Quote:
Originally Posted by Andrew Schreiber
Thank You Karthik, now if someone could explain all of this in layman's terms. I fail to understand how this works, to me it appears as though GM is saying, "This is not the GM you are looking for" to its creditors. On March 31 they had $54.4 billion in consolidated debt and now they have $17 billion in consolidated debt. Now, I KNOW they didn't pay off all that debt so where did it go?
Also, if I understand this correctly those people that owned stock in GM just got the shaft
And one last question, New VEBA, what is it?
EDIT: Yes, I read the article, I am just confused by it...
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From reading the article and dozens of news reports, this is how it sounds like it'll all work: (if anyone can clarify or correct any points here, please do)
The "New GM" will buy all the assets of old GM, as well as automatically transfer all employees that aren't being laid off. The debt owed by old GM is poof, gone. How did it disappear? The US and Canadian governments, as well as UAW and select bondholders "bought" the debt for differing percentages of the "New GM". The concept of buying debt for [partial] ownership is based around the idea that if reorganized, the company would return to profitability and those which bought the debt would now own a profitable company, which can be used to pay off the debt they incurred. As such, the old GM stock is now poof, gone as well.
The US Feds don't want to own GM forever, and are seeking to begin selling off their share of the company in a few years as soon as "new GM" returns to profitability to regain the money they lost in "buying" the debt.
Sacrifices will have to be made to enable the company to balance its books, and they will close more plants, lay off more employees, and seek reductions in benefits. These are crucial in order to allow the company to return to profitability.
However, despite all of this, there should be no negative impacts on consumers. GM has dedicated themselves to their customers, current and future, and will honor all warranties, etc. They will also continue to pay all employees through the reorganization period.