Monday GM CEO Statement on Chapt. 11

[War Eagle]

Here are some quotes from the Auto Show, some positive some negative.

http://www.reuters.com/article/marke...0090113?rpc=44

Steve

[Hylton]

Originally Posted by DGthe3

Wow, GM is trying to avoid ch11. How is this news?

Ch 11 would result in a huge legacy cost (tens of billions which are not loans) being dumped onto taxpayers. Plus GM's sales would likely drop below where they are now making it even harder to prove their viability. A chapter 11 could take up to a decade to be worked out and there is no guarantee that GM won't be forced into ch7 by the courts.

Actually taxpayers are not held liable for any legacy costs of any company going into bankruptcy. GM is no exception. What would happen in fact, is that the UAW stands to be creditor number 1 after the last bailout is paid back. I believe UAW will end up owning at least 25% of the company post Chapter 11. The courts will tell them to either make a go at it or sell their interest to pay out the legacy costs.

[nester7929]

Originally Posted by War Eagle

Kylepo,

I will let you decide. I have a BS and Masters degree. I worked for a major corporation for 38 years in executive management and retired at age 60 with a very nice pension and a fat 401K. I fully understand operating and legacy costs. I was smart enough to move all of my money out of stocks before the crash and lost none. I am a SEL pilot with instrument rating, but the main thing that may sway you is that I am smart enough to love the new Camaro and what an outstanding car it is.

Everyone should be able to offer information and voice an opinion within limits.
Now you can write a couple of things down because I feel strongly that they will indeed happen.

1. Wagoner will be gone by Summer
2. Car sales will stay down for 2009 after a brief up spike in Jan maybe due to the incentives. Wagoner and GM are counting on more sales in 2009 to leverage the costs that they have and the sales will not be there. The recovery will take longer than expected.
3. Without the UAW concessions and the sales below expectations GM will need far more operating capital than the short term loans they have received. There is a good possibility that Congress will not be willing to pony up the massive amount of money they will need to survive (Public Opinion).

GM will finally file Chapter 11 by the end of the year and be able to reorganize, downsize and start a slow recovery to a smaller and more efficient Company. There is no way they can continue the way they are going now, not after the latest information we have. That is why I said you can put a fork in them. They will have to end up filing Chapter 11 to save the Company and that will be a good thing.

When you hear of Wagoners resignation you can reply to this post, be patient it may take a few more months.

Best Regards

Steve

While I'm sure you think this will happen, there are many people who do not share the same sentiment.

Chapter 11 could conceivably help GM, but there are many people (myself included) who believe that option could potentially doom GM. If you're an everyday consumer shopping for a car, you're less likely to buy from a company that has filed for Chapter 11. After all, GM might have to file for Chapter 7, and then you're left with a car that's out of warranty.

Now, it's unlikely that GM will have to file Chapter 7, but I'm sure you know that the public perception of reality is more important than reality itself. As long as people THINK that GM is in any danger of bankruptcy, it will put a huge dent in sales.

GM could file for Chapter 11, but they would have to compensate for it by slashing prices on ALL their cars (and probably tacking on a hefty warranty as well); it would have to make the Red Tag deal look like a rip-off.

Also, you may want to take the whole "I have an advanced degree and job experience" thing down a notch. If that's true, then you probably do have a better leg to stand on than most people here, but you're still going to come across as arrogant when you start throwing around your educational history. I'm sure you weren't doing that on purpose, but that's how a lot of people are going to take it.

[DGthe3]

Originally Posted by Hylton

Actually taxpayers are not held liable for any legacy costs of any company going into bankruptcy. GM is no exception. What would happen in fact, is that the UAW stands to be creditor number 1 after the last bailout is paid back. I believe UAW will end up owning at least 25% of the company post Chapter 11. The courts will tell them to either make a go at it or sell their interest to pay out the legacy costs.

So no healthcare costs or unemployment would have to be paid by the government if GM decides to cut benefits and jobs?

[Hylton]

Originally Posted by DGthe3

So no healthcare costs or unemployment would have to be paid by the government if GM decides to cut benefits and jobs?

There is no liability on the part of the government to pay them out. There is no statute within the Chapter 11 bankruptcy law which states that the government automatically assumes ownership of a companies liabilities regardless of what they may be.

That is not to say that socialism will kick in and the judge will order the government to handle the healthcare and pension obligations but that would set a very dangerous precedence.

The judge would put these obligations first in distributing the companies assets before he would give those assets to a bank at the cost of making the taxpayer responsible for GM's healthcare/pension obligations. Believe me when I say that the UAW is in the drivers seat if GM goes Chapter 11.

Many companies have gone under in the past and as a result, employees health and pensions plans had disappeared in a cloud of smoke. What saves the UAW here is that GM has billions of real assets which they can make claim to in chapter 11 bankruptcy proceedings.

[DGthe3]

I concede to the other points. But I would like to restate this one:

Originally Posted by Hylton

Believe me when I say that the UAW is in the drivers seat if GM goes Chapter 11.

I say that the UAW is in the drivers seat sending GM to Chapter 11.

[War Eagle]

Originally Posted by DGthe3

I concede to the other points. But I would like to restate this one:


I say that the UAW is in the drivers seat sending GM to Chapter 11.

"Under the terms of the $17.4 billion in federal money granted to domestic automakers last month, the companies have until Feb. 17 to find a way to bring their labor costs in line with those of foreign-owned auto plants in the U.S.

GM and Chrysler need to include those concessions as part of restructuring plans they must submit by March 31. If the deadline is not met, the government can demand its money back.

McAlinden said Toyota pays workers at its older U.S. plants up to $26 an hour and Honda pays $25, while the UAW rate at auto plants is $28.

He also noted that workers at foreign-owned plants pay 20 percent of health-care premiums, while UAW workers pay 7 percent.

The foreign-owned plants also have fewer job classifications, which allows them to operate with fewer skilled-trades workers because they can be cross-trained for more jobs, McAlinden said."