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Liberty Media saves Sirius XM from Echostar

Sirius XM, the largest provider of satellite radio, has struggled mightily in the months since the company was created by the merger of Sirius and XM.  On the verge of bankruptcy, Sirius has been saved for the time being by Liberty Media, which has agreed to loan the company a large amount of money to prevent it from being taken over by Charles Ergen's EchoStar or forced to declare bankruptcy.

The deal loans Sirius XM $530M USD, enough to pay off its debts to EchoStar, and in exchange Liberty Media will have a 40 percent stake in the company via 12.5 million shares of preferred stock.  The move will dilute the stock of current shareholders, but given the fact that its low value was largely due to the uncertainty surrounding the company, this is welcome news to many.

Sirius XM will have Liberty Media's chief executive John Malone, who brokered the deal with Sirius XM chief Mel Karmazin, on its board of directors.  The company also expects to add Liberty Media's Greg Maffei to its board.

The loans issued to Sirius XM will come at a 15 percent interest rate.  The deal is a significant one as it means the nation's top satellite TV provider (DirecTV, a subsidiary of Liberty Media) and its top satellite radio provider, Sirius XM, will be closely tied. 

No word has been announced if the companies will plan joint packages or marketing, but given their new ties, such promotions seem likely.



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Finally!
By Spivonious on 2/17/2009 9:38:30 AM , Rating: 5
This is the only kind of "bail-out" that companies should receive. If a company is going under that others in the industry think should survive, then let them purchase a stake in it.

Propping up Chrysler/GM/Fannie/Freddie/AIG only prolongs the inevitable bankruptcies. "Too big to fail" should be "Too failed to be".




RE: Finally!
By quiksilvr on 2/17/09, Rating: 0
RE: Finally!
By austinag on 2/17/2009 10:44:58 AM , Rating: 3
Toyota, Honda, and Nissan are in no position to buyout anyone, they are hurting to.


RE: Finally!
By Targon on 2/17/2009 11:21:39 AM , Rating: 2
Of course, because the problems affecting the auto industry are generated by the overall economy being down. When people can not afford to pay cash for something, they need credit. When banks refuse to lend to people who are credit-worthy, those people can not buy the goods.

Ford had seen problems with the "SUV-only" problems ahead of time, so while there are problems, Ford isn't having nearly as much trouble as GM. If GM fails, there may be a market for repairing GM cars and trucks as the focus of the business for maybe ten more years, but after the first three years, even that market would quickly dry up as people get rid of their GM cars/tricks and buy something from a company that still exists, just because they KNOW they can get parts and repairs for what they have.

If Apple suddenly went out of business, after only three years, most people with a Mac would already switch to a Windows based computer just because there would still be support, and new parts could be gotten easily. People will only stick with a product from a dead company ONLY if they can continue getting support and parts, or if they can do the work themselves.


RE: Finally!
By meepstone on 2/17/2009 12:44:27 PM , Rating: 2
The union workers make better money than most people. they dont need anything. ontop of that if there is no work they still get paid while they are off.


RE: Finally!
By RamarC on 2/17/2009 10:21:50 AM , Rating: 4
you've over-simplified the situation if sirius xm failed, probably 5000 jobs would be affected. if gm fails, 100,000 or more jobs would be loss (workers at gm factories, gm parts suppliers, gm shippers, gm dealerships, gm repair centers, gm defense contract workers). unemployment benefits alone would be OVER $500M a month!


RE: Finally!
By acejj26 on 2/17/2009 10:49:39 AM , Rating: 5
OK...now how much is the government giving them per month? Here's a hint. It's more than $500 million a month.


RE: Finally!
By mmcdonalataocdotgov on 2/17/2009 11:40:48 AM , Rating: 2
Too true, easily over US$1B per month - that is the rate they are spending it, anyway.

The same number of cars will be sold as the economy gets better, so those people displaced when the big 3 go under can work for the new big 3, and on through their supplier chain.


