Posts Tagged ‘bondholders’

UAW on Offensive over its part in GM Restructuring

Reuther tells Congress news coverage and editorials are wrong.

by on May.29, 2009

Photo Leticia Quesada, courtesy of UAW Local 2244

The union, with uncharacteristic aggressiveness, took on the media.

The United Auto Workers Union yesterday told United States Representatives and Senators that recent news stories, editorials and op-eds about the restructuring plan at General Motors have a number of “inaccurate assertions” about the shares of equity in a New GM that will be distributed after it emerges from bankruptcy. has reported that the U.S. Treasury Department had revised an offer to angry, holdout bondholders, who claim that they are not being fairly treated in General Motors Corporation’s revised viability plan that gave them 10% of the new company to settle more than $27 billion in debt. Bondholders say the UAW is getting a better deal.

Treasury now challenges bondholders to accept the 10% stake in a reorganized GM as originally proposed by GM, and eventually another 15% of the new company will be offered by way of stock warrants.

The U.S. government will receive an initial allocation of 72.5% of the equity in the new company.

The UAW in its latest lobbying and p.r. push wanted to be sure that everyone understood that the bondholders not only will receive an initial allocation of 10% of the equity, but thee are now warrants that can result in their receiving “substantially more.”    (more…)

GM Unlikely To Reach Deal with Bondholders before the Dept for Equity Swap Deadline

Bankruptcy closer to reality for a second U.S. automaker.

by on May.19, 2009

President Barack Obama and President Barack Obama shakes hands with GM President Fritz Henderson, AP Photo/Charles Dharapak

The dispute over GM exporting jobs is shaping up to become a major political headache for the Obama Administration, with its claims to be promoting policies that will create American jobs.

General Motors Corporation late today filed a prospectus supplement with the Securities and Exchange Commission about its exchange offers for $27 billion of its unsecured public notes and the related consent solicitations that began on April 27, 2009.

In plain English, the filed supplement says that as of today GM has not reached agreements with its bondholders about a debt-for-equity swap — and it is unlikely to do so before the midnight May 26, 2009 expiration date.

Since the swap is a key element in its revised “viability plan” bankruptcy appears certain. The bondholder deal is necessary to obtain the agreement of the U.S. Treasury Department for further financing. It is also needed for the United Auto Workers Union and the VEBA-settlement class representative to accept GM stock for cash payments due. Bondholders, as they did in the case of the now bankrupt Chrysler LLC, are not cooperating. And the UAW is taking a hard line over other aspects of the plan.

Ron Gettelfinger, president of the UAW, spent the afternoon at the U.S. Treasury Department in Washington, D.C. While not commenting directly on what the issues concerning the union are, Gettelfinger went public over the weekend with at least one of them by releasing a letter to members of Congress that complained about the doubling of imports by GM from non-union and restricted-trade countries in Asia. The union wants job guarantees as part of the fragile, controversial deal Treasury is trying to put together to save GM.

Alan Reuther, UAW Legislative Director, wrote Congress that “As the discussions continue concerning the restructuring of General Motors, the UAW wishes to restate our strong opposition to the company’s plan to close 16 manufacturing facilities in the United States, while at the same time dramatically increasing the number of vehicles it will be importing from Mexico, Korea, Japan and China for sale in this country. We urge Members of Congress to join with the UAW in urging the Obama administration to insist, as part of any further government assistance, that GM should be required to maintain the maximum number of jobs in the U.S., instead of outsourcing more production to these other countries.”    (more…)

Chrysler to Shut Down Most Manufacturing Operations While Bankruptcy Proceeds

Production halts this Monday, May 4, and only resumes when the New Chrysler emerges from the court proceedings.

by on Apr.30, 2009

Tom LaSorda, Chrysler Vice Chairman and President, left, and Bob Nardelli, Chairman and CEO, will leave Chrysler.

Tom LaSorda, Chrysler Vice Chairman and President, left, and Bob Nardelli, Chairman and CEO, will leave.

