Destroyer of economies and rich democratic traditions.

Option #3:
GM is done for; don’t waste another $1 of taxpayer money on GM…shut her down and let the more lean and innovative car makers quickly fill in the resultant void.

As a taxpayer underwriting/supporting GM (involuntarily), I hereby cast my single vote for Option #2. Second in place, Option #3.

PS…way to GM-VOLT.com commenter’s! This is a particularly rich blog thread with many well reasoned and articulated points.
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The only way for Chrysler/GM to continue is if government pours money into it. This was as true last November as it is today. As statik pointed out earlier, as soon as government started to pour money into it, it had the choice of continuing to pour money into it, or stop and look foolish for pouring money in to a broken vessel (not his words, but you get the idea).

Consequently, if Chrysler/GM does survive in some form, it will be under a form of government ownership/control. As many if not most posters have noted, no one wants to buy a government-made, government-controlled product. In short, Chrysler/GM would appear doomed to fail regardless of the outcome of the GSB.

The one smart thing the government could do here is what it won’t do, and wouldn’t do last November:

It could allow Chrysler/GM to fail, with the result that many buyers with domestic loyalties move to Ford, and one healthy domestic automaker emerges out of the ruins of the Big 3. To continue on our current path of continued government meddling is to likely to condemn Ford as well as GM/Chrysler to the trash-heap of history. Unfortunately, government bureaucrats who (in most cases) have never made or designed a product or valuable good or service in lives are unlikely to be blessed with so much foresight (as evidenced by their current set of actions).

NPNS!

No. In that situation, JPM couldn’t do anything. But if their loan was secured, they would retain first claim to the asset in question. If not, they still couldn’t do anything about it. That’s why its in my credit card contract that they can raise my interest rates if I become a riskier bet. In the bond market (which is where GM and Chrysler are), the bondholder takes a loss on his or her bonds.

And yes, everyone assumes that something will arise from the reorganization. At least for GM, Chrysler is more questionable. GM’s assets are worth quite a lot more as a going concern than in a liquidation. Chrysler’s are too, but its continued ability to act as going concern is a lot more questionable.

Nuclear is more expensive than coal because the coal plants have been freely polluting the air and passing all those costs on to you and me. Once coal (and other “dirty” fuel sources like oil) have to pay the actual cost of their product nuclear will be cheaper.

Coal plants produce waste. In fact, coal plant emissions include a small percentage of nuclear material (google it or http://www.epa.gov/radtown/coal-plant.html if you’re too lazy) so you’re breathing nuclear stuff right now because of a bunch of well-intentioned but misinformed people who think nuclear power plants are so bad. The joke is on the anti-nuke activists because they have CAUSED more nuclear pollution than any nuclear power plant ever could. No technology is perfect but with advances in nuclear especially in the last 10 years nuclear power is now far safer than coal or natural gas when you factor in the hidden damage those two technologies cause. And nuclear power will continue to get better (unlike coal and natural gas) as new technologies come online.

If you look at my older posts you will see that I have consistently said that nuclear power is one part of the solution, not the only. There is no “one solution.” We need a huge expansion of solar power and wind energy as well as energy from the tides and ocean currents. Hydro power accounts for about 10% of our nations power now and we should look into environmentally safe ways to expand that as well. But we need nuclear to provide base line power to most parts of the country (that don’t happen to have a huge hydro power plant nearby).

If we expand renewables enough to provide 40% of our energy needs (solar now covers about 1% IIRC) then double our nuclear power from 20% to 40% and keep the hydro at 10% we will be energy independent. That won’t happen overnight. But sticking our heads in the sand about nuclear just isn’t an option.

Reference: http://www.ornl.gov/info/ornlreview/rev26-34/text/colmain.html
and http://www.epa.gov/radtown/coal-plant.html among others.

Thank you for the thoughtful response. Your BAC and JP example is a good one but not completely congruous. I suppose the argument I’m presenting is what if I went to BAC and said I cannot operate for the next 2 months please gimme some cash and the loan in question is not on realestate but a depreciable asset. BAC comes back and says well I might be willing to do that but come back with a plan that shows how you will be able to operate in the future. Part of the plan I come back with says that I will reduce my debt to JP by 2/3 among other things. BAC says it sounds like you might onto something but you have to do this in 3 months time and prove viability then or I’m calling back my loan to you. Does JP have no legal right to say WOAA, these guys are not in a position to pay me back now and they are basically negioting away my position without my say or delaying a bankruptcy while the value of my sercurity deminishes. So, the litigation would not have been to force bankruptcy but rather to block two parties from conspiring to negotiate away JP’s bond value. I suppose JP will have to be shown to be suffiently aware of the terms of the loan, even if this is a valid legal argument.

