Obama’s “Path to Viability for GM & Chrysler”: The ruthless language of Wall Street

[Hannah Bell]

By Barry Grey
3 April 2009

On Monday, President Barack Obama issued a set of ultimatums to General Motors and Chrysler that represent the direct intervention of the US government to effect a brutal restructuring of the American auto industry in the interests of Wall Street...

At the heart of the "New Path to Viability" outlined by Obama's Auto Task Force is a far more "aggressive" shutting of plants, elimination of models and nameplates, closing of dealerships and destruction of jobs, combined with deeper cuts in wages, benefits and work rules and the ditching of the auto companies' pension and retiree health care obligations...

The overview of the Task Force's findings carries the euphemistically cynical title "Obama Administration New Path to Viability for GM & Chrysler." ...the statement declares that... "Their best chance of success may well require utilizing the bankruptcy code in a quick and surgical way... a structured bankruptcy process—if needed here—would be a tool to make it easier for General Motors and Chrysler to clear away old liabilities so they can get on a path to success..." .

What are these "unsustainable liabilities" that must be "cleared away?"

They are the pensions and health benefits of 800,000 GM and 125,000 Chrysler UAW retirees and their dependents...

A section of this overview...refers to "restructuring experts retained by the Administration" who "will work closely with the company." . Who are these "restructuring experts?"

They are more commonly known as asset strippers. They advise Wall Street investors on the best means of making a profit by hiving off unprofitable sections of companies, slashing jobs and gutting wages and benefits.

Geithner's two top advisors on the Task Force are such individuals—the investment bankers Steven Rattner and Ron Bloom. The latter worked for a period as an adviser to the United Steelworkers union, helping to organize the downsizing, closure and merger of steel companies which involved the destruction of tens of thousands of jobs. In the process, the steel bosses offloaded billions of dollars in pension obligations to the government's Pension Benefit Guarantee Corporation, resulting in sharp reductions in pension benefits for retired workers and the elimination of health care benefits for more than 200,000 workers...

This document concludes with the following curious formulation: "e believe that there could be a viable business within GM if the Company and its stakeholders engage in a substantially more aggressive restructuring plan." .

Why the phrase "within"? The answer, as revealed by the Wall Street Journal in a recent article, is a scheme being considered by the administration to use the bankruptcy courts to divide GM into two companies—a profitable company producing popular models that would be divested of retiree obligations, and a "bad" GM onto which pension and retiree health obligations would be offloaded. The latter would remain in bankruptcy until its assets were sold off or otherwise liquidated...

http://www.wsws.org/articles/2009/apr2009/oatf-a03.shtml

[FrenchieCat]

1. Thank God I make my own decisions on things, and don't have

somebody leading me by the nose to hate everything this President does and says. Most don't know what in the fuck they are talking about.

What are these "unsustainable liabilities" that must be "cleared away?" the dumbass write asks cynically.


The Bondholders, that's who. :eyes:



GM Bankruptcy In Bondholders' Hands
Report: Bondholders Want More Money In Exchange For Forgiving Automaker's Debt
http://www.cbsnews.com/stories/2009/02/12/business/main4795973.shtml

GM Bondholders not digging restructuring plan
Bondholder discontent isn't surprising here, considering the government loan conditions mandate GM exchanges two-thirds of its $27 billion in debt into liquidity. If GM doesn't hit its target, the automaker would be forced to give back $13.4 billion in government loans, guaranteeing chapter 11 bankruptcy. If bondholders acquiesce and agree to the debt reduction and GM still goes bankrupt, the bondholder equity would be worthless.
http://www.autoblog.com/2009/03/23/gm-bondholders-not-digging-restructuring-plan/


GM bondholders, Obama auto team to meet Thursday

* GM bondholders to meet with Obama autos team Thurs

* Bondholders focused on keeping GM out of bankruptcy

* Guarantee of bond debt one of issues up for talks
http://www.zimbio.com/Personal+Finance/articles/14551/GM+bondholders+Obama+auto+team+meet+Thursday


GM bondholders beg for a seat at the table
http://latimesblogs.latimes.com/money_co/2009/03/gm-bondholders--general-motors-corps-bondholders-know-theyre-likely-to-become-stockholders-whether-the-company-reorga.html


Obama Turns Up The Heat On GM Bondholders (GM)
http://www.businessinsider.com/obama-turns-up-the-heat-on-gm-bondholders-2009-4


The bondholders bought GM's debt when it was mostly investment grade. Now, the company is offering just 33 cents on the dollar and the rest in stock. The bondholders want a better deal, and they're worried the stock could be worthless.

Why should the bondholders even consider this? Well, if GM goes into bankruptcy, they could get zero cents on the dollar.
http://www.npr.org/templates/story/story.php?storyId=102416435

[Larkspur]

2. So will Obama come up with another stimululs package that includes extending unemployment

compensation to all those laid off by this plan and raising Social Security benefits for the retirees? I doubt it because Wall Street runs the White House. Obama's coziness to Wall Street was the main reason I could not get enthusiastic about him as a candidate. He is Bill Clinton version 2.0.

[cliffordu]

3. It seems to me that the ONLY way Obama could get re-elected if he

cuts the health care of 800,000 employees would be to segue them into a "public option" health care....like the one being pushed by Congressional liberals....

I hope.

But this is so far afield from anything I would have expected.....