Chrysler LLC today announced that, as a result of the comprehensive restructuring plan agreed to by many of its stakeholders, it has reached an agreement in principle to establish a global strategic alliance with Fiat SpA to form a new company. 

Unfortunately for workers, the company also filed for bankruptcy at a Federal court in New York City. During the bankruptcy proceedings, which are expected to last from 30 to 60 days, most of its manufacturing facilities will be closed. It is only when the New Chrysler emerges from bankruptcy that production will gradually resume. Workers will be eligible for supplemental unemployment benefits, worth about 80% of pay. Some additional plant closings are anticipated.

Chrysler already has a relatively low inventory as a result of previous cutbacks. The decision does not restrict Chrysler’s ability to reopen the plants if buyer demand warrants. Nonetheless, this is a severe blow to suppliers, who are also under pressure from GM’s announcement last week to take its plants down for 90 days.

“Even though total agreement was not possible, I am truly grateful for all that has been sacrificed, on the part of many of Chrysler’s stakeholders to reach an agreement in principle with Fiat,” said CEO and Chairman, Bob Nardelli. “My number one priority has been to preserve Chrysler and the thousands of people who depend on its success. While I am excited about the creation of the global alliance, I am personally disappointed that today Chrysler has filed for Chapter 11. This was not my first choice. “ 

Things didn’t work out so well for Nardelli, as previously predicted, and even though he was singled out for praise by the Administration today. “Chrysler’s management, and in particular, its CEO, Robert Nardelli, have played a positive and constructive role throughout this process,” President Obama said. (more…)

U.S. Treasury Moves Forward with Chrysler Bankruptcy and Fiat Partnership!

President makes tough decisions to move forward with the agreement of major stakeholders.

by on Apr.30, 2009

"It is unaceptable to let a small group of

"It was unacceptable to let a small group of speculators endanger Chrysler's future by refusing to sacrifice like everyone else.

The failure of some of Chrysler LLC’s creditors to agree to a debt-for-equity swap, tested President Obama’s patience for a month, but not his resolve or his readiness to save the once proud Michigan automaker from oblivion, and give it what he said would be a “new lease on life.”

So the President agreed with the recommendations of his Auto Task Force and directed that Chrysler LLC enter into bankruptcy under Chapter 11, section 363, in a Federal District Court in New York City, which is vastly experienced in such matters. The bankruptcy was filed today.

New Chrysler will emerge “stronger, and more competitive,” the President said.  No further job cuts are anticipated at this time. If all goes well, more jobs will ultimately be created.

The “alliance” with Fiat will create the sixth-largest global automaker, spreading R&D and design development costs over higher volumes, making it more competitive in an increasingly global and consolidating industry.

Fiat is contributing billions of dollars in advanced technology and intellectual property, and offering Chrysler access to its global distribution network.  Fiat’s technology will allow Chrysler to build new fuel-efficient cars and engines in North American factories.

The “appropriate level of shared sacrifice” was not achieved, so Chrysler will go through what is termed a “surgical, short bankruptcy in order to finish the restructuring of its balance sheet and  emerge with as a properly capitalized company that could be competitive,” a senior administration official said in a background briefing that participated in.

Chrysler’s largest secured creditors have agreed to exchange their portion of the Company’s $6.9 billion secured claim for a pro-rata share of $2 billion in cash at closing. The Bankruptcy Court will be used to impose this treatment on those lenders that failed to accept the offer, which was accepted by a majority of the lenders.

The President lambasted hedge funds and speculators looking for “unacceptable” taxpayer subsidies.

During the 30 to 60 days the bankruptcy is predicted to take, Chrysler will function normally, suppliers will be paid and people will be able to finance and purchase vehicles because of funding from the U.S. and Canadian governments. Funding  is being provided on about a $3:C$1 ratio, reflecting the highly integrated nature of Chrysler’s operations on both sides of the border.

