasury will be able to exercise significant influence and control over our business if it elects to do so."
Cuts announced
GM announced Monday that it would cut 21,000 hourly jobs and close 13 plants by the end of next year, part of the restructuring needed for the company to get more aid. That news prompted some to call on the auto task force to do more for workers.
"Protection of jobs in the United States ... will be a significant factor in the Treasury's reaction to the GM proposal," said Sen. Carl Levin, D-Detroit, adding that the auto task force "will consider the views of the UAW in their evaluation."
The task force will have the power to approve which GM plants will be closed. GM has said it plans to start naming those plants in the next few weeks.
David Brophy, a business professor at the University of Michigan, said the Treasury Department "will have complete control" but he said "the last thing the task force guys want is to have responsibility for the auto companies.
"You don't fire the guy who knows how to milk the cow if you don't know how to milk a cow," Brophy said.
Veto power exercised
The Treasury Department already has veto power over any transaction of $100 million or more at GM and other significant transactions, and it has exercised some of that control. The Treasury objected to a GM deal with Delphi Corp. last month.
The Treasury could opt to select GM's managers and set their pay, business strategy and relationship with employees, unions and others, GM said. The auto task force is already consulted on all major decisions.
President Barack Obama has said the government doesn't want to run GM. "Let me be clear. The United States government has no interest in running GM. We have no intention of running GM," Obama said in a March 30 speech.
But now that the government is set to own a majority of GM, that may be difficult to avoid.
David Cole, chairman of the Center for Automotive Research in Ann Arbor, said the administration's role shouldn't be too hands-on. "If they are smart, it won't be a big role," he said. "I would see them trying to get out very quickly."
GM's latest plan would cede control to U.S.
Bondholders remain stumbling block to deal
David Shepardson / Detroit News Washington Bureau
Washington -- The U.S. Treasury Department would own a majority of General Motors Corp. and have the right to appoint all of its directors, under the company's turnaround plan unveiled Monday -- the latest sign of the government's growing role in the automaker's restructuring.
The administration also told the Detroit automaker it wouldn't support giving bondholders any more than 10 percent equity in the company.
That hard-line offer could be a major factor in bondholders rejecting the exchange and forcing GM into bankruptcy, analysts said. The Obama administration has boosted the percentage of debt it wants the automaker to write off to at least 90 percent, up from two-thirds.
Advertisement
GM's bondholders came out swinging, saying the company's offer of just 10 percent equity in exchange for $27.2 billion in bonds was inadequate.
"This offer demonstrates that the company and the auto task force, unfortunately, are pinning their hopes on an extremely risky and legally questionable turnaround in bankruptcy court, instead of engaging its lenders and workers in the very type of negotiations that could avoid such a fate," an ad hoc committee of GM's bondholders said.
Shelly Lombard from Gimme Credit, an independent bond research firm, wrote in a research note that "the exchange offer that General Motors announced this morning must look to bondholders like something Tony Soprano dreamed up. It's pretty heavy-handed and doesn't offer much in the way of options."
The Obama administration, which has been heavily involved in GM's restructuring since rejecting its viability plan in late March, said it hadn't agreed to GM's plan ahead of a June 1 federal deadline and brushed off suggestions it wanted to run GM's day-to-day affairs. "It is not our desire to either own or run one of the auto companies," White House spokesman Robert Gibbs said.
Task force weighs in
But the administration has been flexing its muscles for months, pushing out GM Chairman and CEO Rick Wagoner, setting up shop in a suite of offices in the Renaissance Center's 300 Tower and ordering GM to replace a majority of directors.
The task force has weighed in on every aspect of the business, including GM's brand strategy. On Monday, GM reversed course and agreed to kill its 83-year-old Pontiac brand by next year; it previously said it would be a niche brand of one or two vehicles.
It also moved ahead to this year plans to end production of its Saturn brand cars.
The bondholder offer remains a significant hurdle, though.
Barclay Capital auto analyst Brian Johnson said the bondholder offer likely will fail because bondholders would recover up to 5 cents on the dollar compared to a 50-cent to 60-cent recovery for the United Auto Workers union, which will own up to 39 percent of GM with the deal it has agreed to with the company.
