babble is rabble.ca's discussion board but it's much more than that: it's an online community for folks who just won't shut up. It's a place to tell each other — and the world — what's up with our work and campaigns.
Support rabble | Advertise with us | Contact our staff | About rabble | Log-in or Register for a new account | Corrections | Privacy policy | Newsfeeds | Mailing lists
rabble: Features | Columnists | In Cahoots | Blogs | Books | Photos | What's Up | Polls
babble: Forum Topics | Active Topics
The rpn: About the RPN | Become a podcaster
rabbleTV: Program Guide | Features | Indie Inside | Best of the net
Copyright © 2001-2013 the authors
Syndicate
The timeline is more like weeks.
It has become increasingly an academic fine point whether or not bankruptcy. For GM, in practice, not being in Chapter 11 looks pretty much like bankruptcy; and if they do go into Chapter 11 it wont look much like any other Chapter 11 [highly financed and orchestrated].
Its really going to boil down to which path looks best to the Obama team, and that decision has to be reached within weeks.
The mystery will be whether they fold anyway. And are liquidated [like I said, not the same thing as bankruptcy]. The consensus seems to be more like a year if GM were to go into the final death thoes and fold. But nobody's guesses have been worth much.
How long GM can survive without folding is the real question, and how risky it looks for the US government to underwrite the attempt to stave that off. [Chapter 11 or not being very much a secondary question.]
And that question is in turn driven by when the bottom in car sales comes. That is a guess, but even more of a guess to any outsiders is how much GM's survival plans are dependent on meeting their prediction of sales.
Getting their own handle on that is the priority for the Obama team, and what they see is what will drive how far out on a limb they go to keep GM from folding.
My sense is that they aren't going to let it go now. That they are gauging how short the leash will be before they jerk it to cut the losses to the US government. [With Canada and Ontario agreeing to a proportionate share, and the same basic leash arrangement.]
GM and CAW have tentative agreement
No details yet - later this afternoon no doubt.
Ok folks, here are the highlights:
Maybe. But, if GM goes into bankruptcy (either reorganization or liquidation), any such agreement could get tossed aside anyway.
_______________________________________
Eleutherophobics of the World...Unite!!!
Are you thinking good news because an agreement means it is more likely people will still have jobs?
My quick senses is that it could have been worse. The UAW has conceded much more. But most of that is around who pays for health care costs which isn't as big an issue here.
So this may roughly track the 'dollar value' of UAW concessions, without it having to hurt as much. But thats just my rough guess.
And the UAW dodn't have an agreement with GM yet, and the agreement with Ford that is supposed to be a pattern is going to be close if it is approved by enough locals.
It doesn't look like the CAW demanded even some assurances about employment levels. But thats probably just realism: GM can't promise anybody anything on that score.
I see nothing in the highlights that looks like the UAW two-tier wages, which is where Hargrove drew his line in the sand last year. I hope it's not in the fine print somewhere, though I kind of doubt they could have kept something like that out of the summary.
My memory fails me for specifics, but the agreement last year brought in the CAW concessions that were the pound of flesh for not having two tier.
So there was no need to go further on that. Similarly for the UAW now, from its concession base. Current negotiations are to provide concessions that hit the bottom line quick [which 2 tier does not for example].
Bankruptcy is the wild card. But not to the degree one would normally expect. If GM goes into Chapter 11 it will have all sorts of unusual aspects. It will be a package financed by the US govt. That package could, and I think probably will, have provisions that labour contracts stay more or less intact.
Maybe. But I have my doubts. I don't think most people care what GM pays its labor force (and if GM pays out $70 in labor-related costs for every hour worked, I think most people think, "That's up to GM"). But, if taxpayer money is going to go to GM, most people (who earn far less than what autoworkers earn) are going to blanch at any proposal where their tax dollars would be going to support people who make a lot more money than they do.
_______________________________________
Eleutherophobics of the World...Unite!!!
