Autoblog

BREAKING: GM lurches toward bankruptcy as bondholder offer fails

Chris Paukert — Wed, 27 May 2009 08:58:00 EST

Filed under: Trends, Government/Legal, GM, Earnings/Financials

General Motors is teetering ever closer to the brink of bankruptcy today, as the automaker's exchange offer for its outstanding debt fell "substantially" short of the necessary take-rate. GM had offered some $27.2 billion of its unsecured public notes to its bondholders, but the offer expired at noon yesterday without having the minimum tender amount met. The U.S. Treasury Department had mandated that at least 90 percent of bondholders would have to agree to swap their shares for a 10 percent stake in the GM, but far too few failed to take GM up on its offer, effectively negating any swap at all under the conditions of the tender offer.

A number of major bondholders had originally countered with an offer to give up their stocks in exchange for a markedly larger stake in the company - 58 percent - but with the lion's share of the company already promised to the United Auto Workers' VEBA fund and to the U.S. government, the bondholder issue was widely expected to fail.

As a result, many are expecting GM to file for Chapter 11 bankruptcy by Monday, with The Detroit News reporting that GM's board of directors scheduled to meet earlier than that to discuss whatever options they may have left. Official GM press release after the jump.

[Sources: General Motors; The Detroit News | Image: Bill Pugliano/Getty]

Continue reading BREAKING: GM lurches toward bankruptcy as bondholder offer fails

BREAKING: GM lurches toward bankruptcy as bondholder offer fails originally appeared on Autoblog on Wed, 27 May 2009 08:58:00 EST. Please see our terms for use of feeds.

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Ford to offer 300 million shares of common stock

Chris Shunk — Tue, 12 May 2009 08:01:00 EST

Filed under: Ford, UAW/Unions

Right now, cash is king in the automotive world, and Ford Motor Company is looking to raise some serious greenbacks with 300 million shares of common stock. The money will be used to fund automotive operations, with a portion of the payments Ford is required to make to the Voluntary Employee Beneficiary Association (VEBA) retiree health care fund with the UAW.

At the close of trading on Monday, Ford stock was worth $6.08 per share, and the stock sale should net somewhere close to $1.8 billion, depending on future share fluctuations. That's low by historic standards, but nearly five times what it was worth in November, when the size and scope of the recession and automotive slump was being realized. Since that time, Ford has emerged as the one Detroit automaker that didn't need government funding. The Blue Oval has also increased market share in six of the past seven months, something the Dearborn, MI-based automaker hasn't done in years. The common share sale will be handled jointly by Citi, Goldman, Sachs & Co., J.P. Morgan and Morgan Stanley. Hit the jump to pour over Ford's press release.

[Source: Ford | Image Source: Bill Pugliano/Getty]

Continue reading Ford to offer 300 million shares of common stock

Ford to offer 300 million shares of common stock originally appeared on Autoblog on Tue, 12 May 2009 08:01:00 EST. Please see our terms for use of feeds.

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UAW will eventually sell Chrysler stock to keep VEBA going

John Neff — Wed, 06 May 2009 08:58:00 EST

Filed under: UAW/Unions

Big surprise, the United Auto Workers union does not intend to be majority owner of the New New Chrysler for very long. Outgoing UAW president Ron Gettelfinger confirmed in a press conference yesterday that the union's Voluntary Employee Beneficiary Association (VEBA) will likely sell part or all of its 55% stake in the newly formed automaker once its stock appreciates, that is, if its stock appreciates.

And why would the UAW want to keep its shares? Despite owning a majority of the company, the UAW's shares are nonvoting and they may only get one seat on the company's board, if that. The sole purpose of the VEBA is to fund retiree healthcare, not run an automaker, so ditching its shares at some point to replenish the fund's coffers sounds like the right thing to do. The funny thing is that before the VEBA was even set up, both General Motors and Ford wanted to fund their contributions partly with company stock instead of cash. Looks like they may get their wish if Chrysler's situation is anything to go by.

[Source: Automotive News - Sub. Req.]

UAW will eventually sell Chrysler stock to keep VEBA going originally appeared on Autoblog on Wed, 06 May 2009 08:58:00 EST. Please see our terms for use of feeds.

