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Monday, June 1, 2009

GM Buys Bankruptcy For Dummies Book


GM declares bankruptcy and how your going to get the shaft.


I came across this article in the New York Times

Source

DETROIT DAILY DIRT translated it into terms the rest us can understand.

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QUESTION. Is G.M. going out of business?

ANSWER. No. G.M. is reorganizing under Chapter 11 of the United States Bankruptcy Code. The law allows companies to shed assets, restructure debt, cancel contracts and close operations that normally would have to continue running. Once they secure financing to emerge from bankruptcy, these companies are reconstituted as new legal entities.

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DETROIT DAILY DIRT TRANSLATION. Going out of business? HA! No way, they will be better off than they have in the past 20 years after all their debts are forgiven. Recent changes in the bankruptcy laws made it harder for you and I to declare bankruptcy but this one gets the corporate fast track to the tune of $172 billion.

If you or I went to court to declare bankruptcy we would have to explain to each of our debtors why we could not pay in front of a judge and then the debtor would ask the judge to make us pay...fun.

Now figure all your debts and the months it would take you to go through a bankruptcy.

Imagine how complex and convoluted the finances of a 100 year old corporation that used to be the largest employer in the country must be AND imagine that same company with piss poor board level management of finances which threw it into bankruptcy in the first place...pretty murky huh?

By all rights to be done right it should take years if not decades to resolve. I foresee this as the sloppiest chapter 11 declaration in American history.

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Should G.M. fail to successfully reorganize, it might turn to a Chapter 7 bankruptcy, which would mean liquidation, but that is not seen as likely given support from the Treasury and the Obama administration.

Q. Where will the case be heard?

A. As with Chrysler, the case will be heard in the United States Bankruptcy Court for the Southern District of New York. Judge Robert E. Gerber will preside.

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DETROIT DAILY DIRT TRANSLATION. Liquidate it how? To who? Be real, Chapter 7 is as likely to be completed as a ladder made of my poop to the moon.

No offense to the honorable Robert E. Gerber but how the hell would he even approach something like this? Introduction of the known GM assets would take years in court.

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Q. How long will this take?

A. Senior White House officials say the essence of the case should take 60 to 90 days. It plans to use Section 363 of the bankruptcy code to sell assets, rid the company of liabilities and restructure its debt, creating a new version of G.M.

Late Sunday, the bankruptcy court approved the sale of Chrysler assets to Fiat, only a month after its case began. The remaining pieces of Chrysler will remain in bankruptcy for at least several more weeks. Such quick bankruptcies are unusual. In reality, most bankruptcies take much longer. United Airlines spent more than three years under bankruptcy protection. Delphi, the auto parts supplier, has been in Chapter 11 since 2005. The bankruptcy by LTV, a steel maker, took seven years to resolve.

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DETROIT DAILY DIRT TRANSLATION. 15 to 25 years.

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Q. What happens to G.M. dealers?

A. G.M. is able under bankruptcy to cancel franchise agreements with its dealers. It has already announced plans to eliminate 1,100 dealers and may cut more. The company wants those dealers to close within 18 months. Dealers can sue to block the action, but a final decision would be up to the judge. In the meantime, G.M. will continue to provide dealers with vehicles.

GMAC, with support from the government, will provide financing for G.M. customers. It is also providing financing for Chrysler.

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DETROIT DAILY DIRT TRANSLATION. Dealers? Out of business unless they have a proven track record of selling X amount of product per year if Chapter 11 is used.

If chapter 7 is utilized all dealers are on their own, probably will switch to used vehicle sells or a new manufacturer.

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Q. What’s the biggest difference between the G.M. and Chrysler cases?

A. Chrysler had reached an agreement to sell assets to Fiat before its case began. G.M. is attempting to restructure on its own, with financing from the Treasury. It is providing G.M. with $30 billion in debtor-in-possession financing so it can operate while in bankruptcy, in addition to about $20 billion G.M. has already received. It is likely the Treasury will provide more scrutiny and guidance in the G.M. case, since such a large amount of taxpayer money is at stake.

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DETROIT DAILY DIRT TRANSLATION. GM's corporate officers collective egos would not allow them to admit to themselves and the world that they failed.

Selling assets would have been tantamount to admittance of failure in addition to the fact all the assets for lack of a better term would be considered toxic since GM had little or no worth to the private investor.