What do you mean liquidation is "not the same thing as bankruptcy"? That's like saying "reorganization is not the same thing as bankruptcy". It doesn't make any sense.
There are two basic types of bankruptcy: reorganization bankruptcy and liquidation bankruptcy.
_______________________________________
Eleutherophobics of the World...Unite!!!
Its not only or mostly a question of who cares about GM workers.
Its also brutal business logic. If GM is going to survive it has to work something out with the unions. Abrogating contracts just means they need new ones. Its not in anyones interests who is actually IN the business to start over on that- whatever hicks and middle class envy in Minnesota or Tennessee thinks.
The reason that labour contracts could be left intact while bondholders get more screwed in Chapter 11 is the simple fact that GM needs workers, and at this point in its 'trajectory', for GM management Wall Stret can take a flying leap.
Class solidarity doesn't count much for capitaists when their survival is at stake.
It isn't a fabtastic lever for the UAW, but it aint nothing either.
"Are you thinking good news because an agreement means it is more likely people will still have jobs?"
yes
and one can 'dig one's own grave' or let others do it for you [buddha grin]That's deep.
Except those hicks are voters. Whether or not you want to look down your nose at working class stiffs, their votes count. And there are a lot of them.
I shouldn't expect people to know it, but I'm a hick myself in every way: working class and rural.
So to be clearer, its in part self-relective gallows humour that my ilk are guilty of the same envy of autoworkers as middle class folk. [And yes, working class stiffs get all the attention for that envy... but look to the tony suburbs and inner city gentry.]
As to the real substance of the point: to be blunt, at some point it doesn't matter what the voters think. Or to be more precise, voters in Kentucky and Minnesota may say they resent autoworkers and they are just going to get what they deserve... but will it be a determining factor next time they vote? No way.
So, aside from the fact that the Obama administration wants to protect autoworkers as much as possible, there is the brutal business sense I referred to.
The business logic is that GM only has the workers it has. It needs them. And it will have to have a contract with them even if Chapter 11 swept away the existing collective agreements. It will make matters even worse if they have to step back and start from scratch on a slew of new collective bargaiining agreements.
If you just look at the formalities of the law of Chapter 11 workers have no more rights and power in the process than any othe unsecured creditor, and less power than a lot of bondholders.
But if GM chooses to go into Chapter 11 it will be an arrangement bankrolled by the US government.... so what it says on paper gets rejigged.
So guess who is more expendable to GM management and the US government: the workers or the bondholders?
Don't think too hard on that one.
The negotiations with GM are a 3 ring circus: GM, UAW, and bondholders. The latter 2 are looking to maximize the sacrifices of the other and minimize their own... and everyone looking over their shoulder at what they expect from the US government.
My educted guess is that when the UAW said no further concessions from us before there was an agreement, its because they knew the bondholders had the most to loose from a failure of agreement that leads to Chapter 11- the 180 degree opposite of the usual case.
IE, the US government has the controlling card because they will finance the Chapter 11 reorganization. If they say that continuation of UAW contracts is a condition, AND GM management agrees that this is best for their chances of viability, thats it.
By the way- HEY MODS....
This thread title is a perfect illustration that its nuts that we can't change the titles. I haven't followed the discussions of what has to change when bable gets tinkered with- but thats one of them.
The thread title is not just unreflective of what the issue is about now- it says the opposite of present reality.
It isn't just "bondholders" who have a secured interest in GM. GM's banks and certain other lenders of non-equity capital also have a secured interest in GM's assets. And as source of non-governmental capital, that's about the only source of capital that GM is likely going to have (who's going to invest in GM equity?).
So, unless there is an unlimited amount of money that the U.S. government will expend to keep GM afloat, GM's survival depends on secured creditors.
The secured creditors do a relatively simple calculation in bankruptcy: What is more valuable: GM as a going concern or the assets of GM in liquidation? If the collective bargaining agreements are not reduced substantially, then the value of GM as a going concern is reduced. If it is reduced too much, secured creditors will opt for Chapter 7 (liquidation bankruptcy).