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REPORT: UAW's majority stake in Chrysler doesn't necessarily translate to control

Chris Shunk — Thu, 30 Apr 2009 09:25:00 EST

Filed under: Chrysler, UAW/Unions

The reworked contract between Chrysler and the United Auto Workers cedes 55% of Pentastar stock to the worker's retiree health care fund. That has lead to speculation that the UAW would have majority representation on the Chrysler board, but labor experts believe that won't be the case. University of California Berkeley labor professor Harley Shaiken insists that "equity stake doesn't translate into voting control." The 55% was given to the VEBA fund in lieu of the previously agreed upon cash payment. Since the only job of the VEBA is to ensure that the retiree health-care fund is properly funded, by rule, it cannot take ownership of the automaker. Though the UAW won't have majority representation, most expect the workers to receive at least one seat at the board.

Assuming that everything falls into place, the remaining owners of the new, leaner Chrysler will be Fiat at 35% and the government and lenders at a combined 10%. The changes made by the Pentastar over the past few months should equate to a healthier, more competitive Chrysler. But if things don't work out as planned (they rarely do) and Chrysler ultimately fails, retiree health car could end up being a thing of the past.

[Source: Detroit News Image Source: Bill Pugliano/Getty]

REPORT: UAW's majority stake in Chrysler doesn't necessarily translate to control originally appeared on Autoblog on Thu, 30 Apr 2009 09:25:00 EST. Please see our terms for use of feeds.

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GM future hinges on success of new debt-for-equity swap offers

Chris Paukert — Mon, 27 Apr 2009 10:49:00 EST

Filed under: Trends, Government/Legal, Hirings/Firings/Layoffs, GM

In addition to announcing the shuttering of Pontiac, General Motors has put forth a new offer to its bondholders to exchange $27 billion in claims for equity in the struggling automaker.

As part of the plan, GM is offering its bondholders a 10% equity stake in the company, but worryingly, if 90 percent of GM's stockholders don't make good on the exchange by June 1, the U.S. Treasury will almost assuredly push GM toward bankruptcy. In the language of GM's press release, the company would "expect to seek bankruptcy relief if the exchange offers are not consummated."

And it isn't just the shareholders that are being called to action - the success of the bond-exchange offer also hinges upon the Voluntary Employee Beneficiary Association (VEBA) health-care fund, whose controllers must also agree to swap at least 50% of its equity claims in order to make the plan work.

Finally, the U.S. Treasury must agree to exchange 50% its own loans - thought to be about $10 billion - for stock in the company. Together, the U.S. government and VEBA would then own around 89 percent of GM's stock post- debt-for-equity swap, with the outstanding one percent being held by GM's current common shareholders (10% bondholders + 89% VEBA/US Treasury + 1% = 100%).

Given that a debt-for-equity swap is widely considered to be unattractive to most bondholders (something that GM CEO Fritz Henderson stopped just short of confirming in today's press conference), The General seems to be well along the road to bankruptcy... and picking up steam.

Official press release posted after the jump.

[Source: General Motors | Image: Bill Pugliano/Getty]

Continue reading GM future hinges on success of new debt-for-equity swap offers

GM future hinges on success of new debt-for-equity swap offers originally appeared on Autoblog on Mon, 27 Apr 2009 10:49:00 EST. Please see our terms for use of feeds.

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Ford's new deal with UAW gets wages down to $55/hour

Jonathon Ramsey — Thu, 12 Mar 2009 11:29:00 EST

Filed under: Plants/Manufacturing, Ford, Earnings/Financials, UAW/Unions

Two years ago when Ford was negotiating a new contract with the UAW, the automaker was paying its union workers the oft-bandied amount of $70 per hour. That amount wasn't the actual hourly wage of each employee, though, but rather the employee's hourly wage plus the cost of contributions to current and future benefits for retirees and workers still with the company. Now, due to a newly signed agreement with the United Auto Workers union, Ford projects that total cost per worker will go down to $55 per hour.

That puts The Blue Oval only about $5 away from the total hourly compensation paid by transplanted automakers like Toyota and Honda to their non-union workers. Among measures such as cutting overtime, bonuses, cost-of-living increases, and one paid holiday, Ford reworked its contribution to the VEBA account that will fund retiree healthcare so that it can pay into it with stock instead of cash, the total savings of which could add up to $500 million per year.

Intriguingly, it was remarked that "Ford's deal with the UAW appeared to meet the cost savings targets set out by the Treasury Department for its aid to GM and Chrysler," yet Ford is the one that didn't take government money and so, technically, is the one automaker not compelled to meet those targets. General Motors and Chrysler have also made new agreements with the UAW, but details have yet to be released.

[Source: Reuters, Photo by Larry W. Smith/Getty]

Ford's new deal with UAW gets wages down to $55/hour originally appeared on Autoblog on Thu, 12 Mar 2009 11:29:00 EST. Please see our terms for use of feeds.