GM also went toe-to-toe with the US Government on the "we are too big to fail" defense and received $50 billion.

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Q. What happens to G.M. employees?

A. G.M. employees who are not union members do not have any job security. The company can ask a judge for an immediate pay cut for its salaried employees, and can announce job cuts and close offices, just as it can outside bankruptcy,

Contracts covering members of the United Automobile Workers union and other unions will remain in force, unless the company asks a judge to void them. However, U.A.W. members approved changes last week, and the new G.M. is expected to honor that contract.

But in bankruptcy, the company can ask for contracts to be terminated and replaced with terms it can more readily afford, and the union would have a chance to respond in court. Negotiations would take place before any cuts were imposed. Such a process could take months.

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DETROIT DAILY DIRT TRANSLATION. Attention GM employees you are hereby screwed.

If GM can squirm it's way out of ANY contractual or moral obligation to it's employees and retirees...it will.

The Union will be worth less than nothing at this point as well, what good are 20,000 members if they can't pay dues?....see ya!

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Q. Are pensions and retiree health care benefits protected?

A. The White House said Sunday that, assuming the sale goes forward, G.M. workers’ pensions and health care benefits would transfer to the new company, and remain in force.

Companies have the right under bankruptcy law to ask to terminate their pension plans. If such a request were to be made, a judge would convene a brief trial on the subject and hear both sides. If pensions were terminated, employees would still receive about a third of their benefits through financing from the federal pension agency.

A company can also eliminate retiree health care benefits for nonunion employees; they would subsequently be covered by Medicare.

The U.A.W. and G.M. agreed in 2007 to transfer responsibility for union retiree health care to a special fund, and the fund would administer those retiree benefits.

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DETROIT DAILY DIRT TRANSLATION. If GM can push its health benefit cost to US taxpayer, it will. Otherwise it will probably just cut it off regardless.

I would just consider pensions and health benefits as good as gone at this point.

P. S. Refunds on the 30 years of your life you gave to GM are not enforceable, so even though you came through with your end of the deal by giving your entire life away in 8 hour shifts to GM, they will choose to renege on their promise to you to take care of you in your golden years.

Don't believe me? Just watch.

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Q. What happens to G.M.suppliers?

A. In its bankruptcy filing, G.M. listed its 50 biggest creditors holding unsecured claims, meaning those that would have to get in line behind creditors whose debt is secured by collateral, like the company’s plants, brands and other assets. The unsecured creditors include Wilmington Trust Company, a bondholder; the U.A.W., through its health care trust; and suppliers like Delphi, Robert Bosch and Lear.

The White House said supplier contracts would remain in force, and it has created a program to provide federal help to parts makers. But in bankruptcy, supplier contracts can be canceled.

G.M. is likely to tell the court which suppliers it wants to keep doing business with, and which contracts it wants to reject. Suppliers could challenge the rejection of their contract, but most likely they would have to reach a settlement with G.M.

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DETROIT DAILY DIRT TRANSLATION. If suppliers aren't flexible enough to move sales to new clients they are as good as gone. They won't get enough money to survive without GM to continue with "business as usual" and any money the do get will take years to get and the lawyers will no doubt have their cut first.

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Q. What happens next in the bankruptcy case?

A. G.M. filed its initial paperwork with the federal bankruptcy court in New York on Monday. Next, it will ask a judge to issue a series of rulings called the first-day orders, which allow the company to keep operating. They may include authorizing the payment of routine expenses, like salaries and payments to vendors, including its lawyers, and whatever else G.M. needs to run its business. G.M., unlike Chrysler, has not halted production.

Once the case begins, a committee will also be formed that represents G.M.’s creditors.

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DETROIT DAILY DIRT TRANSLATION. The lawyers descent like maggots on a dead bison.

All officers of the GM upper management will secure their own salaries and start searching the"old boy network" to get another job. Sad part is, they will get other jobs.

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Q. Should owners of G.M. cars and trucks be concerned?

A. The federal government said it would back the warranties on vehicles bought from G.M. while it is operating in bankruptcy. So, effective Monday, warranties are underwritten by the government.

Owners of G.M. vehicles bought before Monday should expect their warranties to be honored until they expire. Owners whose vehicle warranties have run out are liable for any problems with their cars and trucks, as they are now.

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DETROIT DAILY DIRT TRANSLATION. No more concerned than those of us who own AMC Hornets should be.

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