What GM BANKRUPTCY REALY IS

[Kenneth B.]

I would like everyone to understand what chapter 11 means for businesses. GM will not have to pay any suppliers in fact if thy received payment within 60 days previous to filing they will have to give the money back. Tier 1 vender's will not get paid & will also file & not have to pay tier 2 ETC. This will filter down to small business like mine that supply tooling for the foundry's. GM will not pay Dana. Dana will not pay foundries which will not pay my company. Most GM suppliers will not be able to take another hit. Thousands of small company's will go out of business putting 100'S of thousands of well paid non union people out of work. Of course the lawyers,accountants,& consultants will make millions & GM & the tier 1 company's will reorganize & go on using parts tooling & material they never pay for. In essence it will be the small business that bail out the car companies. That boys & girls is how business bankruptcy works. Also they can do this over & over. No time limit. Look what happened a few years ago with tier 1 suppliers.
KEN BARRY

[Steven B.]

Re: What GM BANKRUPTCY REALY IS

Ken:

Thanks for your perspective as one who sits at the bottom of the payment chain! Just another example of someone (Congress) thinking, from their small, secluded world, that bankruptcy is a painless way to correct old mistakes. Seems you need to organize the hundreds of small businesses that are unseen during this crisis and show your strength and your voice to those who think chapter 11 is the way to go. This has become so much more than saving bad corporate officers who made bad decisions, and is more about protecting the thousands of guys like yourself. And I assume you continued doing business with GM because they represented a huge portion of your bottom line and you never thought rational people would ever contemplate bankruptcy! Best of luck-your survival will make a great story-your demise will make the half a million November unemployment numbers look small come January. Bankruptcy always hurts the little guy! That's the reason Congress tried to make it tougher to go that route. It was too easy to cast off all their debt, or as you would refer to it, your invoice and paycheck!
Steve

[Joe C.]

Re: What GM BANKRUPTCY REALY IS

I would like everyone to understand what chapter 11 means for businesses. GM will not have to pay any suppliers in fact if thy received payment within 60 days previous to filing they will have to give the money back. Tier 1 vender's will not get paid & will also file & not have to pay tier 2 ETC. This will filter down to small business like mine that supply tooling for the foundry's. GM will not pay Dana. Dana will not pay foundries which will not pay my company. Most GM suppliers will not be able to take another hit. Thousands of small company's will go out of business putting 100'S of thousands of well paid non union people out of work. Of course the lawyers,accountants,& consultants will make millions & GM & the tier 1 company's will reorganize & go on using parts tooling & material they never pay for. In essence it will be the small business that bail out the car companies. That boys & girls is how business bankruptcy works. Also they can do this over & over. No time limit. Look what happened a few years ago with tier 1 suppliers.
KEN BARRY

Isn't that the main reason that all small businesses incorporate....................so that they can take advantage of bankruptcy protection.
There are 2 retail stores in my vicinity which routinely go "bankrupt" every couple years, or so.
In their case, a slick marketing ploy..........that is, whether or not they actually file Chapter 11 is anybody's guess. I never go within 100 yards of either of these stores, for fear of catching some sort of disease, or, at least, from becoming enveloped in the oil slick emanating from the owners' vile, *(&^$%#^* carcass.

[Ted S.]

Re: What GM BANKRUPTCY REALY IS

Looks like you've done pretty well off GM didn't you see this coming and why didn't you prepare?

OUCH!!! It's pretty hard to see a Chap 11 coming. We lost a fair amount of cash when one of our customers filed Chap 11. The impact to a small business is substantial.

You indicate if GM doesn't pay DANA, DANA doesn't pay you. Your payments became at risk when DANA filed Chapter 11. Did you change terms on your invoicing at that time?

I feel for you and the employees of your company. My understanding is the UAW wouldn't agree to a timeframe to get their cost structure in line with Toyota, Nissan, Mercedes, etc. I believe they kept Hundai even out of the mix when figuring the target.

If the US bails out the big 3 only to close down US plants and keep shipping jobs to Mexico and Canada we might as well be funding the imports. At least they're creating jobs here. The UAW needs to understand that their pricing themselves out of a job. They need to negotiate on the legacy costs. If they continue thinking status quo on the legacy benefits, they won't have a company left to pay for the jobs, union dues, health care benefits, pension plans, etc. The union is like the government, it doesn't create wealth other than for the top of it's food chain.

[Kenneth B.]