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Ford, UAW reach tentative retiree health care trust fund deal

Chris Paukert — Mon, 23 Feb 2009 17:29:00 EST

Filed under: Etc., Ford, UAW/Unions

Ford Motor Company says it has reached a tentative deal with the UAW regarding modifications to the Voluntary Employees' Beneficiary Association (VEGA) pact, the union's retiree health care trust. While specifics are not yet being divulged, the Blue Oval says that it has agreed to make up to half of its future payments into the fund with Ford common stock, although it may continue to use cash depending on the automaker's needs.

Before this and other changes can take effect, the UAW will review the agreement later this week, and any alterations must be signed off on by UAW-represented Blue Oval workers as well as the court system. Ford says that the VEBA agreement, combined with the labor deal reached on February 15, will help the automaker be more competitive during the economic recession without federal loans. Be sure to check out Ford's press release after the jump.

[Source: Ford | Image: Bill Pugliano/Getty]

Continue reading Ford, UAW reach tentative retiree health care trust fund deal

Ford, UAW reach tentative retiree health care trust fund deal originally appeared on Autoblog on Mon, 23 Feb 2009 17:29:00 EST. Please see our terms for use of feeds.

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Gettelfinger: Wage cuts won't be part of UAW concessions

Chris Shunk — Thu, 22 Jan 2009 16:30:00 EST

Filed under: Hirings/Firings/Layoffs, Chrysler, GM, UAW/Unions

General Motors and Chrysler are tasked with gaining concessions from debt holders and organized labor by February 17. If major cuts aren't achieved, the struggling Detroit automakers risk having to pay back the $17.4 billion in government loans that have helped keep the companies solvent. UAW President Ron Gettelfinger told Automotive News that any concessions won't include wage cuts. The Ron points out that Toyota workers at Georgetown average $30 per hour in wages and bonuses, or $2 more than tenured UAW workers. Though the union's $28 per hour wage is likely safe, generous blue collar health care benefits may not be. Pension costs are likely to decrease as well, as part of the loan agreement calls for half the retiree health care trust to be paid for with equity instead of cash.

Gettelfinger has recently questioned whether it was possible to agree to concessions in time for perceived February 17 deadline, but now he sayst that he fully expects the UAW, GM, and Chrysler to have "laid out ground work" to satisfy its portion of the loan deal.

[Source: Automotive News, subs req'd]

Gettelfinger: Wage cuts won't be part of UAW concessions originally appeared on Autoblog on Thu, 22 Jan 2009 16:30:00 EST. Please see our terms for use of feeds.

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UAW agrees to suspend Jobs Bank, postpone VEBA contributions

John Neff — Wed, 03 Dec 2008 14:27:00 EST

Filed under: Government/Legal, UAW/Unions

While Ford, General Motors and Chrysler all submitted plans to Congress yesterday that detail how much sacrifice they're willing to make in order to secure government loans, the United Auto Workers union waited until today to announce how it plans to contribute. UAW President Ron Gettelfinger met with leaders of his local Detroit 3 unions today and emerged with a plan to suspend the controversial Jobs Bank program that allows laid off workers to receive up to 95% of their standard pay. Gettelfinger also said that Detroit automakers could postpone making payments into the Voluntary Employee Beneficiary Association, a union-run fund that was scheduled to assume responsibility for retiree healthcare after automaker contributions in the tens of billions were made.

Gettelfinger will once again take a seat next to GM CEO Rick Wagoner, Ford CEO Alan Mulally and Chrysler CEO Bob Nardelli in front of Congress tomorrow. After their admittedly weak showing on Capitol Hill last month, the CEOs and Gettelfinger now have detailed plans to offer Congress on how they would use government loans to ensure their long term viability.

Oh, and while each of the Detroit 3 CEOs will be driving down to DC after being lambasted by Congress for their previous travel aboard separate private jets, Gettelfinger, who never had a private jet, will still be using a commercial airline to reach his date with destiny.

[Source: Automotive News - sub. req'd, Jalopnik, Photo by Chip Somodevilla/Getty]

UAW agrees to suspend Jobs Bank, postpone VEBA contributions originally appeared on Autoblog on Wed, 03 Dec 2008 14:27:00 EST. Please see our terms for use of feeds.

