When I took a look at this last week, I forgot a rather-significant item – the transfer of the existing internal VEBA assets from Government Motors (which “inherited” it from Old GM) to the UAW’s control. While GM’s 2009 annual report mentioned several times that this transfer happened, the actual amount was mentioned only once. $12.6 billion went to the UAW in early 2010 (the timing is not known – the annual report says it happened within 10 days of 12/31/2009, and the SEC does not appear to have a separate record in EDGAR). The internal VEBA assets were actually part of the $20.56 billion Old GM owed the VEBA (see page 36 of the Congressional Oversight Panel’s September 2009 report, and do note the typographical error in the footnote).
Also, the “IPO” underwriters fully-exercised their option to buy an additional 13.35 million common shares from the UAW. That netted another $437 million for the UAW, with like amounts going into the Treasury and the Canadian government.
Adding those two amounts to the $3.56 billion in cash previously disclosed brings the amount recovered to date by the UAW to $16.6 billion. That means I grossly understated the profit the UAW is going to make from driving GM into bankruptcy. If GM survives as an entity until the middle of 2017, makes its note payments to the UAW, and buys back the preferred stock as soon as it can, the UAW will receive $29.79 billion (or if you will, almost $1.45 for every $1.00 Old GM owed it) before it sells any additional common stock. In fact, the UAW will profit if GM either makes the first of the note payments in 2013 and buys back the preferred stock at the end of 2014 or makes the first two note payments in 2013 and 2015 and just the dividend payments on the preferred stock – again, no common-stock sale required.
Side note – that $12.6 billion is a shocking number because it had been anticipated that only about $10 billion would be available in internal VEBA assets. Indeed, the internal VEBA assets at Old GM amounted to only $10.0 billion on 12/31/2008, and the agreement between Government Motors and the UAW specifying the terms of transfer valued the assets at $9.4 billion as of March 31, 2009. If that is a legitimate increase, I want whoever was in charge of that in charge of my portfolio.
Revisions/extensions (8:03 am 12/4/2010) - I really need to keep on top of the SEC filings. The VEBA note was paid off on October 26 to the tune of $2.8 billion. That does wipe out the future principal and interest payments that I had commented on earlier, bringing the all-but-guaranteed recovery (pre-common-stock-sale, assuming GM makes it to the end of 2014 and buys back all the preferred stock at that point) down to $28.39 billion. However, it also brings the total recovery-to-date of the $20.57 billion Old GM owed the UAW to $19.4 billion. That means that, assuming Government Motors continues to make the payments on the preferred stock the UAW holds, the UAW will turn a profit on driving Old GM to bankruptcy on December 15, 2011.