"Unless the offer is revised before May 8, GM could potentially file for (Chapter 11) protection by the end of next month," Johnson wrote.
Under GM's revised plan, the U.S. government would have the right to call all of the shots -- as part of its $15.4 billion in loans to GM to date. GM said it expects to receive another $11.6 billion in loans from the government by Dec. 31 -- a big infusion of taxpayer money that might give the Obama administration a greater incentive to take a more hands-on role.
"As a result of its ownership of GM common stock, the U.S. Treasury will be able to elect all of our directors and to control the vote on substantially all matters brought for a stockholder vote," GM said in a statement. "The U.S. Treasury will be able to exercise significant influence and control over our business if it elects to do so."
Cuts announced
GM announced Monday that it would cut 21,000 hourly jobs and close 13 plants by the end of next year, part of the restructuring needed for the company to get more aid. That news prompted some to call on the auto task force to do more for workers.
"Protection of jobs in the United States ... will be a significant factor in the Treasury's reaction to the GM proposal," said Sen. Carl Levin, D-Detroit, adding that the auto task force "will consider the views of the UAW in their evaluation."
The task force will have the power to approve which GM plants will be closed. GM has said it plans to start naming those plants in the next few weeks.
David Brophy, a business professor at the University of Michigan, said the Treasury Department "will have complete control" but he said "the last thing the task force guys want is to have responsibility for the auto companies.
"You don't fire the guy who knows how to milk the cow if you don't know how to milk a cow," Brophy said.
Veto power exercised
The Treasury Department already has veto power over any transaction of $100 million or more at GM and other significant transactions, and it has exercised some of that control. The Treasury objected to a GM deal with Delphi Corp. last month.
The Treasury could opt to select GM's managers and set their pay, business strategy and relationship with employees, unions and others, GM said. The auto task force is already consulted on all major decisions.
President Barack Obama has said the government doesn't want to run GM. "Let me be clear. The United States government has no interest in running GM. We have no intention of running GM," Obama said in a March 30 speech.
But now that the government is set to own a majority of GM, that may be difficult to avoid.
David Cole, chairman of the Center for Automotive Research in Ann Arbor, said the administration's role shouldn't be too hands-on. "If they are smart, it won't be a big role," he said. "I would see them trying to get out very quickly."
04-28-2009, 06:19 PM
#3
Melting Slicks
Member Since: Sep 2006
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Think of all those great sports cars developed by the Soviet Union, then you will know where the US auto industry and US racing are headed.
What a tragedy.
What a tragedy.
04-28-2009, 06:30 PM
#4
Team Owner
Thread Starter
Wait till Obama hears #3 is going to race #4 in France for a million plus!
If they do go into bankruptcy by June racing may really be gone. Chrysler will see it's fate this week. See what happens to Chrysler in NASCAR if they go bankrupt this week. Where do I get parts for my truck?
I guess the new ZR-1 will be the pinnicale for a long time if not forever
If they do go into bankruptcy by June racing may really be gone. Chrysler will see it's fate this week. See what happens to Chrysler in NASCAR if they go bankrupt this week. Where do I get parts for my truck?I guess the new ZR-1 will be the pinnicale for a long time if not forever
Last edited by John Shiels; 04-28-2009 at 06:32 PM.
04-28-2009, 06:38 PM
#6
Melting Slicks
Member Since: Jun 2002
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Being a bond holder, I'm pissed.
The government wants to free up lending, but we the bondholders have loaned GM more than the Government and more than the union is owed but are getting only 10% of the company vs. 89% for the others. This is political payback to the unions and will stiffle bondholder credit loaning willingness.
I bet Wagner is wishing he took GM directly into bankruptcy rather than flying that jet to Washington.
If this deal goes though I will never buy another GM car or truck and will never frequent a GM dealer for parts or service. Good luck selling those government mandated cars....
The government wants to free up lending, but we the bondholders have loaned GM more than the Government and more than the union is owed but are getting only 10% of the company vs. 89% for the others. This is political payback to the unions and will stiffle bondholder credit loaning willingness.