RE: Finally!
By zombiexl on 2/17/2009 10:53:38 AM , Rating: 3
What are the caps on unemployement in the states that would be affected. I'm pretty sure all states have a weekly (or bi-weekly) max. Also you recieve only a portion of what you would if you were working thorugh unemployment.
I think that your 500,000,000/mo is over inflated as well as the 100k jobs. At 100k that would be 5k/mo (60k per year) per unemployed person. I'm pretty sure most unemoployment max's are below that and closer to 3-4k.

If GM failed other companies would need more suppliers for increased demand for their products. Also people with GM vehicles would still need parts when their cars needed repairs. Companies would need more workers to fill the demand for vehicles. Just becuase GM fails doesnt mean everyone who buys GM will stop buying or repairing cars.

You are using the numbers the UAW pushed out there to scare america into giving the car companies the money to keep overpaying their employees. Of course that's so those same employee's can keep paying their union dues. Most americans werent stupid enough to believe those numbers and didnt want any bailout. Good old W went ahead and turned his back on those who voted for him (much like the rest of his second term) and the wishes of the american people in general.

The UAW cares about the UAW, just like any union. If they have to save a job here and there to make it look like they are doing something they will. If the Big 3 failed the UAW would crumble and they arent going to let that happen. If any of the big 3 filed bankruptcy they could boot the union out and the UAW would be hurting.


RE: Finally!
By bldckstark on 2/17/2009 12:27:04 PM , Rating: 2
Filing bankruptcy does not automatically end the UAW contract. That remains up to the judge.

The UAW workers make on average $3 more per hour than the import workers. It is the retiree benefits that are killing the big 3.

If ANY of the large automakers declare bankruptcy, all of their suppliers would almost immediately be out of business**. Most suppliers sell parts to several auto makers, so all of the suppliers customers would also be shut down. For example, if GM fails then Ford, Chrysler, and probably Toyota would also fail. That equates to about 4M -6M jobs. 4M more people out of jobs would cause a depression the likes of which this country has not seen since the 1930's, and very well could cause the failure of the USA. That is why the government is bailing them out.

Most people don't understand this, and that is why they are against the bailout.

**About 18% of an automotive supplier's cash is tied up at any one time with each of it's customers. If one of them files bankruptcy, the suppliers lose 18% of their cash as it is tied up in legal issues, or they get a few cents on the dollar returned. That is too large a hit for pretty much any business to remain afloat.


RE: Finally!
By omnicronx on 2/17/2009 12:32:00 PM , Rating: 2
quote:
The UAW workers make on average $3 more per hour than the import workers. It is the retiree benefits that are killing the big 3.
This is without the amazing health benefit packages they receive. When this is weighed in, they are making almost at least 1/3 more than import workers.


RE: Finally!
By bldckstark on 2/17/2009 12:49:14 PM , Rating: 2
Nope, not true. The import workers also receive a similar health package, along with other beneifits such as on site child care, and preventive medical treatments on site as well.


RE: Finally!
By austinag on 2/17/2009 2:32:38 PM , Rating: 2
Here is a good article on the subject:
http://factcheckcms.bootnetworks.com/articles/arti...

The conclusion of which, is that the cost, (not the wage) of a Domestic UAW workers is about 15 dollars an hour higher the a transplant manufacturers's workers because of retiree benefits costs.


RE: Finally!
By RamarC on 2/17/2009 1:26:10 PM , Rating: 2
it's simple math. unemployment benefits are about $600 a month. 100,000 beneficiaries results in at least 500x100,000 = 500,000,000. the number of employees affected by a shutdown of gm are well documented. (the estimates were published when the auto execs begged for the bailout before congress.)

and union contracts, just like any financial contract, are terminated/nullified by bankruptcy (depending on the type). any contract holder (uaw included) becomes a creditor and the presiding judge will determine who gets paid and how much. and if there is no cash (and gm is almost broke), nobody's getting paid until a liquidation takes place.


RE: Finally!
By psychobriggsy on 2/17/2009 3:45:22 PM , Rating: 2
$600 * 100,000 = $60,000,000.

Let's factor in the fact that these 100,000 directly or indirectly keep another 50,000 in work by buying things. That's still only $90,000,000 a month.

