Bankruptcy or Bust-Out?

What’s good for Chrysler is good for General Motors:

Surprising no one, General Motors announced Wednesday morning that its offer to exchange $27.2 billion of its bonds for a stake in a reorganized iteration of itself had expired, and had failed to garner enough interest from investors.

The announcement clears the path to a bankruptcy filing by the carmaker.

According to the terms of its reorganization plan, approved by the Treasury Department, G.M. needed a 90 percent acceptance rate from its tens of thousands of bondholders. In its statement, the company said the amount of bonds exchanged was “substantially less” than that.

G.M. added that its board would meet to discuss the company’s next steps.

The New York Times reported Tuesday afternoon that 70 percent of the newly reorganized G.M. would be owned by the federal government, with up to 20 percent going to the United Auto Workers union.

Bondholders had long opposed the debt exchange, going so far as to have proposed their own counter offer, which would have given them a 58 percent stake in a reorganized G.M. But the Treasury’s task force had determined that the bonds were “out of the money” and their debt was not worth that much.

At the core of bondholders’ arguments is that they are receiving worse treatment than the U.A.W., which is owed about $20 billion to a health care trust for the union’s retirees. Both groups hold what is known as unsecured debt, which is not backed by assets like plants or equipment.

“Our fundamental position is that equal groups in a creditor class should be treated equally,” Elliot Sloane, a spokesman for a committee of G.M.’s largest bondholders, told DealBook on Tuesday.

Give President Obama credit for not demonizing the “speculators” in GM debt as he did with Chrysler bondholders.

But let’s look at the last statement in the story and the math behind it:

The bondholders are owed $27.2 billion; the UAW is owed $20 billion.


The bondholders are offered 10% of the company; the UAW 20%.

How is that not a payoff to the UAW for past services rendered?

Meanwhile, there is no more endangered species than a Republican Chrysler dealer.

They just interviewed a local Chrysler dealer on the radio who meets none of the criteria for shut-down. He’s above quota, he’s in a high-traffic area, he moves a lot of product. But he got the pink slip, without explanation. Then he got the letter from the Chrysler financing corporation saying that the $4 million in inventory he had rotting on the lot (who’s going to buy from him if he’s not going to be around to service it?) was still his responsibility, and to expect a lien.

He’s a registered Democrat, btw, but he did not vote for or contribute to Obama.

I’ve said it before, I’ll say it again. Tony Soprano was never so ruthless.


  1. Carol said,

    May 28, 2009 @ 10:24 am

    Tony Soprano just had a few guns. The One has the entire might of the United States government to back him up. This business with the auto dealers is proof positive that the only possible party label applicable to The One is fascist. Nothing else will do.

  2. Martino said,

    May 28, 2009 @ 10:33 am

    “You’re a microcosmic cog in his catostrophic plan, designed and directed by his Red Right Hand.”

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