Bankruptcy Losses Make Hedge Fund Profits

By DAN STRUMPF and KIMBERLY S. JOHNSON, AP Auto Writers Dan Strumpf And Kimberly S. Johnson, Ap Auto Writers – 34 mins ago
NEW YORK – General Motors filed for Chapter 11 bankruptcy protection Monday as part of the Obama administration's plan to shrink the automaker to a sustainable size and give a majority ownership stake to the federal government.
"Our agreement with the U.S. Treasury and the governments of Canada and Ontario will create a leaner, quicker more customer and completely product-focused company, one that's more cost competitive and has a competitive balance sheet," CEO Fritz Henderson said at a news conference in New York. "This new GM will be built from the strongest parts of our business, including our best brands and products."
The Detroit automaker said warranty coverage, service and customer support will continue uninterrupted, plants will continue to make cars and trucks, and employees and essential suppliers will continue to be paid. GMAC Financial Services said in a statement that it will continues to provide automotive financing to GM and Chrysler dealers and customers.
GM will follow a similar course taken by smaller rival Chrysler LLC, which filed for Chapter 11 protection in April. A judge gave Chrysler approval to sell most of its assets to Italy's Fiat, moving the U.S. automaker closer to a quick exit from court protection, possibly this week.
The plan is for the federal government to take a 60 percent ownership stake in the new GM. The Canadian government would take 12.5 percent, with the United Auto Workers getting a 17.5 percent share and unsecured bondholders receiving 10 percent. Existing GM shareholders are expected to be wiped out.
The Pontiac, Mich., and Wilmington, Del., assembly plants will close this year, while plants in Spring Hill, Tenn., and Orion, Mich., will shut down production but remain on standby. One of the idled plants will be retooled to build a small car that GM had originally planned to build in China.
The company plans to cut 21,000 employees, about 34 percent of its work force, and reduce the number of dealers by 2,600. (Any cuts in CEO's or their multi million dollar salaries? )

"There is still plenty of pain to go around, but I'm confident this is far better than the alternative," said Sen. Carl Levin, D-Mich. "It's a new beginning, it's a rebirth, it's a new General Motors."
GM shares fell as low as 27 cents in Monday morning trading, their lowest price in the company's 100-year history, but rebounded to rise 13 cents from Friday's close to 88 cents in afternoon trading. The bankruptcy filing represents a dramatic downfall for GM, which was founded in 1908 by William C. Durant, who brought several car companies under one roof and developed a strategy of "a car for every purse and purpose." Longtime leader Alfred P. Sloan built the global automaker into a corporate icon.
When GM failed to do so by a March 31 deadline, Obama forced out CEO Rick Wagoner and replaced him with Henderson.

It was an all-out sprint to Monday's filing, as GM quickly sought to nail down deals with its union, bondholders and sell off brands and along with most of its Opel operations in Europe in an effort to appear in court with a near-complete plan to quickly emerge as a leaner company with a chance to become profitable.
In the U.S., the UAW's ratification of concessions, announced Friday, will save GM $1.3 billion per year. The new deal freezes wages, ends bonuses and eliminates some noncompetitive work rules.
It also moves billions in retiree health care costs off GM's books. In exchange for its ownership stake, (Great so retirees get worthless stock in lieu of healthcare. Seems like a fair trade.) Higher health care costs alone accounted for a $1,500-per-car cost gap between GM and Japanese vehicles. (National single payer health care would solve this problem. Hello!!!!)
GM will offer buyouts and early retirement packages to all of its 61,000 hourly workers as it plans to shrink overall employment. The company also has about 27,000 white collar employees. In contrast, GM employed 618,000 Americans in 1979, more than any other company.
But just cutting labor and overhead costs won't be enough to save the company. It also has been working to streamline its engineering and design, as well as standardize many parts so they can go into multiple models. (Taking money away from engineering and design? Are you kidding me? How can their priorities be so out of whack?)

So, what isn't getting any media coverage is the hedge funds and credit swap derivatives that helped push the auto companies into bankruptcy. The very same people like Goldman Sacks and other financial institutions bet against the auto companies solvency. If the government bailed out GM and Chrysler like they did so many Wall Street companies, Congressmen and their lobbyist clientele would have lost money. As it stands Wall Street hedge funds that our tax payer dollars subsidized, are going to clean up while the UAW takes it in the shorts, Joe six pack laborer loses his job and any stock they owned in the company is pretty much worthless.
Where's the outrage?! Where's the 60 minute expose'? Why aren't any of the media outlets covering this scam?! WTF?!


DaG Out