GM: The Death Watch Begins
Just think what kind of Memorial Day weekend GM bondholders are having. Everyone else is waving flags and barbecuing with friends and family; these guys are inside, alone, drinking heavily. On Friday, their creditor committee turned down a debt-for-equity swap of some $27 billion in bond holdings for a 10 percent share in the drowning company.
Can you blame them? The proposed restructuring would give the government a 50 percent share of GM and the UAW 39 percent. This is similar to the deal that drove Chrysler to the bankruptcy courts. To put it plainly, creditors are getting screwed.
So are the dealers and, possibly, the suppliers—who supposedly will follow the pattern set by a Chrysler restructuring. If things work out as the Washington Post and other sources report, we may see GM filing before the June 1 deadline—meaning, this week!
Opel is the other shoe to drop this week. A decision on three offers to buy the company will be coming in a few days, says a spokesperson for German Chancellor Angela Merkel. There are offers from Fiat, Magna International (Canadian parts maker, with financing from Russia’s Sherbank), and a New York buyout firm, Ripplewood Holdings. GM will have final choice of who wins (or whether the firm should be allowed to go into bankruptcy), but the Germans will decide whether and how to lend state support in loan guarantees.
German officials are contradicting themselves about whether bankruptcy for Opel is possible or desirable, and they claim they need “considerable clarification from the American government, such as on brand rights and intellectual property.” Magna appears to be winning, say some, and others point to “movement in the positions” of the potential investors.
Opel has 25,000 workers, about half of GM’s European workforce, and so plenty of politics are involved in the decision, which seems to be the norm these days. Enjoy what’s left of your weekend.
Did anybody out there think about GM this weekend? If you did, heaven forbid, what were your thoughts?