New plan would wipe out current G.M. shareholders

DETROIT (Reuters) -- General Motors Corp. Tuesday detailed plans to all but wipe out the holdings of remaining shareholders by issuing up to 60 billion new shares in a bid to pay off debt to the U.S. government, bondholders and the United Auto Workers union.

The unusual plan, which was detailed in a filing with U.S. securities regulators, would only need the approval of the U.S. Treasury to proceed since the U.S. government would be the majority shareholder of a new GM (GM, Fortune 500), the company said.

The flood of new stock issuance that could be unleashed has been widely expected by analysts who have long warned that GM's shares could be worthless whether the company restructures out of court or in bankruptcy.

The debt-for-equity exchanges detailed in the filing with the Securities and Exchange Commission would leave GM's stock investors with just 1% of the equity in a restructured automaker, ending a long run when the Dow component was seen as a bellwether for the strength of the broader U.S. economy.

GM shares closed Tuesday at $1.85 on the New York Stock Exchange. The stock would be worth just over 1 cent if the first phase of GM's restructuring moves forward as described.

Once GM has issued new shares to pay off its debt to the U.S. government, bondholders and its major union, it said it would then undertake a 1-for-100 reverse stock split.

Such a move would take the nominal value of the stock back to near where it had been before the flood of new shares. But in the process, GM's existing shareholders would see their stake in the 100-year-old automaker all but wiped out.

The automaker said it expected to draw another $2.6 billion from the U.S. Treasury before a June 1 deadline set by the Obama administration for it to reach agreements with all of its key stakeholders.

That borrowing would take GM's debt to the U.S. government to $18 billion, and the automaker said it expected to have to borrow a total of nearly $27 billion.

GM is considering what is known as a reverse stock split.

When my Chrysler stock split some time ago, 1 share became 2. Done to keep stocks affordable, and keep people buying them.

The reverse stock split is where many become 1. Sometimes, it's to weed out potential buyers, and to increase the value of the stock (theory is that the more exclusive a stock is, the more stable it is and you reward your larger shareholders).

It's also used when the stock becomes worthless.

GM's reverse stock split isn't a 2 for 1, or anything like that.

It's 100 for 1.

If you had 400 shares of GM stock, you would wind up with just 4.



On a positive note....

If you bought Ford shares early this year, you are probally break dancing in the streets by now.

Ford was something like $1.50 per share not too long ago.

Now... it's something like $5.50, headed to $6. :bow:

GM is considering what is known as a reverse stock split.


That's a minor part of the plan. The real news is that it's considering issuing 60 billion shares. The reverse split is just a way to bring the number of shares down to something reasonable after they're done. The point of the entire exercise is to change the ownership of the company.

If you had 400 shares of GM stock, you would wind up with just 4.


Note also that if they end up doing a 363 like Chrysler is doing, you'd end up with 0.

GM is considering what is known as a reverse stock split.

On a positive note....

If you bought Ford shares early this year, you are probally break dancing in the streets by now.

Ford was something like $1.50 per share not too long ago.

Now... it's something like $5.50, headed to $6. :bow:

Yep, I bought GM and Ford stock when they were both hovering around 2.25 a share back in March. I'm glad I bought the Ford ............Not so glad I bought the GM. I will stick it out with GM though and see what happens. According to my stock tracker, Ford closed at 6.26 a share today. :D

GM is considering what is known as a reverse stock split.


If you bought Ford shares early this year, you are probally break dancing in the streets by now.




Yup but only 50 shares :( along with alcoa and sprint.

Yup but only 50 shares :( along with alcoa and sprint.

50 shares? If this goes through, you'll get a check for something like $1, as you can't have a fractional share.

You all realize the plan involves reducing the equity share from 100% to 1% from the current shareholders; then giving the remaining 99% to the government, which gets 50% and the UAW, 41% and the rest to the bondholders in exchange for all their secured loans, right?

The bondholders will never go for this and it is absolute theft from the current shareholders. I am glad I sold all of my stock last year. You're a fool if you plan on sticking this turd out. Best case scenario you reduce your pie share to a immeasurably small fraction of 1% ownership. Worst case it goes into Chapter 11 then Chapter 7.