Employees will get paid, including salary, wages and ordinary benefits.  Workers compensation claims will continue to be paid by Chrysler’s insurers.  Assuming the sale moves forward as expected, Pension Plan and VEBA funding will be transferred to the purchaser. (more…)

Virtually all UAW Members Ratify Chrysler Settlement Agreement. President Obama Speaks at Noon About the Company’s Future

Only bondholders remain in the way of a last minute reprive of the company.

by on Apr.29, 2009

"Our members have responded by accepting an agreement that is painful for our active and retired workers, but which helps preserve U.S. manufacturing jobs and gives Chrysler a chance to survive."

"Our members have responded by accepting an agreement that is painful for our active and retired workers, but which helps preserve U.S. manufacturing jobs and gives Chrysler a chance to survive."

UAW members at Chrysler have overwhelmingly ratified a settlement agreement with Chrysler, Fiat and the U.S. Treasury that will allow the restructuring of the ailing company to go ahead.

The remaining obstruction to a reorganized Chrysler this morning are hedge funds that hold its virtually worthless secured debt. The four largest banks, holding 70% of the debt have already agreed to the proposed swap, but it appears that all of the bondholders must go along, and small ones are refusing to do so.

The funds are expected to try and hold out until the last possible minute – midnight tonight – of the deadline imposed by the Auto Task Force. But President Obama is due to speak at noon today, an indication that the administration is willing to act forcefully and move on. If agreement is not reached by then, the U.S. government is prepared to put Chrysler in receivership and provide funding until Chrysler’s assets can reassigned to a new company that would then go on.

With the approval of a new contract, union workers are putting their jobs on the line, saying they are willing to take the risk that a new, new Chrysler can survive and ultimately thrive.

Eighty-two percent of production workers, and 80% of skilled-trades workers voted for the agreement in balloting that took place at UAW Chrysler locations throughout the United States. Ninety percent of office and clerical workers voted in favor of the agreement, and 94% of UAW-represented Chrysler engineering workers voted for approval.

“This has been a challenging time filled with anxiety and uncertainty for our membership,” said UAW President Ron Gettelfinger. “Our members have responded by accepting an agreement that is painful for our active and retired workers, but which helps preserve U.S. manufacturing jobs and gives Chrysler a chance to survive.”

UAW Vice President General Holiefield, who directs the union’s Chrysler Department, said: “Once again, UAW members have stepped up to the plate and acted responsibly. If other stakeholders will join us in making difficult sacrifices, Chrysler will have a chance to rebuild and participate in the eventual recovery of the U.S. vehicle market.” (more…)

UAW Agrees to Ban Strikes

New Chrysler contract alters traditional confrontational mode.

by on Apr.29, 2009

Picket Lines are a thing of the past as a UAW bargaining tool.

Picket Lines are a thing of the past as a UAW bargaining tool under the revised contract.

The United Auto Workers Union’s tentative contract with Chrysler LLC presented to union members Tuesday fundamentally changes labor relations by curbing the UAW’s right to strike for the next several years.

The contract was being presented to the more than 28,000 UAW members ahead of the ratification vote today.

“It’s very difficult,” said one union leader, who asked not to be identified.

“I really don’t think we had much choice but to go along,” Harley Shaiken, a labor expert from the University of California-Berkeley, said the “no-strike” provision represents a major change in Detroit’s often contentious labor relations. “That’s a fundamental change,” Shaiken said. “But it’s being done in the context that it will take anywhere from three to five years for this company to recover,” he said.

For years, the union had used the strike threat in economic disputes, particularly at General Motors and Chrysler. In fact, the union staged brief strikes against Chrysler and GM during contract talks in 2007, and a major 80-day strike against American Axle. However, the terms of the bridge loan agreements, effectively ban strikes. A strike is considered a default under the terms of the loan, which means even a local strike, a favorite union bargaining weapon in recent years, is probably off the table now, said one key union official. (more…)

Chrysler Deadline Met or Just Chrysler is Dead?

