I have not blogged much in the last week on the Obama takeover of GM, but you can take all my old Chrysler posts and just substitute "GM" for "Chrysler" and you will have it pretty much straight. Having gotten away with hammering secured creditors in favor of the UAW at Chrysler, Obama is setting the same course at GM. Via Q&O:
The United Auto Workers retiree health fund is set to own as much as 39 percent of the restructured GM, in exchange for giving up its claim to at least $10 billion that the company owes it....
The chief obstacle to an out-of-court settlement for GM remains: There has been no agreement between the company and the investors who hold $27 billion worth of GM bonds.
Under orders from the Obama administration, GM has offered to give the bondholders a 10 percent equity stake in the restructured company in exchange for giving up their bonds.
Hmmm... let's give unsecured creditor the UAW a 10x better deal than the secured creditors. No wonder Obama wants to keep this out of bankruptcy court -- laws and contracts and stuff actually would have to be applied there. But the company will be set for the future -- the US and Canadian governments will control a majority of the board seats, with the rest presumably controlled by the UAW. Does everybody believe me now when I say we are heading toward a European-style corporate state?
The only thing standing in the way, of course, is those pesky secured creditors, who are actually holding out for what they are legally and contractually due. Obama's got a bit more difficulty here at GM than at Chrysler because a smaller percentage of the secured creditors are TARP recipients, and therefore he has less leverage to make them give up their rights (at Chrysler, the TARP majority was pressured successfully into selling out their non-TARP brethren among the creditors).
Of course, Obama has the advantage of Chrysler as a precedent, which makes it pretty clear why he set Chrysler up as the first to be intimidated, as he had the most leverage over them with TARP recipients in the creditor group. Interestingly, this is very similar to how the UAW has always dealt with the Big 3, targeting the most vulnerable for pressure in contract talks, and then using that settlement as a precedent in the rest of industry. One wonders if the UAW hasn't been whispering in his ear through this whole process.