Now I'm sure they'd get more than $600 a month, if they normally earn $3000+ a month (what do these people earn? It's a trainable assembly job so it's not that advanced, can't be more than $40k a year - maybe someone in the US who knows can say). Or maybe other benefits kick in on top.


RE: Finally!
By Oregonian2 on 2/17/2009 10:14:27 PM , Rating: 2
In Oregon, the maximum for unemployment benefits is under $500/week. Unfortunately I'm speaking from experience. And it lasts for a maximum of 26 weeks.


RE: Finally!
By Ordr on 2/17/2009 10:54:40 AM , Rating: 1
Then end unemployment benefits.


RE: Finally!
By Chudilo on 2/17/2009 11:07:03 AM , Rating: 3
Well then brake them up into smaller pieces and let the smaller pieces be consolidated or purchased by other vendors. Some of the pieces will inevitably fail. But if anything it would be a great improvement for the industry.

That's what the justice department is there for, with the whole process of reviewing all major corporate the mergers. If they allowed these guys to grow "too big to fail" then they didn't do their job either.

What is the point of the whole Justice department having to approve a merger, if the country's economy depends on livelihood of a particular company.

Break them up. Smaller pieces could really be more effective in managing quality, reliability and could potentially be consolidated amongst the big three.

As an added benefit UAW won't have as much power as well.


RE: Finally!
By Targon on 2/17/2009 11:09:29 AM , Rating: 1
While this may be true of smaller businesses, how many people would be out of work if GM were to go out of business? If you think that it is only the people involved in building the cars, that is a TINY number of people affected.

You have all the car dealerships, and the repair shops, and the auto-parts vendors, not to mention the ripple effect that would come from all of these people being out of business. It gets REALLY REALLY REALLY messy, and would affect every single person in this country.

We are talking about over two million jobs that would be lost if GM were to fold since employees also spend money, and if that many people were out of work, they would no longer be spending money. At the very least, letting the company fail slowly, rather than all at once would keep the entire economy from completely collapsing.

Now, I agree that smaller businesses should not be bailed out, and the whole financial sector should not have gotten what it did, but there are cases where the free market may dissolve if the government did nothing.

What the government could easily have done to fix some problems with the lending issue(where banks were not lending money) would have been to put something like the FDIC into place for banks, so if banks lend money to other banks or businesses(not individuals, not individuals who just set up a corporation to hide behind), they will be covered for up to a certain amount.

There are other problems when it comes to bail-outs that you may not have thought about. If a company is the primary employer in a town, and it goes out of business, the entire town will dry up and end up as a very depressed place for decades. This has happened when steel mills and coal mines were shut down, leaving nothing behind but misery. Now, you go from an area that was producing a good amount of tax revenue to draining money due to unemployment. Without people in that town who still have a source of income, you end up with a real problem of homeless people, crime, and also no hope, because there isn't anything left that would stimulate economic growth.

That is what the government SHOULD be working to prevent. This is what the current economic climate is causing to happen on a larger scale though, and not just from one company. I am seeing signs of this myself, where people are spending less, so the local businesses are hurting. As those businesses shut down, there are fewer and fewer jobs, and fewer and fewer people with the money to buy things, so the cycle is going down and down.

If a business fails due to the customer base disappearing, and that business has a good business model, without wasteful spending, shouldn't THAT be something to be afraid of? Tax breaks will not help businesses when they have no customers, so ANY local business failing is a bad thing.

You look at the bail-outs of big business as a bad thing because those big businesses have management problems that cause money to be wasted. The problem is, what will happen when well-run companies fail due to all the people who will suddenly be out of work? Now, if management is the cause of many of these businesses getting into trouble, a requirement of any bail-out should be to replace the entire management team without any compensation for those managers. I am not saying the government should decide who gets those jobs, but if management is inept, it SHOULD be replaced if they need a government bailout.


RE: Finally!
By theapparition on 2/17/2009 12:07:07 PM , Rating: 2
Excellent post. Few here see the long term ramifications of Detroit going belly up. They think that just because they don't like american cars or work in the industry, it won't affect them. They are so wrong.