Chrysler working to the bitter end (beginning) to meet Treasury's demands for continued aid.

by on Apr.29, 2009

Once again financial speculators on Wall Street will determine Main Street's fate.

Financial speculators on Wall Street will determine Main Street's fate.

It all comes down to bondholders of $6.9 billion in debt. Chrysler LLC, in the latest version of its restructuring plan, wants to give them $2 billion in cash and shares in a restructured company.

Bondholders are balking, though, and it apparently requires the agreement of almost all of the 46 financial institutions and hedge funds that hold its virtually worthless debt at current trading prices to prevent a bankruptcy.

Chrysler, late yesterday, reached a tentative agreement to an equity swap with its four largest banks that hold 70% of its debt.  But it isn’t clear, if that is enough to force the 42 others to fold. As of this evening, Chrysler was still waiting to hear if  it will be forced into bankruptcy tomorrow by the  U.S. Treasury Department Auto Task Force.

Neither the President and Vice President would confirm a bankruptcy today, and the Treasury Department appears to be using the uncertainty, and media leaks about getting reading for a filing, as a cudgel to force the bondholders to relent.

“I am very pleased that principal banks have reached a deal with Chrysler to restructure the company’s debt so it can achieve viability.  A month ago when I first wrote to the CEOs of Chrysler’s major debtholders they were not even at the table, so this is a very positive development,” said Rep. Gary Peters (D-Michigan), who has been prodding the banks to negotiate with Chrysler. “The remaining debt holders should understand that this deal is better than what they could expect in bankruptcy and I encourage them to accept this fair offer,” he said.  

All the other pieces of the restructuring are basically in place. The Canadian Auto Workers Union and the United Auto Workers Union have cut their labor and benefit costs. By accepting stock for its health care fund, the UAW will end up with 55% of the new company, if ratification of the  revised agreement by members comes through tonight as expected. (more…)

Two Down, Two to go in Chrysler Negotiations?

The Canadian Auto Workers union ratifies a new contract. UAW also reaches tentative deal, subject to member approval.

by on Apr.26, 2009


Bondholders, whose jobs are not at stake, are stopping Chrysler's restructuring.

At the same time as the Canadian Auto Workers union was announcing the overwhelming ratification of a new contract by 87% of its members with Chrysler LLC on Sunday evening, the United Auto Workers union in the U.S. issued a statement saying it, too, had reached a tentative deal with Chrysler that satisfied the U.S. Auto Task Force requirements to make labor costs competitive.

Chrysler has thus reached agreements with both of its unions to modify its contracts to meet the viability tests imposed by North American federal and regional  governments for the continuation of bridge loans to ensure liquidity as the Great Recession marches on.

The UAW deal is pending,  until its membership votes positively on the new four-year contract. Ratification is expected to come by Wednesday. It is also expected that the UAW will become a significant shareholder of 20% or more of the new company in return for giving up at least half of the $10.9 billion in cash payments due to it for the  financing of member health care benefits, due to be administered next year by a Voluntary Employee Beneficiary Association, which was established in its 2007 contract with Chrysler.

The VEBA allowed Chrysler and its venture capital owners to remove health care liabilities from its weak balance sheet and transfer the risk to the UAW. By accepting virtually worthless Chrysler stock now,  instead of cash, the union is in effect becoming  a bigger proponent of free-market capitalism and risk taking than Chrysler bondholders, who want the government to socialize their risk on failed investments and make them whole.

While the latest developments are encouraging for people with sweat equity in the ailing automaker, as opposed to speculators in paper instruments who espouse free market ideology while in fact benefiting from “socialism for the rich” when their investments flounder and they turn to the government for relief,  Chrysler still needs restructuring agreements with Fiat, for an alliance, and secured debtholders, aka the socialists, for drastic cuts in the amounts it previously borrowed.

