Karl Denninger at The Market Ticker updates GM Goes Boom.
Gettlefools’ Bet Gets Called: ALL IN!
Courtesy of Karl Denninger at The Market Ticker
Well well well. In an update to my GM-Go-Boom Ticker, it appears that we may now have to ask: Did Obama grow a pair?
"WASHINGTON – President Barack Obama plans to appoint senior administration officials — rather than a single "car czar," as had been discussed — to oversee a restructuring of the auto industry.
Treasury Secretary Timothy Geithner and National Economic Council Director Lawrence Summers will oversee the across-the-government panel, a senior administration official said Sunday on the condition of anonymity because no announcement had been made.
It has also been rumored that President Obama himself will make any final decision on whether any further assistance will be rendered to the automakers.
Gettlefool has overplayed his hand. He was caught admitting that he scuttled the bill originally planned to help the automakers and forced it through Treasury because "he had Bush in his back pocket", a move that infuriated Senators and guaranteed that there was no chance whatsoever the bill could pass there.
The UAW was reported to have broken off talks on Friday, although there are rumors that talks restarted today.
Someone needs to whack this idiot upside the head and explain to him that a union that is smaller but still exists is better than one that dies entirely or undergoes forced Chapter 11 renegotiation of its contracts. If the UAW thinks that it will do better in bankruptcy court than it will in negotiations I have a bridge to sell UAW members, and they should have a look at what happened to union airline pilots when United went under – including their pensions.
Hint: How’s a 50-75% reduction in your promised pension benefits sound, complete elimination of SUB pay (which is NOT covered by pension guarantees) and complete elimination of ALL post-retirement or post-layoff private health insurance, leaving you with nothing until you can qualify for Medicare?
That’s what you’re going to get if you’re a UAW member and let this clownface continue to play his game of "hardball".
This is truly "the final countdown" for the UAW membership.
The bondholders have a similar problem in that in December PIMpCO pimped GMAC’s bondholders by reneging on a commitment to take part in a voluntary cramdown. As a consequence PIMpCO got a nice return on their bonds, but everyone else got bent over the table, and the folks who hold the parent company’s bonds are quick learners; they won’t make that mistake twice.
It is not at all certain that there is a lawful structure available to place those who cram down or restructure ahead of those who do not. This makes playing "prisoner dilemma" rather profitable if you wind up on the right side of it, but it also makes these negotiations extremely difficult.
Here’s my advice to both groups – the bondholders and the UAW:
I can read a balance sheet and so can you. I strongly suggest that you do so before proceeding down a path that is almost certain to lead to extreme losses when you can (probably) wind up with a better result through negotiation.
Simply put I would be surprised if subordinated debtholders get much of anything in a Chapter 11. Preferred and common holders will get zero. Senior holders will almost certainly get hit, possibly substantially, as well.
The Government can call the existing lines, effectively forcing both firms into bankruptcy immediately. Such a move would put the government in the position to extend DIP financing and control the restructuring on terms it, rather than the debtholders and UAW, controls.
Go ahead Gettlefool, keep up with your stupidity. You are about to put the majority of your remaining members out of work, bankrupt thousands of suppliers and as a consequence add a couple of million more people to the unemployment rolls, and you will be the one who gets the blame for it.
Disclosure: Still long Ford; I still believe they live without government help.