My question, “Does it matter any way?” is just addressing the issue that all of the discussion about what everyone will end up with is based on the presumption that something will rise out of bankruptcy. If the judge chooses to liquidate then none of this matters. We would have to know a lot more detail for informed speculation but it certainly seems plausible, if not likely, that this process will lead to Ch7.

I’ll try to take a stab this. Although, I’m really not an expert in bankruptcy law.

But this is my basic understanding of the situation (and Statik please correct me if I’m wrong):

When the government loaned money to GM and Chrysler, Chrysler’s assets were already mortgaged. That meant the government had to take a junior position. So, in a bankruptcy proceeding, the bondholders get priority over the government. GM, on the other hand, had unencumbered assets, so the government’s loan is secured. And the government will take priority over the bondholders in a bankruptcy proceeding.

(It’s more complicated than that–some of GM’s bonds are secured, but the assets involved are of questionable value–Saturn, which they’re already giving away for free, and a plant they would probably like to keep, but is very politically expendable.)

Second, a bondholder cannot object to GM or Chrysler getting new loan any more than JP Morgan could object to someone getting a second mortgage on their house from Bank of America.

And if BAC issued the mortgage on the condition that JP Morgan lower the first one, that would be between the homeowner and BAC. JP Morgan would have nothing to do with it. And if BAC foreclosed, they’d still have to pay off JP Morgan since that’s the first mortgage. Similarly, GM and Chrysler’s loan from the government is between them and the government. The bondholders have no standing to object to any of it. But they certainly aren’t required to meet the government’s requirements of GM or Chrysler.

Also, as long as GM or Chrysler are current with their payments, the bondholders cannot force GM into bankruptcy. Any more than a bank can foreclose on people who are currently up-to-date with their mortage payments. Even if they start borrowing heavily on their credit cards.

I’m not sure I understand the rest of your question. Yes. It matters because in a reorganization, every creditor is entitled to receive at least the value they would get in a liquidation. If a group can prove that they would do better in a liquidation than a reorganization, then they can force a liquidation. The judge is allowed to make a judgment on the liquidation value, but that’s a long process, and certainly would take more than the allotted 30-60 days.

There is something called a “cram down” where the 2/3rds of the bondholders of a given priority level can drag the rest with them. However, the bondholders votes have to be given in “good faith,” and the tarp lenders probably shouldn’t qualify, which renders everything a lot more complicated.

http://news.yahoo.com/s/ap/20090504/ap_on_re_us/eu_italy_fiat_gm;_ylt=AjbBrO0DM59r24jSrWFCS_bBF4l4;_ylu=X3oDMTJqam5jaXZiBGFzc2V0A2FwLzIwMDkwNTA0L2V1X2l0YWx5X2ZpYXRfZ20EY3BvcwMxBHBvcwMxBHNlYwN5bl90b3Bfc3RvcmllcwRzbGsDZmlhdGV5ZXNuZXdj

Now is looks like Fiat is also going to buy the European GM divisions. I guess they can afford it, since they are getting Chrysler for free. I always new that I would end up with a Ferrari someday! I can just see it now, tooling around the highways and by-ways in my Ferrari Agila.

http://www.opel-europe.com/agila2008/

Lurtz #77: Wow! I have never been called an eliminationist class-warrior before. Something new I can add to my list of “sticks and stones”. OK, you got me on the discount clothing – It is a weekend after all. But I am rather proud of my hair!!! And my spring mansion is in Youngstown, OH, because the weather is much nicer this time of year….

And by the way, the orbital velocity of Mars is 11,000 miles per hour, or if you like the metric system, 24.1309 km/sec.

Till tomorrow’s thread

“Didn’t those terms include viability plans that included concessions by all parties, including the bondholders?”

Statik #104

“no sir & especially not them”

Oops…I meant to write:
…concession PLANS by all…

It’s the understanding of the intent of the loans that matters, IMO.

I never saw anything as to WHY the government’s loan was at the head of the creditor line, but I know I read that on more one occasion. In fact, I thought you included something like that in your comments from back at the time of the loans.

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“It seems to me that the bondholders passively accepted those terms by not legally objecting to the terms and the loans at that time, thereby forcing bankruptcy around that time.”

“no they did not”

Another poor conveyance on my part. It should have read:
It seems to me that the bondholders passively accepted those terms by not legally objecting to the terms and the loans at that time, which would have forced bankruptcy around that time if the loans were blocked.

I assume you mean that you believe they did not accept in a legal sense. They certainly did in reality.

.