Source:
The Wall Street JournalBy JEFFREY MCCRACKEN and JOHN D. STOLL
The federal government is taking an increasingly hard line with the creditors of General Motors Corp. and Chrysler LLC, trying to squeeze billions of dollars in concessions out of banks, bondholders and others.In both cases, the U.S. is directly and not-so-directly managing negotiations for the companies as they prepare for what could be contentious Chapter 11 filings.
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The Treasury is pushing GM to offer its bondholders, who are owed $29 billion, a small piece of equity but no cash or new debt, say people familiar with the matter.
That's a reduction from an offer made two weeks ago.This offer would be a last chance at avoiding bankruptcy, which GM worries would be more expensive than an out-of-court solution. The government feels bankruptcy is the best bet.
At Chrysler, the U.S. wants banks and bank debtholders to give up about 85% of the nearly $7 billion they are owed. Banks have yet to make a counteroffer but chafe at that proposal.
Even if issues with bondholders and lenders are resolved, the United Auto Workers union will play a key role in the efforts to restructure. And
questions remain whether the Obama administration, which had labor backing in the election, will demand as much pain for workers as for investors. The UAW isn't at the negotiating table because it is waiting to see how much investors in GM and Chrysler, which is controlled by Cerberus Capital Management LP, will have to give up.Read more:
http://online.wsj.com/article/SB123932036083306929.html
I heard a Union official say that they had made concessions but they haven't been announced. You can see why the Unions have generally been keeping quiet. This is all about squeezing the bondholders right now.