Print 31 comment(s) - last by bldckstark.. on Feb 18 at 12:33 PM

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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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
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
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.

"And boy have we patented it!" -- Steve Jobs, Macworld 2007

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