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GM - Saving Whose Bacon?



May 13, 2009 – Comments (0) | RELATED TICKERS: GM

Not long ago, a Fool article asked: why are the powers that be trying so hard to save GM? Surely the cure was going to be worse than the cure? The author theorized: bondholders.

Guess again.

Details of the proposed settlement are now known:

Bondholders have $27B, and will get 10% of GM

Goldfinger holds    $20B, and will get 39% of GM

If my 99¢ calculator is correct, the UAW healthcare fund gets $5 of debt repayment for every $1 that bondholders receive, so that becomes:

500% more,

5x more,

quintuple the $’s, etc.

Glad to see that the president is not playing favorites on this one. Bondholders seem to want the same deal Goldfinger is getting, and that is totally fair (e.g. for every $1B GM owes you, you get 1% of GM?). Yet, the administration is crabbing on evil “hedge funds” for being greedy and selfish. Uh, Mr. President, how does that work again?

In a perfect world, this is what SHOULD happen:

VEBA simply gets zeroed out (UAW retirees would then become eligible for Medicare, by special law if necessary, just like very other American retiree).

Pensions get tossed over the wall to PBGC (they “only” get half of what they were scheduled to receive, but this is still several times more per month than all other Americans who rely solely on SSI; disappointing? Yes; disaster? hardly).

Bondholders get so few pennies on the $, that they do not get enough change to run an old-fashion gumball machine (and I am thinking of the regular ones, not the monster ones you find at the mall).

Chapter 7. GM simply disappears, and someone who knows how to make a profit making cars buys up the good parts of what is mostly a cruddy car company. One of the original justifications for pumping taxdollars into GM was that the country would go down a big, nasty, financial hole if it failed. Well, dangers of total collapse are over, there are green shoots, we are safe from disaster, and it is now safe to simply let our beloved keepsake go bye-bye?


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