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July 17, 2009
Emerges Quickly from a Weird Bankruptcy
General Motors has now emerged from bankruptcy, you might be wondering what
happened in bankruptcy that made it possible for the “new GM” to emerge
while the “old GM” stayed behind to rot and rust into nothingness.
Bankruptcy is never pretty, but it’s particularly hideous when the
government a) owns the bankrupt company; and b) is doing its best to dictate
the terms of the bankruptcy. That can only result in outcomes most
charitably described as relatively insane (as opposed to completely
illustrate the point, we need only revisit one of the very favorite pals of
this column – erstwhile GM Chairman Rick Wagoner.
will of course remember Rick’s
celebrated pronouncement at the end of 2007 that he was “pleased” with
the company’s performance of that year – the year that saw GM lose $38.7
billion. Nice job, everyone! The boss is pleased. Who doesn’t love a boss
who still pats you on the back when you break something, wear shoes that
don’t match, bankrupt the company . . . that sort of thing?
maybe there’s a reason Rick was so pleased. As he surely realized, losing
that much money with no sign of profit in sight would eventually get him
fired. He also surely knew that getting fired from GM just means you move on
to the next stage of your executive life, which is to start collecting the
company’s gold-plated executive retirement package.
was entitled to $23 million upon his retirement, which isn’t too shabby, and
might very well compel a clever CEO to start walking around in women’s
clothes like Klinger on M*A*S*H, looking for that corporate Section 8
that would push him into full-time golf and gardening while the checks roll
In bankruptcy, the first thing that happens is that the judge tears up
existing obligations like that so the company can emerge in a position to
actually make a profit again. That might help explain why Rick kept
insisting bankruptcy was not an option, even though everyone else in the
world (with the exception of most auto executives, union representatives and
Detroit-area media personalities) understood it was the only option.
we learned just how rough Rick is going to have it in retirement. First, he
gets $74,000 a year under the “salaried retirement” program. But he also
gets $1.64 million a year for the first five years of his retirement under
the executive retirement plan. All told, Rick is entitled to a retirement
package with $8.6 million.
don’t know what his living expenses are. Maybe Rick has a $1 million-a-month
mortgage payment. And if that’s the case, granted, he would have a hard time
selling a house in Michigan right now without losing his shirt on it.
I’m not feeling it to fret too much over his short- or long-term financial
viability. Even if Rick sells his house for pennies on the dollar, I’m sure
he could pay cash for a nice three-bedroom ranch-style home in Ferndale and
have money left over for groceries.
headlines last week, declaring with great fanfare that GM had emerged from
bankruptcy and would now be ready to rumble, suddenly make a lot more sense.
If all you have to do in bankruptcy is agree to pay your failed CEO fewer
millions than you were originally planning, you could emerge pretty quickly
too. If all you have to do is give the union nearly 40 percent of the
company so it can use the value (I know, stop laughing) of its stock to pay
health insurance premiums for people who stopped working for you 20 years
ago, hey, what’s to haggle over?
the judge sign the order and let’s get this thing done.
has been a pretty weird bankruptcy, but then, this is a pretty weird
company. It’s run by people who haven’t been exposed to the daylight some of
us call reality in a very long time. And if it’s true that the government
plans to sell its ownership stake as soon as possible, I suppose the best we
can say about this bankruptcy is that the next one for GM will surely be far
more brutal to everyone involved – which is to say, it will be better.
what GM appears to have learned – nothing – it is surely inevitable.
© 2009 North Star Writers Group. May not be republished without permission.
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