
Before there was a Motors Liquidation Co, post-bankruptcy GM's hived-off shelter for useless assets, there was Old Carco LLC. That's the company Chrysler built to house its useless assets, and unsurprisingly, it doesn't have good news for unsecured creditors. Old Carco was left with liabilities of $20.5 billion, but has less than half of that to pay off everyone it owes.
The latest accounting says there is $2.345 billion to pay things off. With a shortfall that drastic, even the U.S. Treasury and the Canadian governments are waiting for their money, with a $3.34 billion loan and $29 million in interest going not being repaid. The Treasury sent Old Carco a notice of default last month, which strikes us as a waste of a stamp and paper.
And since Old Carco isn't allowed to borrow any more money, there is almost no chance that creditors will be made whole. At this point, as the company tries to unload leftover factories and property, it looks like the best anyone's going to get is pennies on the dollar -- or just fractions of that -- and that could be for the folks first in line. Old Carco is dead, long live Chrysler...



Some analysts are wondering if Porsche isn't running itself more like the Blackstone Group than as an automaker. The option trades it used last year to take control of Volkswagen netted the German automaker €6.8 billion. The business of selling cars netted Porsche just €1 billion over the same period. And that's not all: Porsche made an additional €392 million trading shares in other companies on the German exchange. This has industry watchers trying to figure out how Porsche is looking to make its money, especially considering that its total stock exposure is €31 billion. Even though Porsche has valued its stake in VW at less than half the current value of VW shares, the concern is that VW shares are overvalued and another industry jolt could drive them below the price Porsche paid. And that has people wondering whether the ensuing writedown would cause the controlling Porsche and Piech familes to lose control of the company or inject personal funds to prop it up. Beyond those hypothetical concerns, Porsche has the real challenge of refinancing a debt that currently comes due at the end of March. With severely reduced cash flow from actually selling cars, Porsche might be looking at unconventional measures, or even the trading floor, to help it out. But after making jokes at the opening of the Porsche Museum that went 100% over budget, if Porsche CEO Wendelin Wiedeking is nervous about the company's financials, you'd never know it.

Ask for a little help from the government, and the next thing you know you're asking for the government to protect you from the very help it's giving you. General Motors is restructuring its debt load by offering equity shares instead of cash to debt holders, namely the government and the UAW. The UAW transaction concerns the VEBA health care fund in that GM wants to pay its obligation to the fund with shares. The issue is that this transaction is a debt-asset swap and comes with a distressed asset tax (DAT) of $7 billion. The DAT was codified in 1986 to prevent companies from buying money-losing companies just to avoid paying taxes. In GM's case, the debt-asset swap counts as corporate income, but GM can claim it's 2008 losses against that income, greatly reducing its tax bill. If the tax isn't waived, GM will need to immediately return $7 billion of the money it was just given. It is talking to the Treasury Department, but so far it's been no dice. GM has been lobbying to have a waiver provision put in the economic stimulus bill currently being wrangled over in the Senate, yet there's also been no movement there, either. It's almost inconceivable that the government will demand GM pay the tax. It's equally hard to believe that this is even taking place.

The UAW jobs bank is a kind of employment limbo in which workers get paid a portion of their salary but don't work while they wait for their job to open up again. Last year, there were about 3,500 people in this so-called bank of jobs. It is the kind of benefit that can perplex an outsider, because someone can remain in the job bank for years and still get a wage from the company, plus supplemental pay from the company, plus unemployment benefits, plus insurance. That was the kind of thing that Congress zeroed in on when it created stipulations for granting GM and Chrysler $17.4 billion in bridge loans. The intent was to get domestic automaker costs in line with those of foreign automakers by not paying people who aren't actually working. Due to that, Chrysler's job bank will officially end on Monday, with workers still in the bank being moved to another quizzical state: "enhanced layoff." Those folks will keep their insurance and should receive some kind of job benefits. The union has told its members that "these provisions will only be in effect until such time as the mandates from the U.S. Treasury Department have been clarified," which would appear to leave the possibility open for a return of the job bank. Chrysler has only said is is working "with its UAW partners to comply with the terms and conditions outlined." GM is still wrangling with the UAW over its job bank. Ford, having sat out the government bailout, hasn't clarified its position on the matter.
General Motors is ringing the alarm bell over a delay in the second installment of its bridge loan. Chrysler faced the same thing when it was waiting on its first installment, but eventually got its money in time. GM puts the delay down to having to fill out a great deal of paperwork and having to wait on the Treasury to finish doing the ballroom-and-cocktail circuit during a little thing called the presidential inauguration. GM President Fritz Henderson said the money should arrive "in the next several days." And even though it's still only January, just in case you needed a reminder, he also said "If we don't get our second installment ... we'll run out of cash" by March 31. Cue the wailing and gnashing of teeth...
