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Interesting commentary from the Wall Street Journal on the current state of the recapitalization of GM (aka Government Motors). The scenario is set for the UAW, now with directors on the board and owning a substantial share (39%)of GM voting common stock, to bargain with itself in the future for salary, benefits and workrules. The government will own 50% in return for all the subsidies given to date. The article also gives some insight into history of the last 40 years of GM and our protectionist policies, leading to today's situation.
The sum of this (and many other recent articles) is that the original common shareholders/investors (grandma, you, and your IRA account) lose bigtime when their ownership is diluted out by all of the new stock; the unsecured debt holders get pennies on the dollar and some minor amount of new common stock, and the UAW gets 39% of the company in return for giving up the right to unfunded future medical benefits, which would have been lost in a normal bankruptcy proceeding anyway -literally something for nothing.
It will be interesting to see how Ford can compete against this, as the UAW has always bargained with the weakest of the Big Three by threatening a strike, and then forced the other two to accept those same terms.
But the article shows that none of this is new given the history of labor, big business and government. Hopefully SAAB can break away from this to have new ownership and a second chance......
http://online.wsj.com/article/SB124096698307566437.html#printMode
posted by 216.187....
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