While I'm not going to excuse the domestics from thier bad management and contractual decisions, when you get right down to it, they make competitive cars. That's not the issue.

The issue is that when 2 million+ potential jobs are suddenly thrust onto the market, states and areas will go bankrupt. Causing even more government intervention, causing more tax increases, causing less consumer spending, causing less purchases, causing less cars being bought....ooops, vicious circle.

People claim parts suppliers won't be affected. Try asking them yourself. AAM stated they would lock thier doors the day after a GM failure. That's thousands more jobs. Plus all of the companies that service those jobs would lose income, from janatorial to IT, and they would be forced to scale back or close up.

I'm not about rewarding failure as this may seem. However, the alternative is signifigantly worse than most can imagine.

The only thing that keeps the economy moving is confidence. You spend money because you have the confidence that you can work to replace it. Only by inspiring confidence back can the economy pick back up.


RE: Finally!
By bldckstark on 2/17/2009 12:46:59 PM , Rating: 2
A lot of people also don't understand the philosophy or the necessity of complex design and assembly manufacturing to the health of a nation. If you don't make cars, then you can't make tanks, or airplanes, or any other complex defense vehicle. You have to buy those from other countries and rely on them for your spare parts and maintenance. Do you want to buy our war machines from the Japanese, German's, or (God forbid) the French?

Look at China - They can't make a car for crap. They also have the least and worst mechanized army in the developed world. But that is changing because we are basically transferring all of our manufacturing expertise to them in exchange for profit from car sales.

THINK, PEOPLE! Don't just listen, THINK ! Domestic auto manufacturing is essential to our existence as a world leader in the future. I have no problem letting GM fail in slow motion, but not all at once, taking our entire economy with it. I have no problem with GM dying, but you cannot just let them go bankrupt while the economy is in the crapper, and the rest of the country is not prepared.


RE: Finally!
By The0ne on 2/17/2009 1:31:49 PM , Rating: 2
quote:
A lot of people also don't understand the philosophy or the necessity of complex design and assembly manufacturing to the health of a nation


While your post and the others above your good reasons there is also another side to the argument. Continuing to bail out these companies will only continue the trend for a LONG period of time. We don't have that kind of money to just throw at them every month, nor is it common sense to do so.

My point, however, is that this is a grand opportunity to rebuild and restructure a system that has not been working for decades. Yes, there will be millions of people without jobs and we, as a nation, will suffer for a while. But if we rebuild and restructure properly and timely I believe it will be more sustainable, far more into the future than if we continue this path. Continuing on this path when they are apparently are not and cannot make the necessary changes is beyond ridiculous now.

The death of the big3 doesn't mean the complete death of all other tied-in business. Surely companies with larger stakes with the big3 will suffer more but they could make themselves become competitive and help drive and implement some of the changes that should be happening. When changes happen in the industry like this, although not quite this large scale, that's what companies do...they adjust so they can maintain profitability. A stagnate company will not survive long. The auto industry supply chain is one industry that has gone through a change and I don't see why it shouldn't if the big3 dies off.

What I've said above isn't impossible. In fact, it's done everyday with many companies. Toyota, itself, has done this with the best result a company could hope for...millions upon millions of profit and to spend them how they please.

And as I said it before, I hate to see the big3 go, but there isn't much that they could do to survive or compete with the UAW involved. The change I'm talking about above or any type of manufacturing change that will greatly increase productivity will not happen. The UAW has too much power now, too much influences politically and to some extent too many lazy workers living off the contracts.


RE: Finally!
By bldckstark on 2/18/2009 12:33:03 PM , Rating: 2
I don't really agree with your point of view, but I do accept it.

I just wanted to re-state that letting them fail is fine, just not all at the same time. The automotive supplier industry cannot tolerate any of the big three to die right now. Any system can only withstand so much pain until it fails. I believe that if one of the big three fails right now, our entire economy might fail. I support floating them until the economy turns up, then let them die, one by one.


