Let GM go Bankrupt

I think the answer is that the government should not routinely bend the rules it establishes in the law for its own perceived good or that of its key political supporters. That is generally called corruption. GM could have been saved in a routine bankrupcy filing just as have many large companies - Continental airlines (and others) included.

There were winners and losers in the government managed quasi bankruptcy of GM. The UAW was a major winner and the bondholders were losers. Government should not be in the business of picking winners and losers in particular cases - particularly when the winners are the major contributors to the political party in power.

Who were the banks who would have loaned them the billions of dollars?

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Who were the banks who would have loaned them the billions of dollars?

It is clear that there was not going to be any private financing at the time, the markets were frozen, but it is not clear that any was needed.

Do you know different? If the Judge running GM had approved spending for employees, utilities, suppliers and dealer support only was GM going to need any money through the bankruptcy process? If the Court was going to run GM for years as we ran Conrail for years then at some point money would need to be found, but I dont think we needed any for the first year. It was not a reason to abort the bankruptcy process and take it from the courts and handing it over the the other two branches, with Obama in the lead.

Bankruptcy law does not provide protection for unpaid contributions to employee pension funds. In the case of GM this aspect of the law was defeated by the stock transfers and as a result moneys due to both securied and unsecured creditors and bondholders went instead to the UAW.

I don't dispute the liquidity question. The feds were needed for that at the time. However that didn't require the politically motivated bailout of the parasitic union that was complicit in the company's failure.

[So, when these hundreds of thousands - if not millions - of UAW workers lost their jobs under the reorganization and lost all their (unfunded) pensions, who do you think was going to be on the tab for their unemployment and retirement, George? The rest of us.

Cycloptichorn

So, when these hundreds of thousands - if not millions - of UAW workers lost their jobs under the reorganization and lost all their (unfunded) pensions, who do you think was going to be on the tab for their unemployment and retirement, George? The rest of us.

Cycloptichorn wrote:

[So, when these hundreds of thousands - if not millions - of UAW workers lost their jobs under the reorganization and lost all their (unfunded) pensions, who do you think was going to be on the tab for their unemployment and retirement, George? The rest of us.

Cycloptichorn

In the first place UAW membership is in the hundreds of thousands (and falling fast). In the second, they wouldn't have lost all their pensions. The unfunded liabilities would have fallen to a government backed entity that taxes pension plans precisely to provide this fiscal protection. Doing this in accordance with the law would have increased public and government awareness of the reality of pension liabilities. Evading the issue as they did was just another step towards the public employee unfunded pension liability disaster which still faces us all. This is just kicking the problem down the road. Not exactly in keeping with Obama's oft-repeated promises of higher standards.

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So, when these hundreds of thousands - if not millions - of UAW workers lost their jobs under the reorganization and lost all their (unfunded) pensions, who do you think was going to be on the tab for their unemployment and retirement, George? The rest of us.

UAW workers would have gotten less than 50 cents on the dollar of their promised pensions after default, and the pension plan did have assets that would have paid for some it it, how much I dont know. And had GM been operated by the bankruptcy court until a buyer was found only some of the employees would have been out of a job, how many more than ended up being out of a job we dont know, so your unemployment cost claim is pretty squishy.

[Woah - this doesn't have anything to do with 'public employee unfunded pensions.' These were PRIVATE employees whose pensions were unfunded. You transitioned between the two deftly, but that's not logical.
Cycloptichorn

Cycloptichorn wrote:

[Woah - this doesn't have anything to do with 'public employee unfunded pensions.' These were PRIVATE employees whose pensions were unfunded. You transitioned between the two deftly, but that's not logical.
Cycloptichorn

You are correct the laws governing private and public pensions are profoundly different. The connection I posited had to do, not with the specific procedure, but rather with with public and political awareness of a growing and very serious problem with respect to the funding of public pensions. The officers of corporations could be subject to criminal penalties for the accounting duplicity most states have engaged in to support the demands of their public employee union supporters.

I would also point out that the Unions gave up a bunch of stuff during the bailout as well - something you never mention. They gave up their retiree HC benefits in large part and are prohibited from striking in the future over either wages or benefits (though not workplace conditions).

Not only that, but GM is working to actually fund those pensions. If they had been dissolved under bankruptcy, that sure wouldn't be happening.

Not enough. I would like to see them give up their existence.

Right now they are struggling (with the Administration's help) through the NLRB to do away with both makority requirements and secret ballots in their organizing campaigns. They say they need this because the auto workers in Toyota, Nissan, and Volkswagen plants have repeatedly voted against their representation.

If you can't win by persuasion and majority rule, then buy enough politicians to use government to enable you bypass the wishes of the workers and get a government sanctioned monopoly control of employment in the industry. That is the strategy of organized labor in this country.

There were wiunners and losers in the government managed quasi bankrupcy of GM. The UAW was a major winner and the bondholders were losers.

Bankruptcy law does not provide protection for unpaid contributions to employee pension funds. In the case of GM this aspect of the law was defeated by the stock transfers and as a result moneys due to both securied and unsecured creditors and bondholders went instead to the UAW.

Bankruptcy judge blocks Mesaba Airlines from canceling union contracts

The unfunded liabilities would have fallen to a government backed entity that taxes pension plans precisely to provide this fiscal protection.

The UAW pension and health care funds became owners of the rescued company's stock - the bondholders did not.

Curiously, unmentioned amid the overwhelming publicity surrounding the stock offering were the original unsecured GM bondholders. Our effort to explain their position follows:

According to the trustee, the bondholders who technically own all the assets of the old GM Corp. (Motors Liquidation Company) will receive 10% equity in the new GM along with warrants for an additional 15%.

The timing of this distribution of equity to unsecured bondholders is subject to the bankruptcy court process and will occur after a reorganization plan is submitted, accepted and implemented. It cannot be determined how long this will take, but three to six months seems to be a reasonable estimate.

Some bondholders have expressed disappointment in being unable to participate in the new stock offering, annoyed at being forced to wait for the conversion to stock and warrants.