So, it isn't a question of: Which is more valuable or necessary, workers or secured creditors? Instead, the question is, again, which is more valuable: GM as a going concern or the assets of GM in liquidation? That is the question that the secured creditors will be asking and, in the absence of unlimited U.S. government funds, it is the key question underlying what will happen to GM.
_______________________________________
Eleutherophobics of the World...Unite!!!
You know too much about too little, though I doubt anyone else around here has too much of an interest in who is more on the money.
But briefly:
Of course GM is going to need more lenders than the US government. And they will probably be part of the package of new financing if there is an agrred 'soft landing' Chapter 11 for GM. Think of them as becomeing 'super-secured' after a reorganization. They can still lose, but they become first in line, like any new money from the US government.
And if GM keeps operating it will need coninued borrowing, with ever less backstopped guarantees from the US government. But if they survive, their creditworthiness will be entirely on the basis of the current merits and market conditions... how badly the secured creditors got screwed in a Chapter 11 being all water under the bridge.
Your comment actually has two distinct parts. Second part:
You keep on as if this is just any other banruptcy prospect.
In all cases, a bankruptcy judge makes the final determination. In no case do the secured creditors simply have a veto over whether its going to be Chapter 11, or its liquidation because they are better off that way.
They do generally have a great deal of leverage that can amount pretty much to a veto. But that leverage is vastly diminished in this case.
If the US government says to a bankruptcy judge that the secured creditors interests have not been ignored....
GM and the government do have to take the Chapter 11 option very seriously, and one of the plan paths would he how it happens.
But being serious about it is also a message to the secured creditors to back off, before they end up with even less than they are being offered outside of bankruptcy.
The leverage the secured creditors have is not what it uusally is and what you stubbornly persist at insisting they must have also in this case.
Their leverage is that Chapter 11 would restrict the flexibility of GM management decisions in the future, making mid and longer term survival that much harder. As poor as their decisions have been in the past- nobody thinks that a slew of other parties looking over their shoulders is going to improve matters. So management still doesn't want Chapter 11.
But the secured creditirs are the ones with the most to lose from it.
Try reading my post. [Did not say secured creditors have no say. Did not say US government will "ignore" banruptcy law. Or overpower it, or whatever.]
There is plenty of flexibility in the law to accomodate wht the US govt will be looking for if they choose the Chapter 11 path.
If the U.S. government is willing to pour tens of billions of more dollars into GM, then of course that will change the calculus (why wouldn't secured creditors want GM to remain as a going concern if the government is going to foot the bill?).
The question is: Will the federal government be willing to fork over billions of more dollars to GM?
_______________________________________
Eleutherophobics of the World...Unite!!!
Because the Feds will not and cannot [politically] throw in unlimited billions.
So just because its obvious the Feds want to keep GM operating [now], doesn't keep the secured creditors from having damn good reason thinking they are better off with liquidation now, rather than liquidation after GM fails anyway.
If GM fails anyway after a Chapter 11, no one except the financers of the reorginization is going to get anything out of the liquidation.
The workers can purchase GM for a song right now. I wonder why they don't?
_______________________________________
Eleutherophobics of the World...Unite!!!
That's not quite true. Someone on babble recently wrote that while GM is worth a paltry one billion dollars, it comes with many billions of dollars of liabilities in pensions and other things.
That's basically my point. GM is a bloated money loser. And that's why no one with a brain would invest cash in it.
_______________________________________
Eleutherophobics of the World...Unite!!!
Since we've ruled out anyone with a brain that leaves us with the government. And even they will eventually draw a line in the sand and say no more.
The question is: How many more billions of dollars will the government pour into the GM rathole before finally mustering the courage to draw that line?
_______________________________________
Eleutherophobics of the World...Unite!!!