I bet Wagner is wishing he took GM directly into bankruptcy rather than flying that jet to Washington.
If this deal goes though I will never buy another GM car or truck and will never frequent a GM dealer for parts or service. Good luck selling those government mandated cars....
04-28-2009, 06:55 PM
#8
Melting Slicks
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Oh, and you stock and bond holders? You are just a bunch of rich folk that get what you deserve.
04-28-2009, 07:36 PM
#10
Le Mans Master
I'm don't even know where to start. Everything that the gov't's done this year scares me. I never was a fan of GWBs domestic policy, but this guy is way beyond that.
04-28-2009, 07:58 PM
#12
Le Mans Master
Member Since: Dec 2006
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Being a bond holder, I'm pissed.
The government wants to free up lending, but we the bondholders have loaned GM more than the Government and more than the union is owed but are getting only 10% of the company vs. 89% for the others. This is political payback to the unions and will stiffle bondholder credit loaning willingness.
I bet Wagner is wishing he took GM directly into bankruptcy rather than flying that jet to Washington.
If this deal goes though I will never buy another GM car or truck and will never frequent a GM dealer for parts or service. Good luck selling those government mandated cars....
The government wants to free up lending, but we the bondholders have loaned GM more than the Government and more than the union is owed but are getting only 10% of the company vs. 89% for the others. This is political payback to the unions and will stiffle bondholder credit loaning willingness.
I bet Wagner is wishing he took GM directly into bankruptcy rather than flying that jet to Washington.
If this deal goes though I will never buy another GM car or truck and will never frequent a GM dealer for parts or service. Good luck selling those government mandated cars....
04-28-2009, 08:01 PM
#13
Le Mans Master
Member Since: Dec 2006
Location: Phoenix Arizona
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Wonder what it costs to live in China? I saw some of their race tracks on youtube, look very very nice
04-28-2009, 08:58 PM
#15
Safety Car
Commrade's, velcome to the USSA. VE know what you want, VE know what you need (because VE TELL YOU) and VE vill provide it for you (and you vill like it, OR ELSE!). 
04-28-2009, 09:11 PM
#16
Le Mans Master
I have talked to a few dealers...there was a conference call yesterday, Pontiac was the primary subject. But the word is that the government doesn't want GM in the performance car or parts business anymore.
It stands to reason: this POTUS is supported by the ultra environmentals, so ZR1s and such just are not going to be acceptable.
It stands to reason: this POTUS is supported by the ultra environmentals, so ZR1s and such just are not going to be acceptable.
. with his picture on the hood of a NASCAR and on the hood of a C6R
04-28-2009, 10:14 PM
#19
Race Director
so you all feel that GM should be bankrupt, and out of business, instead of running yet under control of the Government???
And when a company the size of GM goes into bankruptcy, a majority of their outside suppliers are forced into bankruptcy as well (either directly, or through preferential payment lawsuits)
I don't really see the current plan being any worse than bankruptcy, and I've unfortunately been a supplier to many bankrupt companies. There is a lot more to the auto industry, and our economy, than racing and sports cars.
And when a company the size of GM goes into bankruptcy, a majority of their outside suppliers are forced into bankruptcy as well (either directly, or through preferential payment lawsuits)
I don't really see the current plan being any worse than bankruptcy, and I've unfortunately been a supplier to many bankrupt companies. There is a lot more to the auto industry, and our economy, than racing and sports cars.
04-28-2009, 10:22 PM
#20
Burning Brakes
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FUBAR! Obama said, "Let me be clear. The United States government has no interest in running GM. We have no intention of running GM." And the sad thing is, that is the truth. The government will own GM, but it has no interest (or the ability) to run it. So, what kind of management do you think it will receive? And what products will it pursue? George Bush made decisions for which I will never forgive him in his handling of Iraq. But, in spite of his mistakes, he understands and appreciates the fundamental quality of capitalism, and the design of a federal government with a limited economic role. Perhaps he gained that insight from the influence of his parents. Maybe there is a lesson there.