GM Confirms UAW Benefits Payment Will Dilute Shareholders

UAW/GM logosThe positive news on GM has been so rampant that many risks factors to share price have been overlooked. It is tough to get unbiased opinions since most analysts work for the GM underwriters and TV networks receive millions of dollars from GM ad revenue. While GM has much good news to discuss, the very obvious risk factor of share dilution to benefit the UAW has not been mentioned.

Here are the facts regarding GM’s plans for diluting shares in order to make a $2 billion contribution to the UAW benefits fund in GM Investor Relations’ own words:

The $2 billion in GM stock will be newly issued shares. They would be dilutive to the existing shares.  We currently expect to complete the contribution to the pension plans in the near-term. The stock contribution is contingent on Department of Labor approval. The number of shares contributed will be determined based

Don’t Pop the Corks for GM Just Yet

Most news we hear regarding General Motor’s IPO this week proclaim the event as a huge success.  It would be prudent to consider whether the process leading up to and following the auto industry restructuring should be a template for future restructurings, as Al Koch (head of Motors Liquidation or “Old GM”) has stated. While some may argue the positive aspects of the GM bailout, it is more than just sour grapes or GM hating that contributes to a desire to have a continuing dialogue on the precedent setting procedures that may lead to a subversion of contract law that has governed for over 200 years in this country.

First, there should be recognition that some creditors were favored over others in the GM bankruptcy process.  It can be spun any way apologists want, but the facts are clear that politically favored groups, i.e. the UAW, were favored over bondholders. …