RE: Finally!
By Oregonian2 on 2/17/2009 10:18:33 PM , Rating: 2
quote:
While this may be true of smaller businesses, how many people would be out of work if GM were to go out of business? If you think that it is only the people involved in building the cars, that is a TINY number of people affected.


That's an understatement. Just the downturn of auto sales creates a downturn in semiconductors (lots go in to cars) which then layoff people who then don't buy hairspray which cuts the sales of the hairspray manufacturers who then layoff people who then don't buy cars which.... spiral.


Will Liberty Media fix the incompetence?
By AlexWade on 2/17/2009 1:13:05 PM , Rating: 2
I am an ex-XM radio subscriber. I was also an early adopter, buying my first XM adapter less than a month after it launched. The merger was the worst thing to happen. Sirius XM is driving customers away. Here are the blunders:

1) Sirius took all of radio stations similar to the ones they had on Sirius and destroyed them. It didn't matter which was better, Sirius got rid of XM carte blanche. The result: the music selection is worse and you have annoying DJ's as bad as over the air radio. I used to be able to find something worth listening to between 5 stations. Now I go through 10 or more and still can't find something good. Music tastes are subjective, so maybe you like the new stations. I do not. I can live with the lack of quality. I cannot live with the annoying DJ's. JUST PLAY THE MUSIC! That I told the outsourced call center to get rid of the DJ's and I'll be back.

2) Anytime you pay more for the same level of service, it is a price increase. The day before I canceled, I got an e-mail saying that Sirius XM was going to charge $2.95 per month extra for the ability to listen online. I swore that if Sirius XM raised their prices, I was going to cancel. Promise kept. I will not go back, even if they get rid of the DJ's, unless they rescind this fee for all subscribers. I supported the merger, even sent a letter to the FCC through a merger website. In that letter I sent, I told the FCC that if Sirius XM raised their prices, I was leaving.

I left Sirius XM. In a few year, I expect we will use this as a model for how not to do a merger.




RE: Will Liberty Media fix the incompetence?
By cpeter38 on 2/17/2009 3:20:25 PM , Rating: 2
quote:
I cannot live with the annoying DJ's. JUST PLAY THE MUSIC!


We turn on the classical music to pacify our toddler. Unfortunately, the DJs announcement of the next song is typically 3 dBa greater than the music. Why does that matter? Our son wakes up or gets restless. To make matters worse, the same DJs love to hear themselves talk. It is not unusual for them to spend 15-30 seconds discussing their great knowledge of the composer or performer.

Sirius, here is some free (but very valuable advice):
Nobody wants to hear the DJs for more than 5 seconds between songs/music!!


Whatever they do say should be matched to the music (volume, tone, & attitude)!!

They have 2 months to fix it - I cannot see myself paying any additional money if I am just going to be continually annoyed!


By psychobriggsy on 2/17/2009 3:53:04 PM , Rating: 2
Naxos classical CDs are dirt cheap.

Screw the radio. Rip the classical onto your home server and install a cheap wireless music device in the nursery.

And yes, screw the subscription. I wouldn't pay to listen to DJs.


RE: Will Liberty Media fix the incompetence?
By EglsFly on 2/17/2009 4:48:56 PM , Rating: 2
quote:
I cannot live with the annoying DJ's.
If all you want is just music, listen to your MP3 player!
I have no issue with the DJ's, having them hop on in between songs and maybe once in a while providing some casual input on a tour or band info is good stuff.


By Oregonian2 on 2/17/2009 10:22:50 PM , Rating: 2
I think that's what they say they're going to do as part of their canceling their satellite radio service (because of the DJ's).


The Beetus
By abscoder on 2/17/2009 10:58:56 AM , Rating: 2
quote:
and in exchange Liberty Mutual will have a 40 percent stake in the company
Wilford "The Beetus" Brimley says "they can help you live a better life".




Good News
By Runiteshark on 2/17/2009 12:15:04 PM , Rating: 2
After working for Echostar, I can say this was a good move. Charlie is a douche and would defiantly cut quite a few channels from XM in order to make it more profitable, and of course, merge it with the existing CSR reps and bring that down into crap territory.




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