Re: What GM BANKRUPTCY RELAY IS

Ken:

Thanks for your perspective as one who sits at the bottom of the payment chain! Just another example of someone (Congress) thinking, from their small, secluded world, that bankruptcy is a painless way to correct old mistakes. Seems you need to organize the hundreds of small businesses that are unseen during this crisis and show your strength and your voice to those who think chapter 11 is the way to go. This has become so much more than saving bad corporate officers who made bad decisions, and is more about protecting the thousands of guys like yourself. And I assume you continued doing business with GM because they represented a huge portion of your bottom line and you never thought rational people would ever contemplate bankruptcy! Best of luck-your survival will make a great story-your demise will make the half a million November unemployment numbers look small come January. Bankruptcy always hurts the little guy! That's the reason Congress tried to make it tougher to go that route. It was too easy to cast off all their debt, or as you would refer to it, your invoice and paycheck!
Steve

STEVE
Thanks for understanding. I got bit the last time The auto companies squeezed the tier 1's for price cuts till they went chapter 11. My company dose very little auto related work. Some of us in the Midwest will be OK. I am just afraid if they do this it will cause a problem for a lot of small suppliers that will put thousands out of work. I live in northing Indiana & the RV industry is in the tank.
KEN

[Kenneth B.]

Re: What GM BANKRUPTCY REALY IS

OUCH!!! It's pretty hard to see a Chap 11 coming. We lost a fair amount of cash when one of our customers filed Chap 11. The impact to a small business is substantial.

You indicate if GM doesn't pay DANA, DANA doesn't pay you. Your payments became at risk when DANA filed Chapter 11. Did you change terms on your invoicing at that time?

I feel for you and the employees of your company. My understanding is the UAW wouldn't agree to a timeframe to get their cost structure in line with Toyota, Nissan, Mercedes, etc. I believe they kept Hundai even out of the mix when figuring the target.

If the US bails out the big 3 only to close down US plants and keep shipping jobs to Mexico and Canada we might as well be funding the imports. At least they're creating jobs here. The UAW needs to understand that their pricing themselves out of a job. They need to negotiate on the legacy costs. If they continue thinking status quo on the legacy benefits, they won't have a company left to pay for the jobs, union dues, health care benefits, pension plans, etc. The union is like the government, it doesn't create wealth other than for the top of it's food chain.

I was using Dana as a example of the supply chain only. I do not do business with them. Companies buy castings from foundries that buy tooling from my company & when GM files chapter 11 is snowballs down hill to the smaller businesses. If it could be structured so that suppliers got paid first rather than the lawyers,accountants & consultants it would work.
KEN

[Jack H.]

Re: What GM BANKRUPTCY REALY IS

Seems this is a very over-simplified explanation of things! For those who really want to understand the big picture read up....

http://www.uscourts.gov/bankruptcycourts/bankruptcybasics/chapter11.html

Essentially, the corporate entity in trouble seeks the protection of the Federal courts providing a 'plan' for its reorganization. If protection (and the plan) are accepted, the presiding bankruptcy judge has the unilateral power to set aside ANY and ALL contracts in accordance with the plan.

It's not unilaterally true that NOBODY gets paid. Consider the airlines. They argued (sucessfully) that their frequent flyer award programs HAD to remain in effect to maintain continued travel from their prime paying business class customers...

A given reorganization plan may argue the vital interests of continued business with this/that specific supplier and/or a class of suppliers where they receive payment preference over other creditors despite existing contractual obligations.

Bottom line, it's not as simple as saying THIS is what will happen, boys and girls. It takes the due diligence of reading the specific reorganization plan + following the periodic ruling(s) of the specific bankruptcy court involved to ferret out the nuts and bolts...

[Erv M.]

Re: What GM BANKRUPTCY REALY IS

Regardless of the path the Big 3 will not resemble what they were 10 years ago. Our bankruptcy laws in this country are terrible at best. In most industrial countries when you file for bankruptcy you are forced to liquidate your assets and pay your debtors, you are essentially out of business.

Under this business model the strong survive;they do not become the low cost producer because they stiffed their vendors.

Our model of bankruptcy needs to be modified!

[Henry S.]

Re: What GM BANKRUPTCY REALY IS

Ken, I feel for you. Unfortunately many of our small business owners are going to get lost in the shuffle I'm afraid. It's sad to say but I don't think the majority of Americans know OR care about what bankruptcy to the Big Three will do to this country. It will have an effect on the United States like we have NEVER felt before. Many want to point the finger at the UAW however EVERY AMERICAN WORKER today has benefitted from the sacrifices or accomplishments of organized labor. Every since the Reagan era "union" has been a dirty word. The hits the AIW is taking from our Congressmen from the South is nothing more than a witch hunt to stick the dagger further into organized labor. Is the AIW blameless in the problems facing the automakers now? Of course they're not. However they don't deserve the raping many want to give them. I'm not saying Congress should open it's wallet to the automakers without any strings attached but just a little bit of the same courtesy they showed the banking industry would go a long way.

