The engagement has become hand-to-hand as the fight to see who will make it out of the rubble of the GM (GM) restructuring comes to a close. The most recent development is that the car company's retired workers are blaming the firm's creditors for dragging their feet and pushing GM closer to bankruptcy. On the one side is a group that wants its money back and on the other are the people who worked on the assembly line for decades and don't want to spend their golden years without healthcare or a pension.
While it is clear that no one will get out of the GM collapse whole, it now is almost certain that some parties will not get out at all. (See the 50 worst cars of all time.)
GM is becoming so desperate that it may offer a program to exchange its $28 billion in unsecured debt for equity in the company. The bondholders would not get a penny under the plan being proposed. The GM shares they would receive may be worthless in a year if the car company cannot mount a furious comeback against both the economy and more well-financed and adroit competitors from Asia. GM is so close to being put into Chapter 11, effectively at the hands of the federal government, that its offer of equity-for-debt will probably by-pass the powerful committee that represents the firm's bondholders in negotiations. The company has made the correct calculation that it is out of time and that good manners won't pave the way to an agreement.
Most of GM's current workers have a reasonably good chance of keeping their jobs if the company remains independent and gets significant government loans. GM has already cut so many blue collar workers that it operates with a skeleton staff and will not have the capacity to ramp up production with its current staff levels when the car markets eventually rebound even if the rebound is a modest one.
GM's future in these final weeks of negotiation will be decided by old men who have retired from years of blue collar living pitted against old men in business suits who have legions of attorneys trying to redeem their bonds at close to face value. The interests of each side are precious enough that neither side is likely to back down.
The fight for the last crumbs on the table has reached a point where neither GM's management nor the government will have to wield the axe. GM's creditors and retired workers will finish the company off on their own.
Douglas A. McIntyre
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