G.M. and Union Reach Deal on Contract Changes

[domano 68]

Originally Posted by Brokinarrow

What are they going to get once GM goes into bankruptcy? They are betting they will get more, but really They could get less. Or they could just settle with GM outside of bankruptcy (thereby helping GM avoid it all together) and it may help their future returns with the company.

At $.10 on the dollar, it is worth the risk of getting nothing by forcing bankruptcy. I am just trying to prove a point that when two parties offer's are drastically different for the same input, why would you be surprised that there would be one party not accepting the the much smaller deal?

I honestly believe GM is forcing bankruptcy by offering the bondholders a miniscule share knowing they will not accept the deal. Then by going into bankruptcy they will be able to restructure thier costs and become much more competitive. It will be interesting what the new union contracts will be like. I am guessing they will be very, very different.

[domano 68]

Originally Posted by nards444

Well the workers are between a rock and hard place. If they dont accept terms now their chances of getting something better during CH. 11 will be worse. I think this will help either avoid ch. 11 or significantly speed it up. If you think about the employees is one of the big problems they face. The UAW needs to go or needs to be restructured they suck so much money out these car companies its rediculous.

I agree.

GM offers the Unions the lion's share thereby giving the impression that GM will stand by the Union, even in bankruptcy court. However, GM offers the bondholders a meager share therefore bankruptcy is forced. At that point, GM then has the upper hand and can achieve one of thier main goals; to re-structure's thier Union contracts at much more reasonable rates. Just my $.02.

[Brokinarrow]

Originally Posted by domano 68

I agree.

GM offers the Unions the lion's share thereby giving the impression that GM will stand by the Union, even in bankruptcy court. However, GM offers the bondholders a meager share therefore bankruptcy is forced. At that point, GM then has the upper hand and can achieve one of thier main goals; to re-structure's thier Union contracts at much more reasonable rates. Just my $.02.

Good points.

[Tran]

Only two major obstacles remain to avoid a bankruptcy filing before GM's government-imposed June 1 deadline. The first is getting CAW to follow the UAW's lead and sign a new agreement, and the second is to get the majority of GM bondholders to accept a debt-for-equity swap that would erase $27 billion of the automaker's debt but leave creditors with only a 10% stake in the company. The UAW would have its proposed 38% stake, common GM shareholders would hold a 1% stake and the U.S. government would have a majority stake of 51%. Its creditors, however, do not appear willing to accept GM's debt-for-equity offer as it stands, so unless a miracle happens in the next two weeks, a Chrysler-like Chapter 11 bankruptcy filing still appears the most likely result.

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[Brokinarrow]

Originally Posted by Tran

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come ooooonnnn miracle!

[Hylton]

Originally Posted by Tran

.

Well after reading that, it's easy to see how the "secured" creditors would be ticked. Let's see - govt. Invests 15 billion and forgives half resulting in 51% of the company for 7.5 billion. Creditors on the other hand, get 10% of the company in exchage for their 27 billion. Gotta love it!

[MrIcky]

This thread is chock full of smarts. Good stuff.

[John Farnen]

A lot of the bond holders represent retired folk who rely on the income from their investments, @ 10 cents on the dollar, they are getting screwed. No one wins, investors, employees, investors, and us, but the investors get the worst of it.

[MerF]

There's no point in even formulating an opinion at this point...we just get to sit back and watch the debacle and hope for the best.

[Andro]

Hope it works out

[dbotsfordtat]

Originally Posted by John Farnen

A lot of the bond holders represent retired folk who rely on the income from their investments, @ 10 cents on the dollar, they are getting screwed. No one wins, investors, employees, investors, and us, but the investors get the worst of it.

Ah, but the investors knew risk was involved and they lost. Like any investment, "past performance is no guarantee of future results". There are still people trading GM common stock, hoping for a windfall return, greed knows no bounds.

The Taxpayers are the real losers because we either pony up or become outlaws. I'll lose no sleep over bondholders.

[OUR72GTO]

CAW has now reached agreement with GM.

More bailout money will now flow from the Federal and Provincial governments.

This should allow the gates to stay open at Oshawa even if the bankruptcy starts in the USA.