The WSJ explains the completely unequal treatment of GM's bondholders at the hands of the UAW and the government itself. Keep in mind that the bondholders have a $27 billion claim, about 50% more than the government's.
The feds have decided they should own a neat 50% of GM, yet that is not the natural outcome of the $16.2 billion that the Treasury has so far lent to the company. Nor is the 40% ownership of GM that the plan awards to the United Auto Workers a natural result of the company's obligations to the union.
Yet Secretary Timothy Geithner and his auto task force, led by Steven Rattner, have somehow decided that Treasury and UAW chief Ron Gettelfinger will get to own a combined 90% of GM. If there's a reason other than the political symbiosis among the Obama Administration, Michigan Democrats and the auto union, it's hard to discern.
OK, so the government and the UAW would own 90% of the company. Does anyone think the comopany would NOT be run based solely on political grounds? Would there be any incentive or way for the company to become profitable again? I highly doubt it...this company will become a nationalized/UAW car company. If it remains public, you can probably make a killing shorting the stock.
The deal seems even better for the UAW with Chrysler. The UAW would own approximately 56% of the stock and can thus run the company however it chooses.