In reality, GMÂ’s demise comes down to a fight between retirees. On one side are GMÂ’s unionized retired workers. On the other, are the rest of us -- either in retirement or saving for it. Guess who will lose as things now stand?
Under the restructuring plan on the table, GMÂ’s retirees would get 39 percent of the company, along with the promise of a $10 billion payment into their health-care trust fund. That is in exchange for $20 billion GM owes the fund.
Not making out so well are current or future retirees who depend on the performance of mutual funds, 401(k) plans and insurance companies that invested in GM bonds. These debt investors, who are owed about $27 billion, will get just 10 percent of the company.
And that probably won’t change. GM Chief Executive Fritz Henderson said on a conference call Monday that there are no plans to modify the terms on offer to bondholders, even as he said a bankruptcy filing now looks “more probable.”
‘Waterboarding’ Investors
ThatÂ’s outrageous. The deal is nothing short of a political rip-off, with the Obama administration currying favor with an organized voting bloc in the form of the United Auto Workers union at the expense of unorganized retirees.
The current deal “can be seen as one that serves up bondholders on the altar of political self-interest,” CreditSights Inc. analyst Glenn Reynolds wrote in a report last week titled, in part, “Waterboarding Bondholders.”
“The powers that be will not face any major constituency risks by screwing some mutual funds, insurance companies, pension managers, and hedge funds (who often manage pension and endowment money etc.) out of their fair and equitable treatment,” Reynolds wrote.
Not that you’ll hear much about the rights of these investors if and when the fur starts flying over a GM bankruptcy filing. Instead, we’ll again hear talk about the “money people” -- the label President Barack Obama pinned on debt investors at Chrysler LLC who refused to swallow the terms foisted on them by the company and government officials.
Expect the fight at GM to be cast in similarly expedient terms of “working man vs. evil money people,” Reynolds’s report noted. And those who raise objections to the government’s plans “will be dubbed Wall Street holdouts and obstructionists.”