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Question to Wagoner: Why?



December 04, 2008 – Comments (1) | RELATED TICKERS: GM

8Q: "General Motors Corporation: Restructuring Plan for Long-Term Viability"
Section 5.8 "Pension and Healthcare Considerations" (p.16)

I Quote:

"Federal loan assistance will allow GM to fulfill obligations to employees and retirees related to pensions and healthcare."

OK; question: why? You expect a taxpayer bailout so you can save the pensions and healthcare of workers who get $75 per hour? Really?

OTOH, GM claims that $1400 of each car goes to healthcare, coming to $4B per year. OK: let's assume GM cuts loose all healthcare; this will barely amount to one month's of cash burn-thru. Look at the 10Q, note 10 "pensions and other postretirement benefits" p. 18. It lists: post-retirement benefits ($33B) + pensions ($11B) = $44B. Surely this is a more lucrative source for cuts? If, say, GM slashes retirement benefits by 1/2, this comes to $2B per MONTH. "GM owes creditors $45 billion and must pay more than $7.5 billion early in 2010 to a UAW-administered trust fund that will take over retiree health care payments." (from article in "The Eagle"). Will $2B be enough (assuming Goldfinger allows it)? Perhaps not, but it will go a long way to.

In their report, GM said that Chapter 11 will cause 80% drop in sales because people do not want to buy a car from a bankrupt company. Goldfinger repeated this nonsense in his Senate testimony. I would like to know where they got this figure; it is not footnoted. Perhaps they are afraid of Chapter 11 because they know that a bankruptcy judge will simply slash and burn all those wonderful, Goldfinger-plated healtcare and retirement union benefits as being too expensive.


1 Comments – Post Your Own

#1) On December 04, 2008 at 9:47 PM, Imperial1964 (94.49) wrote:

I don't figure it makes a lot of difference between GM in a bankruptcy restructuring vs. constant rumors of GM not lasting through the end of the month.

The key is making the bankruptcy quick.  I think a quick pre-packaged bankruptcy wouldn't be any worse than dragging out the uncertainty for months.

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