Czar Nicholas II of Russia
Car Czar Consulting says: It appears to us this is going to be resolved by the court before the July 11, 2009 “witching hour” when GM would be “forced” to liquidate its assets as the Obama Administration’s deadline looms.
There are many impacted here, not the least of which may be the numerous product liability victims who have filed with the courts for redress and would have their cases dismissed as a function of court- approved bankruptcy (for more on this aspect, please see the video below).
Be safe!
General Motors
GM CEO makes case for bankruptcy asset sale
June 30, 2009, NEW YORK (Reuters) – General Motors Corp’s chief executive told a U.S. bankruptcy court on Tuesday that the sale of GM’s main assets to government-backed “New GM” must win court approval in order for the iconic automaker to survive.
Fritz Henderson told the court that if the sale is not approved by July 10 and GM loses access to government funding, the company would be forced to liquidate. He testified on the first day of a hearing at which the automaker is seeking court approval for the sale just 30 days after filing for Chapter 11.
“Business is doing better” at GM, Henderson said, as customers, suppliers, workers and others anticipate the completion of a successful deal. He added that the automaker had originally hoped to repay its loans to the government and restructure outside of bankruptcy.
Henderson also discussed the ouster of former GM CEO Rick Wagoner, saying that Wagoner told him that he had been asked to step down by Steve Rattner, head of the Obama administration’s autos task force.
The GM sale hearing, before Judge Robert Gerber, is expected to continue for at least two days, as the company faces objections and questions from its creditors committee, a group of dissenting bondholders, those with liability and asbestos claims against the company, as well as unions and dealerships.
A lawyer for GM, Harvey Miller of Weil Gotshal & Manges, opened the proceeding by noting the company had made progress on some of the objections about tort claims and state tax claims, but that others were still unresolved.
If the deal is approved, GM will be able to sell its best assets, including Chevrolet and Cadillac, under Section 363 of the bankruptcy code to a “New GM” while the U.S. Treasury would provide billions of dollars in financing.
GM’s old assets would remain behind in bankruptcy court to be liquidated.
BIG WIN FOR U.S. AUTOS TASK FORCE
A successful sale would mark the second big victory for the Obama administration’s autos task force, which earlier this month also helped broker the sale of Chrysler LLC to a group led by Italy’s Fiat SpA. The U.S. Supreme Court cleared the way for that deal to go through on June 9.
Outside the Manhattan courthouse, about 75 union-affiliated protesters carried placards and chanted “Save our benefits.”
No competing bidders have emerged as an alternative to the U.S. government’s $60 billion financing for GM, including a proposed equity investment of $50 billion that would give the U.S. Treasury a 60 percent ownership stake.
Under the plan, the United Auto Workers union would gain a 17.5 percent stake in New GM, the Canadian government would own about 12 percent, and GM bondholders are expected to get about 10 percent.
GM has said more than 50 percent of its bondholders support the deal, but a group of small bondholders mounted a challenge to the sale in court on Tuesday.
Several other individual bondholders have filed objections to the sale, along with the state of Texas which contends the sale illegally challenges state laws on dealerships, and a group representing about 300 Americans with lawsuits against GM for alleged product defects.
GM, however, resolved a key objection from nine state attorneys general over the weekend, saying New GM would accept liability for future product defects. The company also said it would address objections raised by more than 20 of its parts suppliers.
The case is In re: General Motors Corp, U.S. Bankruptcy Court, Southern District of New York, No. 09-50026.
Obama’s Economic Programs Lack Focus
(RealMoney by TheStreet.com) Yahoo! June 30, 2009 Before adjourning, the House of Representatives passed the “cap-and-trade” bill, which probably has no chance of getting through the Senate in its current form. But it has enough inanities in it to make you glad the lawmakers left town for a while. There is a provision that would levy tariffs on any country that didn’t match the goals this bill calls for. This is just protectionism cloaked in self-righteousness.
The Congressional Budget Office figures this bill would cost the average family a mere $175 by 2020. There is no way that is anywhere near accurate. Jason Trennert of Strategas did some digging recently and came up with an unbelievable fact. When Medicaid was passed oh so many years ago, the long-term cost projections figured it would cost $9 billion by 1990. It cost over $100 billion by then. The government was off by a factor of more than 10!
The government is always woefully off in its cost estimates. Additionally, organizations can use “offsets” to ease the burden of cutting emissions. An offset could be planting trees in Costa Rica in place of reducing emissions here. They do some of this in Europe, and they will admit they don’t know the economics of the idea, nor do they know if things really are offset. This is just so lacking in substance.
Our president needs to lead these efforts if they are to make any coherent sense. Peggy Noonan had a very interesting piece in Saturday’s Wall Street Journal. She says successful presidents are described in one sentence. Lincoln freed the slaves and preserved the Union. FDR guided the nation through the Depression and World War II. President Obama is trying to write an essay, not a sentence. And he is letting Congress dictate the language. The health care proposals are all over the place and come from Congress, not the White House. This is not leadership. President Obama needs to spend his political capital on his programs, not a patchwork of congressional ideas that don’t hang together.
Americans don’t know how confident to feel. The University of Michigan sentiment survey was up for the third month in a row last week, but it is still woefully below prior peaks. Most would be in favor of health care reform, environmental initiatives and financial reform. But there is growing fear about these bills’ cost and what they might lose in the transition. While many people don’t have health coverage, those who do are generally very much satisfied and fear they will lose what they have and be taxed heavily besides.
Distrust of Congress is so pervasive that many people are not persuaded as to the merits of these programs. Also, there are limits as to what can be done financially, and President Obama needs to take command of what I see is a situation starting to get out of control. Doug Kass (my granddaughter’s honorary uncle!) phrased it very well last week when he said there is a big difference between being popular and being populist. Obama is popular, but his programs are expensively populist. He will, in my opinion, waste his popularity by not taking control of the populist programs he wants to enact. And he needs to realize that there are limits to what can be afforded.
As for the stock market, most post profit recessions see a rebound in earnings of some 36% following the trough year. The market averages a 43% bounce. We have had a 40% move in stocks from the March trough to the recent peak. I see no way earnings will experience an average rebound with the deleveraging the system is going through and with a rapidly rising savings rate. It continues to make sense to me for the stock market to consolidate.