50 shares? If this goes through, you'll get a check for something like $1, as you can't have a fractional share.


No, I only bought 50 shares of Ford when it was about 2 dollars.

No, I only bought 50 shares of Ford when it was about 2 dollars.

Bought $100 worth of Ford, huh?

Now it's worth about $300?

Not bad for only 2 months! :bow:

Bought $100 worth of Ford, huh?

Now it's worth about $300?

Not bad for only 2 months! :bow:

I rode on a couple hundred shares of ford from ~$2 to the current $6 price point and took a little off the table on the way up. I just got into the market back in December and Ford basically financed my investment in 2 other companies over the past 2 months on its own. Now I'm jumping on the financial bull...I love the market :D

The bondholders will never go for this and it is absolute theft from the current shareholders.

Wrong. The fact the shareholders are even getting 1% is theft from everyone else.

Assets - Debts = Huge negative number. The company is worthless!

Not to mention that the shareholders are 100% responsible for GM going into the toilet because they backed Wagoner and the Board's decisions at every vote.

You all realize the plan involves reducing the equity share from 100% to 1% from the current shareholders; then giving the remaining 99% to the government, which gets 50% and the UAW, 41% and the rest to the bondholders in exchange for all their secured loans, right?

The bondholders will never go for this and it is absolute theft from the current shareholders. I am glad I sold all of my stock last year. You're a fool if you plan on sticking this turd out. Best case scenario you reduce your pie share to a immeasurably small fraction of 1% ownership. Worst case it goes into Chapter 11 then Chapter 7.

1. GM's market value is $1 billion. GM's debt is at least $60 billion. Instead of theft, if you want to cut to the chase, If GM's stock is currently going for $1.50, each share of GM stock is actually worth NEGATIVE $9 per share. You'd be liable to pay $9 simply for have a share.

2. The UAW has 55% in exchange for their health care fund payments. With 55% of General Motors, it's in the UAW's VITAL intrest in making sure GM turns around. GM doesn't make it, they lose everything. What better incentive to make the best vehicles possible?

3. I have said this a million times, and have made it clear just as many. I don't know if some people have a hard time following the connecting dots, or are simply so blinded by beliefs that they can't see straight. So I'll say it again:

IF IT WASN'T FOR THE GOVERNMENT, THERE WOULD BE NO GENERAL MOTORS.... GM WOULD HAVE DIED JANUARY 1st... FOUR MONTHS AGO!!!

Regardless as to what you might have felt about government intervention, if it wasnt for government intervention, alot of people wouldn't have jobs today. That includes factory workers, that includes suppliers... that includes even Fbodfather and the other good friends that depend on GM's survival that visit this site frequently that each and everyone of you has come to know.

Not to mention the fact that the Camaro would have never made it to showrooms.

The Federal Government was the only entity that would actually loan GM money. It was the only entity that had the leverage to make GM do the some of the very same thing that many of you have been advocating (rightly as it turns out) what GM needed to do to fix itself. Many of the observations here over the years were the same things that ended up on the Automotive Task Force's report on GM.

The government forced the union to give up wages and gold plated health care and retirement. That seemed to be a popular sentiment till the government said it.

It was said here GM had too many divisions & that it was too focused on trucks at the expense of cars. Attach a government task force report to the same thing, and it's suddenly bad.

If I had a dollar for each time I read a post saying that GM didn't know how to run a business, I'd be Bill Gate's neighbor. Yet, get the feds involved and suddenly those very same people are visionary experts in running a car business.

The view that taxpayer money should be used only with the most strict conditions? Seen that view here quite a few times. Yet now, we should simply hand over taxpayer money to the same people who ran GM into the ground and simply leave them alone?

Smell that???

That's the smell of good old fashioned, oven baked hypocrisy.


The government will eventually have 1 seat on the board of directors. Not alot of influence for "owing" an entire car company.

The UAW will wind up with a seat on GM. Something that Daimler, Volkswagen, and BMW have among a host of other car companies in both Europe and Japan... countries that have a reputation of having better assembled vehicles than we do, rightly or wrongly.... and ironically, fewer strikes and labor issues.

And much like the government rep, 1 seat for the amount of the company they own is pretty piddling.


