Tuesday, March 31, 2009

Good GM - Bad GM
60 Days to Chapter 11?

The Wall Street Journal has additional information about Monday's Barack Obama press conference on the auto bailout. The President announced that both GM and Chrysler failed to submit a viability plan acceptable to the government. (Soon afterward the Canadian government also gave the plans failing marks.) The government will be replacing most of General Motors' board of directors, and will be giving the company 60 days to put a plan in place that the government thinks is worth putting more dough on the table. If not, President Obama said, that an orderly bankruptcy is an option with government supplied debtor-in-possession financing. To assuage the fears of consumers, B.O. said that, effective immediately, the government would be standing behind the warranties of GM and Chrysler products.

The overall tone of the session suggests that the government isn't really counting on GM cutting any deals with its core creditors or labor. The government has a plan in mind to split GM into two parts, Good GM (including Chevrolet, Cadillac and some foreign assets) and (Bad GM including Hummer, Saturn and virtually all the legacy costs). Creditors and the UAW retirees would get an equity stake in Good GM, and Bad GM would be left to rot waiting for a buyer.

Whether GM goes Chapter 11 or not, it's clear the government is expecting a new collective bargaining agreement with cuts much deeper than the UAW has been willing to grant so far.

For the Marginally Relevant Youtube Clip? How about a tasty morsel of "bad Kirk" from the Classic Trek episode, The Enemy Within. Go buy the episode or dvd so Paramount doesn't get mad at me for embedding this.

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