The Financial Bailout Fiasco

For the first time in history, the United States could have a government-owned automobile company.

A restructuring plan laid out Monday would cut 21,000 General Motors jobs and involve a reduction in brands and dealerships. GM bondholders would have ten-percent ownership in the company in return for relinquishing their debt claims, while the federal government would own a 50-percent share in the company. The United Auto Workers union would own 39 percent.
Under the arrangement with the Treasury Department, warranties for GM and Chrysler vehicles sold during the restructuring – which began on Mar. 30 – are covered. And, “should a participating automaker go out of business, a program administrator will be appointed to identify a qualified service provider to supply warranty services for vehicles sold during the restructuring period in exchange for the assets of the special purpose company,” reported the Government Accountability Office (GAO), a watchdog agency that recently published a report on the auto bailout.
General Motors Corp. said it will cut 21,000 U.S. factory jobs by next year, phase out its storied Pontiac brand and ask the government to take company stock in exchange for half GM’s government debt as part of a major restructuring effort needed to get more government aid.

The struggling automaker said it will offer 225 shares of common stock for every $1,000 in notes held by bondholders as part of a debt-for-equity swap.
The announcements came in a filing Monday with the Securities and Exchange Commission.
GM is living on $15.4 billion in government loans and faces a June 1 deadline to restructure and get more government money. If the restructuring doesn’t satisfy the government, the company could go into bankruptcy protection.

GM said in a news release that it will ask the government to take 50 percent of its common stock in exchange for canceling half the government loans to the company as of June 1.

GM said the bond exchange aims to wipe away a large majority of the company’s $27 billion in unsecured debt. The company estimates that after the exchange, bondholders would own 10 percent of the company.

In addition, GM is offering the United Auto Workers stock for at least 50 percent of the $20 billion the company must pay into a union run trust that will take over retiree health care expenses starting next year.
sources: http://www.cnsnews.com/public/content/article.aspx?RsrcID=47313
http://www.onenewsnow.com/Politics/Default.aspx?id=507896
http://www.courierpress.com/news/2009/apr/27/gm-will-cut-21000-jobs-drop...