So instead of the old tired harping on government this and union that, lets first be thankful that the feds stepped in to try and save GM and Chrysler. Our economy would be screwed if they hadn't, and ALL our cars would wind up being from Japan, Korea, Europe, or China.

Second, drop the tired "union gets everything" BS. What exactly is the UAW walking away with?... Seriously??? Half of a company currently holding 60 times the debt the company's worth in exchange for their retiree's health care fund??? Let me see you willing to take that type of gamble with your future.


We still have a GM that has a chance instead of holding the memory of the company. Our friends at GM still are providing for their families and still working on great things for us. And we still have a future with GM that we can look forward to if everything comes together.

Sorry, but to me that holds alot more water than rigid political idealogy, or anti-government, anti-union rhetoric.

Well said, guionM.

I'm trying to reconcile the complaints that:
(1) The government didn't give billions to Wagoner to keep Pontiac/Saturn/Hummer open so that GM could maintain huge marketshare

(2) The government stopped the bondholders from dismantling GM and selling it for scrap, so they could maximize their speculative gambling profits.

Some people that are hoppin-mad about this might want to examine their positions to make sure they are mutually consistent.

3. I have said this a million times, and have made it clear just as many. I don't know if some people have a hard time following the connecting dots, or are simply so blinded by beliefs that they can't see straight. So I'll say it again:

IF IT WASN'T FOR THE GOVERNMENT, THERE WOULD BE NO GENERAL MOTORS.... GM WOULD HAVE DIED JANUARY 1st... FOUR MONTHS AGO!!!

And I will suggest that stating the obvious does not alter the possibility that there's a better way to resolve concerns with the domestic car companies other than the actions which have been taken. It well may be that, in practice. the taxpayers are ignored between election cycles, but that doesn't make it any more correct or wise. Majority rules, but the minority has rights. At least that's my reading of the founding documents.



Regardless as to what you might have felt about government intervention, if it wasnt for government intervention, alot of people wouldn't have jobs today. That includes factory workers, that includes suppliers... that includes even Fbodfather and the other good friends that depend on GM's survival that visit this site frequently that each and everyone of you has come to know.

Not to mention the fact that the Camaro would have never made it to showrooms.

Once again, the ends don't necessarily justify by the means. Much of the determinations by the government's group assessments about the obstacles to viability for the domestics are true, and in the case of GM, are well known non-surprises and have been a goal that was reakized and being worked toward prior to the government giving these issues a thought.

A large part of the domestic auto business competitive disadvantage has been caused by legacy cost driven overhead.

In specific, pensions and healthcare combined with labor costs for active workers and those realities have affected the pricing and vehicle content or types of vehicles the domestics have had to concentrate on offering.

The import/transplants have a "field day" type advantage in the realm of low MSRP fuel sipper cars. Their advantage is not based on their wisdom or expertise. It's based on the domestic's built in disadvantage.

Overhead dictates pricing structure. For the imports and transplants the pricing issues of the domestics allows them to hit a higher profit, and or, content.


The Federal Government was the only entity that would actually loan GM money. It was the only entity that had the leverage to make GM do the some of the very same thing that many of you have been advocating (rightly as it turns out) what GM needed to do to fix itself. Many of the observations here over the years were the same things that ended up on the Automotive Task Force's report on GM.

The government forced the union to give up wages and gold plated health care and retirement. That seemed to be a popular sentiment till the government said it.

Protecting the jobs of the union workers is not an issue in and of itself. UAW folks work very hard. So do salaried workers. It's a case by case situation. Here's where the politics start to insinuate themselves. At least, give a little thought on which important parties are being given favorable consideration in the government's plan. I see nothing published about the Chrysler plan that considers the salaried workers or their pensions. Business depends on private capital as well. Consider their placement in the government's plan of who and what is important.

It's clear to me that many don't understand the reasons behind the order of importance bankruptcy laws offer to vested parties. There IS a reason the laws have been setup the way they have been.

No one is more concerned that the situation is at this point in regards to working people than myself.

I only offer that driving private capital off is a dangerous gamble. Investment capital is like water in that it goes to the path of least resistance. In the U.K. the attitude by the government toward the wealthy drove a large number of them to being ex-patriots.


