General Motors is rapidly turning into a really bad joke. But the joke’s on their bondholders and taxpayers. This just exemplifies why government has no business getting involved in business.
General Motors Corp. doesn’t plan to make a $1 billion payment due June 1 to bondholders since by that point it expects either to have cut its debt through an exchange for shares, or to have decided to seek bankruptcy-court protection, GM Chief Financial Officer Ray Young said.
Mr. Young, speaking to reporters on the sidelines of a Chinese auto industry summit near Detroit, said the company will launch a debt-for-equity exchange in coming days aimed at greatly reducing its $28 billion unsecured debt load. He said GM needs to move quickly to commence the offer in time to wrap it up by June 1, the federal government deadline it faces for revamping the company.
Mr. Young said GM is determined to restructure and get back on its feet soon, and will right the ship “in court or out of court.” He said a trip to bankruptcy court is “probable,” but indicated the company has the full backing of the U.S. government.
“They want us to be a viable entity when we emerge,” he said. “We’re going to get this done.”
Ha! The full backing of the US government. That’s a good one. It’s really hard to see how they’ll emerge as a “viable entity” when the government wants them to scrap their profitable lines of business.
It’s good to be the king — until you start tripping over your own robe.
So King Barack the Mild is finding as he tries to dictate the terms of what amounts to an out-of-court bankruptcy for Chrysler and GM. He wants Chrysler’s secured lenders to give up their right to nearly full recovery in a bankruptcy in return for 15 cents on the dollar. They’d be crazy to do so, of course, except that these banks also happen to be beholden to the administration for TARP money.
There’s just one problem: Why on earth would GM’s creditors — who include not just bondholders but the UAW’s health-care trust — want any part of this deal?
They’ve already seen that the rights and privileges of shareholders are not worth diddly when the king is throwing his prerogatives around. He dispensed with the services of GM chief Rick Wagoner, though the king owned not a single share of GM stock at the time. His minions communicated the king’s pleasure that GM consider discontinuing its GMC brand, maker of pickups and SUVs that offendeth the royal eye — though these vehicles earn GM’s fattest profit margins.
His minions haven’t asked GM to give up the Chevy Volt, even after determining it will be a profitless black hole, because of the king’s fondness for green.
This is utterly absurd! But hey, I’m just an American who works hard and pays my debts, so what do I know. I have a feeling this isn’t exactly what the American people thought they were signing on to when they voted in November. Are people finally starting to figure that out?
Update: GM announced that they will shut down most of their US plants for the summer. I have an idea, why don’t they shut down and not reopen. We’ll save a lot of money in the long run.
