Word: gm
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Dates: during 2000-2009
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...President: Maybe you should. One fact that's not getting too much attention in these prospective deals, both at Chrysler and GM, is that they are a bit short on fairness. Just consider the plight of American taxpayers who have so far loaned $15.4 billion to GM and another $4 billion to Chrysler. As part of the latest flurry of announcements, both automakers are signaling that (a) they are not likely going to pay most of the government loans back, and (b) they will need many billions more. (See TIME's top 10 Chrysler moments...
Next, look at GM's offer. The unsecured bondholders are owed $27 billion by GM, and they are being asked to trade that IOU for a 10% equity stake. The UAW's VEBA trust, on the other hand, is trading in a $10.2 billion IOU and getting a 39% equity stake. If these were poker chips, you could say the croupier has arbitrarily decided to value bondholders' chips at 37 cents apiece and the UAW's VEBA chips at $3.90 each...
...might argue that given GM's troubled state, the market value of the bonds is not $27 billion but more like $3 billion. But if you accept that troubled-debtor logic, then it's only fair to apply the same logic to the money owed by Chrysler to the UAW's VEBA - so its chips should be marked down as well. (In fact, by law the VEBA's IOU is junior to the bondholders' IOU.) Thus, the VEBA's IOU should not translate into a 39% equity stake but a small sliver of that. (Read about Detroit's attempts...
Another popular argument against bondholders is that they made bad investment choices, so their steep losses are well deserved. But union leaders in Detroit negotiated the richest benefits packages of any industry - GM's health-care outlays grew so big that one Wall Street analyst dubbed the company "an HMO on wheels" - and that played some role in the declining competitiveness of GM and Chrysler. Don't the autoworkers and their union leaders bear some responsibility for that...
...wonder that some of Chrysler's creditors said no, and it's also no surprise that a group of GM bondholders is putting forward an entirely new plan for that automaker, cutting out the government, which is slated to become a majority owner. The creditors' new plan suggests giving them a controlling equity interest instead and keeping the government (i.e., American taxpayers) as a creditor. Obama has made it clear that he has no interest in running a car company, so this offer may be one worth considering...