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Details emerge on Ford/UAW contract

Damon Lavrinc — Mon, 05 Nov 2007 09:01:00 EST

Filed under: Ford, UAW/Unions

Ford stands as the last domestic automaker in the process of negotiating its labor contract with the UAW, and details of the new contract have begun to hit the web. The Detroit News has an in-depth article on what's gone down thus far, but for those of us with attention spans akin to meth-addled Chihuahuas, they put together a listing of the major elements of the new contract, while comparing and contrasting what Ford's cross-town rivals have already agreed to.

On the job side of the equation, two-tier wages will be enacted for new employees until 20-percent of the work force lies in the lower wage bracket. Employees currently in the "Job Bank" have one year to either pick a new position or quit the company, compared to GM's "take the first, or take the second, then you're done" setup, or Chryslers two-year term in the Bank. Another health care VEBA is planned for Ford retirees, with a 40-percent cash infusion, compared to GM's 54-percent and Chrysler's 59-percent.

Ford will shutter two additional manufacturing centers - the Wayne Stamping and Assembly Plant and the Ohio Assembly Plant - and won't close any other plants aside from those already announced. The money they didn't contribute to the VEBA will be invested into plants, specifically to make these centers more flexible so they can manufacture any vehicle in the Blue Oval's arsenal. Ford will also make product commitments to the Wayne plant and a few other facilities.

You can read the entire summary by click the "Read" link below.

[Source: Detroit News]

Details emerge on Ford/UAW contract originally appeared on Autoblog on Mon, 05 Nov 2007 09:01:00 EST. Please see our terms for use of feeds.

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Autoline on Autoblog with John McElroy

John Neff — Thu, 27 Sep 2007 13:57:00 EST

Filed under: Autoline on Autoblog

John McElroy is host of the TV program "Autoline Detroit". Every week he'll bring his unique insights as an auto industry insider to Autoblog readers.

THE MONEYED TYCOONS OF THE UAW
By John McElroy

I gotta believe Karl Marx is spinning in his grave. Can you imagine the captains of capitalism handing tens of billions of dollars over to labor? For free? It's enough to make a Communist lose all hope for class warfare!

Yet, as part of a deal to get rid of all their health care bills for retired hourly workers, Detroit automakers are going to make the UAW richer than it ever dreamed possible. They're creating a VEBA, or Voluntary Employee Beneficiaries Agreement, which is a gigantic fund that will be used to pay all those health care bills.

The payoff for the car companies is that they can take all those future obligations off their books. That will immediately reduce their debts, improve their credit ratings and let them borrow at lower interest rates. It will also save the automakers billions every year, allowing them to drop some of it to the bottom line, and a lot more of it into developing new cars and trucks-something that Detroit desperately needs to do.

But before they get there they'll have to hand over something like $60 billion to the United Auto Workers union. And that's where it gets interesting.

Continue reading Autoline on Autoblog with John McElroy

Autoline on Autoblog with John McElroy originally appeared on Autoblog on Thu, 27 Sep 2007 13:57:00 EST. Please see our terms for use of feeds.

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Big Three discussing joint healthcare fund

Jonathon Ramsey — Tue, 12 Jun 2007 14:27:00 EST

Filed under: Chrysler, Ford, GM, Earnings/Financials

Recently, the UAW decided to look at the unusual step of taking over heathcare liabilities from the Big Three. The reason being that pension fund costs for future retirees is adding a terrific sum to the expense sheet every year -- GM's costs alone were $4.8 billion in 2006, and combined costs could have amounted to $12 billion. That's the price they are paying to assure healthcare for 2 million workers, ex-workers, and dependents. That drag on the bottom line is making GM, Ford, and Chrysler's return to competitiveness difficult, as if the job wasn't difficult enough already: the domestics lost $15 billion in '06, while Toyota, Honda, and Nissan made $23 billion.

In terms of total liabilities, the Big Three owe a combined $114 billion right now. The car companies have begun to discuss a fund, called a VEBA (voluntary employee beneficiary association) among themselves. They would proffer a one-time, lump sum payment, which would be a percentage of what they owe. After that, their contribution would be capped at a consistent rate that would keep them competitive. GM already uses VEBA's for some of its workers, and Goodyear set up a VEBA last year with $1 billion for the United Steelworkers, and has no further healthcare obligation.

A VEBA is just one option on the table, and neither side has said it will bring it up during labor talks. The discussion among the Big Three is in its initial stages, so company contributions have not even been determined yet.

[Source: Bloomberg]

Big Three discussing joint healthcare fund originally appeared on Autoblog on Tue, 12 Jun 2007 14:27:00 EST. Please see our terms for use of feeds.

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