The agreements are due before this Thursday, May 1, in order to meet the terms for continued taxpayer assistance imposed by President Obama’s Auto Task Force back in February. The administration has said that lacking agreements in all areas, Chrysler will be  placed into receivership. With the stipulated agreements in place, it is prepared to advance Chrysler another $6 billion in taxpayer financed loans. A previous, similar bridge loan agreement between taxpayers with Chrysler under Lee Iacocca resulted in taxpayers making money.

This risk/reward concept applied to Chrysler, and GM, is apparently beyond the grasp of the U.S. Treasury Department when it deals with Wall Street, as it advances billions upon billions of taxpayer money to banks and hedge funds to cover their losses and assume their liabilities at 100% of value of financial instruments that should be trading at pennies on the dollar. No possible upside for taxpayers exists in these cases.

In a separate but related development, General Motors has scheduled a 9 am EDT press conference tomorrow, where it is expected that further plant closings, brand and dealer eliminations, and employee firings will be outlined. GM is facing a later, June 1, deadline than Chrysler, from the U.S. Treasury Department to complete its restructuring.


New GM CEO Confirms More Cuts Are Coming

Fritz Henderson vows to get the job done "in or out of court."

by on Mar.31, 2009

The aura of confidence projected by Henderson belies the enormity of the task in front of him.

An aura of confidence projected by Henderson belies the enormity of the task in front of him.

General Motors CEO Fritz Henderson in his second day on the job held a news conference that reaffirmed his commitment to “go deeper and go faster” in preparing a revised viability plan with “a clean balance sheet” that will pass muster with the President’s Auto Task Force. If not, Henderson said “we will do it in court.”

He acknowledged the sweeping criticisms of the President and the U.S. Treasury Department as “painful,” but quickly added that “we got it” and sketched in broad outlines the areas of the strategy that need improvement by June first. 

More job cuts and plant closings will be required, and bondholders and retirees will see commitments made to them by GM trimmed or eliminated. The decision on the sale or closing of Hummer will be made shortly. Saturn’s future remains in doubt beyond 2011, but Henderson said that it is still being studied with no immediate need to take action. Few details emerged, as Henderson said he was not going to conduct negotiations in public that are properly done at the bargaining table. 

Henderson also claimed not to be concerned about his own future beyond 60 days, “I don’t really worry too much about that,” he said. “If we get our job done it’s going to be okay,” he added. In a press briefing yesterday, Robert Gibbs, the President’s Press Secretary, denied that Rick Wagoner’s resignation as GM’s chairman was a quid pro quo for the continuation of aid. He also refused to speculate on what happens to Henderson or GM beyond the current 60-day deadline. 

Treasury is in the process of appointing two directors to the board of General Motors Acceptance Corporation, and is expected to have a significant, if not dominant role, in the remaking of the GM board of directors so that a majority of its members are new by the August meeting. Henderson now has the unenviable task of reporting to two constituencies – the changing GM board, with its new interim chairman, Kent Kresa, and Treasury through its Auto Task Force, headed by Steve Rattner and Ron Bloom. Treasury continues to be involved with any GM decisions that involve taxpayer funding on a “daily basis.”

Henderson said that the need for further cash is being evaluated, and would not say how much more liquidity from U.S. taxpayers would be needed during the next two months. The need for the $2 billion in support that was skipped in March and the $2.6 billion requested for April are still being evaluated. He would not say when taxpayers could expect to see repayment of the loans.

The aura of confidence projected by Henderson during his first leading role belies the enormity of the labors in front of him and his management team that has careened and crashed through an unending series of emergencies.  Henderson worked for virtually his entire career for Rick Wagoner, and he did not really say what would be different now that he is boss in spite of multiple questions on the topic.

Perhaps the biggest issue in getting through the next two months is the core problem of fleeing customers. It’s lights out, if an even worse sales collapse occurs than GM is currently enduring as car buyers shun its brands. The President’s warranty program announced yesterday will be of some, as yet unknown, help. GM also announced — just prior to Henderson speaking — that it will start a plan called “GM Total Confidence,” that it says protects a customer’s paycheck, investment and vehicle for 24 months.  (more…)