Shooter

[Terry M.]

Re: What GM BANKRUPTCY REALY IS

If it could be structured so that suppliers got paid first rather than the lawyers,accountants & consultants it would work.
KEN

Yea, well we all know the chances of that happening. It will happen about the same time our legislators join the Social Security System, and give up their separate pension plan.

There are NCRS members who are tier 1 suppliers to the auto companies, and one whose transportation company has contracts with tier 1 suppliers. Then there are NCRS members who are former auto company employees whose pensions are at risk depending on the resolution of this issue. It is a very personal issue for many people we know.

[Erv M.]

Re: What GM BANKRUPTCY REALY IS

Gentlemen,

I have three locations were my workforce is union. The cost is above normal and productivity is terrible. In some case I must pay 9 hours for an 8 hour day but they are limited to working only 4 hours. What happens is I need 2 people for every job! Cost effective, no but it is their right.

What they do is plan with their working partner. One employee works for the entire 8 hours for the shift and the other goes to the hall and works another shift when he assigned my location. Then they trade off double dipping the system.

Unions have helped our nation, however they have gotten out of hand!

We need more Right to Work States. Isn't this a free country where you have the right to be employed anywhere you want, No. After 90 days if you do not join the union you must be terminated, its in the contract.

[Stuart F.]

Re: What GM BANKRUPTCY REALY IS

I for one would never jump on the Unions with both feet. I was brought up in a Union family and endured the shared torment my Dad went through during strikes, as well as with his disagreement with the Union bosses when it came to work ethics (I saw both sides). When I worked for the Locomotive division of GM, for many years we enjoyed the same or similar benefit improvements riding along on the coat tails of the Union's negotiated contracts. Much was based on the "Foreman's Formula" which, in essence was that whatever the Union workers got, their Foreman got equal or better. This was necessary, of course, to keep people in that level of management. If your workers got more than you, well, why take all the grief - join them! They got COLA, we got COLA, etc. Then, somewhere along the line (mid to late 80's), GM figured it no longer could compensate the salaried workforce equal to or greater than the Union workers, and had to give a disproportion amount to the Unions and less to the salaried. The days of the loyal life time worker were gone for good.

Stu fox

[Gary S.]

Re: What GM BANKRUPTCY REALY IS

I do understand, having been employed by an airline that declared bankruptcy. It cost me my pension and my job. Oth, this would be history and the bailout bill would be signed if the UAW had stepped up to the plate and accepted their portion of the blame/credit/penalty. For the UAW president to say that their wages were in line with the import car makers is beyond ludicrous. Prior to my airline going bankrupt, I took two pay cuts, agreed to by my union, to help them avoid Ch. 11. These pay cuts came despite the fact that other airlines had similar pay scales. The moral of the story is that it doesn't matter what the competition is paying, it matters what you need to give up if you want a job at all.

I believe that this will be a case where the lion's share of the blame will fall on the shoulders of the UAW (and I am/was a union worker!).

Gary

[Don S.]

Re: What GM BANKRUPTCY REALY IS

You can be sure that the lawyers will not suffer in any bankruptcy.I bet they are wringing their hands in anticipation.
The court fees in the articles that Jack Humphry posted are low. But the legal fees demanded by the trustee (lawyers) is astronomical and they want them up front before they take the case. I recently saw a small bankruptcy -(3to 4 hundred thousand) The trustee got 70 grand up front which was about 1/3 of the unscured creditors balances outstanding . The unsecured creditors got nothing. The trustee has a lot of power and can cancell contracts.

[Martin T.]

Re: What GM BANKRUPTCY REALY IS

Ken, I did not read all the responses but what you have shared opens the door to an interesting paradox. We have a mismanaged company that is top heavy with fat; the company is unable to retool to meet current market demands and anticipate the market of next year let alone the next five years; this lack of proper direction and management has resulted in a general lack of confidence necessary for investors to want to reinvest into G.M.; without a revitalized confidence by the public the current requested bailout money will be pissed away in a heartbeat and G.M. will be back begging for more. So what is going to happen now to make investors want to buy stock and recapitalize this company?