It was with great fanfare yesterday that General Motors announced that it was repaying some $4.7 billion of $6.7 billion in loans it received from the federal government. And, with even bigger fanfare, it was announced that this partial repayment was being made some five years earlier than expected. Read more
I really don’t like this guy. I didn’t like him when he was appointed and I like him less now. But … GM and Chrysler begged for the money, they got it, and now … well …
The Obama administration will soon order the nation’s biggest bailed-out companies to drastically cut pay packages for their top executives, according to several reports published Wednesday.
Kenneth Feinberg, who was named the White House’s so-called “pay czar” in June, is expected to demand that the seven largest bailout recipients lower the total compensation for their top 25 highest paid employees by 50%, on average, according to reports in both the New York Times and Wall Street Journal.
For the past two months, Feinberg has been reviewing pay plans at Citigroup (C, Fortune 500), AIG (AIG, Fortune 500), Bank of America (BAC, Fortune 500), General Motors, Chrysler, GMAC and Chrysler Financial in an effort to put these firms in a position to pay back bailout money as soon as possible.
It’s not new.We knew it was coming, and this pay czar is not going away anytime soon.
Interestingly enough, Senator Alexander chimed in on this on Cavuto, reminding people we wouldn’t be debating this if the Democrats had not shot down his idea when the bailout was first proposed.
Steve posted an interesting item recently about the Chrysler dealerships that had been terminated, and, he raised some even more interesting questions about how the terminated dealers were selected. I have no answers, just more questions.
Wednesday’s Orlando Sentinel reported that two Chevy dealerships in the Orlando area received notice Tuesday that their franchise agreements will not be renewed when they expire in October, 2010. Both dealerships are owned by the Holler family.
According to the Orlando Sentinel…
The Holler family has been in the auto business since 1920. Family patriarch Bill Holler was vice president of General Motors and a general sales manager of Chevrolet from 1929 until 1945. The family has sold General Motors products in Orlando since 1938.
As some would say, that’s nice, but what have you done for me lately? Well, the Holler dealerships terminated were the number one and number two sellers of Chevy automobiles in Orlando’s “four county area”.
I don’t know the Hollers’ political affiliation, but, what I do know is that Central Florida is predominately Republican.
All I can glean from this is, either Steve’s post is worth looking into, or, Obama’s car czar is using the dartboard approach to terminate dealerships.
Update by Steve: Thanks to the Sound Off Sister for bringing this up as I’ve been meaning to write about the “top” dealers that are being cut loose.
What it comes down to is profitable dealerships are being shut down. If they are paying their bills, keeping staff employed and making money, why is GM (the Obama administration) cutting them loose?
This is the first question that dealers are asking, and no answers seem to be coming around.
If the dealers really are making money, then the problem is at the corporate level (management and unions) and not at the franchise level.
General Motors has refused to discuss individual dealerships and the reasons behind its franchise cancellations.
This guy just may replace Cavuto as my daily video adrenaline rush. After explaining in this post why GM will likely remain in government control for decades … today he tells Trace how GM and the Feds will game the system (just as they did with AMTRAK) to drive the competition out of business. Taxpayer paid lobbyists lobbying Congress to the advantage of a company controlled by … Congress. Unconstitutional?
I put this up only because you need to understand the kind of thinking that brought this company down is still in place. And you need to hear why I and others believe the Feds will be in charge of GM forever. Read more
and he did it last year. The prophet speaks.
It’s official and GM has no one to blame but itself … and the Federal Government. But check out the video for the kicker to this story. Read more
Wednesday, John, one of the regulars in the chat room, said that he heard Chrysler was about to cut 700 dealers. He wanted to know if anyone in the room had heard the same. As no one had, I decided to do a bit of digging. Well, John, if you are reading this you are not going to like the answer.
Chrysler has about 3,200 dealers and Obama’s car czar is “leaning” on Chrysler to trim those numbers rapidly. Approximately 50% of those 3,200 dealers account for 90% of all Chrysler sales. So, I suppose it safe to say that 1,600 dealerships will remain in business. And, it is anyone’s guess what will happen to the other 1,600. But, I wouldn’t want to be one of them right now, nor would I want to be employed by one of them right now.
The same article also spoke about the fate of GM’s dealers. GM’s plan, announced in February, was to cut 1600 of its 6200 dealers at the rate of 400 per year through 2012. The administration wasn’t happy with that either. So it now insists that GM cut 2,600 of its dealers within 18 months. According to the National Automobile Dealers Association,
Speeding up that process will only dump 180,000 more workers onto unemployment rolls in a recession…
The strange part is that the dealers cost the manufacturers nothing. They are, for the most part, small businessmen who simply sell Chrysler’s and GM’s cars and send Chrysler and GM money for every sale. So, why Obama wants to shut their doors, driving many dealers into bankruptcy, and more workers onto the unemployment rolls, will, no doubt, forever remain a mystery.
I suppose, an even deeper question is how can the government, who is merely an unsecured creditor of Chrysler and GM, dictate things such as this? Perhaps the book Obama received from Cesar Chavez was titled “Government By Intimidation”. If so, Obama has learned well.
Jim spoke on Thursday morning about the “deal” being offered to the bondholders of General Motors which, if accepted by them, will presumably keep GM out of bankruptcy. I say presumably because this “restructuring” has all of the earmarks of failure that are found in the Chrysler plan, but without the help of Fiat. However, I digress.
On the chance you missed it, there was a wonderful opinion in the April 30, 2009 Wall Street Journal aptly titled, “Gettelfinger Motors“. It is definitely worth the time it will take you to read it. Here’s how the “equitable” restructuring of GM would work.
There are three groups of GM creditors that, as a matter of law, would be on similar footing in the Bankruptcy Court… the federal government, the UAW’s retiree health-care benefit trust, and the bondholders. The federal government is owed $16.2 billion, the UAW benefit trust is owed $20 billion, and the bondholders are owed $27.2 billion. One would assume that if the plan was to swap debt for equity in the “new” GM, that the debt/equity swap would be done fairly and proportionately. But, I’m guessing by now, you know that isn’t the plan.
The federal government would receive 50% of the stock of the “new” GM, and $8.1 billion in debt. The UAW retiree health-care benefit trust would receive 40% of the stock, and $10 billion in cash to be paid over time, and the bondholders, who are owed the lion’s share, would receive 10% of the stock and, well, nothing else.
But, here’s the best part.
GM CEO Fritz Henderson says Treasury insisted that bondholders receive, at most, 10% of the company. “We went to the maximum and offered 10%,” Mr. Henderson said. Mr. Rattner’s office did not return our calls, so we can’t say why Mr. Rattner [Obama’s car czar]wanted private risk capital cut out of the ownership of the new GM, but no one has contradicted Mr. Henderson. (emphasis supplied)
So, let me see if I have this right. The entity that is owed the least amount of money out of the three, not only receives the most equity, but also gets to direct how the pie will be divided. I’m guessing that Richard Wagoner, the former CEO of GM, would never have stood for this. Thus, he was “fired” by the Obama Administration.
However, more problematic is President Obama’s insistence that it is the bondholders who are the greedy ones. Is anyone else tiring of hearing our President say one thing only to find out that the facts are quite different?