It was said here GM had too many divisions & that it was too focused on trucks at the expense of cars. Attach a government task force report to the same thing, and it's suddenly bad.

If I had a dollar for each time I read a post saying that GM didn't know how to run a business, I'd be Bill Gate's neighbor. Yet, get the feds involved and suddenly those very same people are visionary experts in running a car business.

The view that taxpayer money should be used only with the most strict conditions? Seen that view here quite a few times. Yet now, we should simply hand over taxpayer money to the same people who ran GM into the ground and simply leave them alone?

Smell that???

That's the smell of good old fashioned, oven baked hypocrisy.]

Many of the anti-GM posts here have been you own Guy. I have no issue with that. We deal in opinion in this section. Fair game is fair game.

I believe that many in this country ignore some big facts. One of those facts is that a good number of people on this planet have a lower dollar amount in mind when it comes to what the labor to build a car is worth. Some folks on this planet we inhabit see absolutely no reason for pensions for workers, particularly when it impacts the price or features of the product.

Throwing out rules and laws smacks far more of hypocrisy than the questioning of a decision's wisdom or long term effects.

Despotism is usually allowed by those that seek the fast track to what seems expedient. I'll pass on despotic actions it given the choice.

I want the situation to be fixed in a long term way. Not a politically expedient fashion.

I don't want to see protectionist policies which are generated by special interests.

Sorry, but to me that holds alot more water than rigid political idealogy, or anti-government, anti-union rhetoric.

Upholding bankruptcy law and precedent is not a "rigid political ideology". Being upset when the government steps in voids all contractual obligations for the express purpose of pleasing the UAW, is not anti-government and anti-union rhetoric, its plain human nature.

Theft is theft, plain and simple. Choosing to justify it by saying its good for the country or good for the workers families is not an excuse. You obviously choose to rationalize unlawful theft and you're not alone. Unfortunately for all of us now, we live in a world where private property can be seized for special interest and the President himself can publicly threaten law abiding citizens for simply trying to keep said property.

I for one like to at least look at this stupid situation with a sterile mindset, and judge it on legal merit. In the US we have laws that govern such situations; the idea of political parties and labor unions stepping in front of the law is what is wrong. After this, the rules change forever, and any industry is is a potential victim of political favor.

GM better love this government bailout because it will be forever before anyone loans them money again since BK law obviously does not apply.

This is of course unless the government makes the banks they control loan them money. Then again..they can't make them loan money to consumers right now.

The mess created in the last nine months with government and private business being interweaved will take a generation to sort out.

I'm kind of bummed about what I read today :(

http://www.bloomberg.com/apps/news?pid=20601087&sid=aB8JzFrrdKRE&refer=home

GM executives including Lutz and Troy Clarke, bailing out on their own company. That's pretty cold.

(I wonder a little if this is a tactic to pressure bondholders, about likelihood of a BK filing?)

I'm kind of bummed about what I read today :(

http://www.bloomberg.com/apps/news?pid=20601087&sid=aB8JzFrrdKRE&refer=home

GM executives including Lutz and Troy Clarke, bailing out on their own company. That's pretty cold.

(I wonder a little if this is a tactic to pressure bondholders, about likelihood of a BK filing?)

"A group of top General Motors Corp. executives, including Vice Chairman Bob Lutz, have sold what was left of their personal stakes, according to several filings with the Securities and Exchange Commission on Monday.

"Our shareholders are obviously facing some pretty severe dilution if the bond exchange goes through or we end up in bankruptcy," GM spokesperson Julie Gibson said. "Either way, no matter the outcome, we'll essentially be issuing new stock."

She acknowledged that the executives took advantage of a trading window to sell their shares while there's still some value "like most reasonable people would do."

At the same time, GM is trying to rid itself of $27 billion in debt by convincing thousands of creditors to exchange their bonds for 10% in GM stock.

According to the SEC filings, Lutz was joined by fellow Vice Chairman Thomas Stephens, Ralph Szygenda, Troy Clarke, Gary Cowger and Carl-Peter Forster. All together, the six sold nearly 205,000 shares between Friday and Monday, fetching between $1.45 and $1.61 a share."