Government Motors: Obama Gang Buys GM, Gets New Revenue Stream Outside Of Taxes
General Motors files for Chapter 11 bankruptcy protection in New York
NEW YORK (AP) — General Motors filed for Chapter 11 bankruptcy protection Monday as part of the Obama administration’s plan to shrink the automaker to a sustainable size and give a majority ownership stake to the federal government.
GM’s bankruptcy filing is the fourth-largest in U.S. history and the largest for an industrial company. The company said it has $172.81 billion in debt and $82.29 billion in assets.
The fallen icon of American industrial might will rely on $30 billion of additional financial assistance from the Treasury Department as it reorganizes. That’s on top of about $20 billion in taxpayer money GM already has received in the form of low-interest loans.
GM will follow a similar course taken by Chrysler LLC, which filed for Chapter 11 protection in April and hopes to emerge from its government-sponsored bankruptcy this week.
The plan is for the federal government to take a 60 percent ownership stake in the new GM. The Canadian government would take a 12.5 percent stake, with the United Auto Workers getting a 17.5 percent stake and unsecured bondholders receiving 10 percent. Existing GM shareholders are expected to be wiped out.
President Barack Obama is scheduled to address the nation about GM’s future at midday from Washington, and GM CEO Fritz Henderson is to follow him with a news conference in New York.
Beyond the bankruptcy announcement Monday, GM is expected to reveal 14 plants it intends to close. One of those plants, however, will be retooled to build a small car.
GM’s filing comes 32 days after a Chapter 11 filing by Chrysler, which also was hobbled by plunging sales of cars and trucks as the worst recession since the Great Depression intensified.
The third of the one-time Big Three, Ford Motor Co., has also been stung hard by the sales slump, but it avoided bankruptcy by mortgaging all of its assets in 2006 to borrow roughly $25 billion, giving it a financial cushion GM and Chrysler lacked.
The downsized GM’s brands will be limited to Chevrolet, Cadillac, GMC and Buick. Its Pontiac, Saturn, Hummer and Saab operations will be either sold or closed. GM said it was finalizing a deal to sell Hummer, and plans for Saturn are expected to be announced within weeks.
GM, whose headquarters tower over downtown Detroit, said it believed the filing was not an acknowledgment of failure, but a necessary way to cleanse itself in an orderly fashion of problems and costs that have dogged it for decades.
Trading of GM shares was halted early Monday after they plunged Friday as low as 74 cents, the lowest price in the company’s 100-year history. GM will be kicked out of the Dow Jones industrial average because rules established by the News Corp. unit that oversees the index prohibit it from including companies that have filed for bankruptcy.
AP Auto Writer Kimberly S. Johnson reported from Detroit.
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GM is listed at $0.75 per share.
By Josh Mitchell
Of Dow Jones Newswires
WASHINGTON -(Dow Jones)- The Obama administration’s planned takeover of General Motors Corp. (GM) raises questions about whether the government is giving the auto maker a competitive advantage over foreign car companies.
U.S. auto makers and their congressional allies have for years accused foreign governments of giving an edge to their auto industries through subsidies, currency manipulation and trade barriers that hurt imports of U.S.-made vehicles. Now the U.S. could be exposed to the same criticism as it takes further steps to prop up GM and Detroit rival Chrysler LLC.
GM filed for Chapter 11 bankruptcy protection in New York on Monday, the largest-ever U.S. industrial bankruptcy filing. The U.S. government plans to provide $30 billion in additional financing to restructure GM. That investment in GM, on top of $19.4 billion in earlier aid, illustrates the type of support foreign auto makers said is designed to favor Detroit.
An Energy Department program to speed the development of fuel-efficient vehicles gives preference to plants at least 20 years old. And a proposal making its way through Congress to stimulate car sales through vouchers would exclude certain cars, such as leased vehicles, that are the specialty of foreign auto makers.
“It’s one of those things where you begin to say, ‘This is really beginning to tilt the playing field,’” said Michael Stanton, president and chief executive of the Association of International Automobile Manufacturers Inc., which represents Toyota Motor Corp. (TM), Honda Motor Co. (HMC), Nissan Motor Co. (NSANY) and others. “We understand that’s going to happen to some degree. It’s the amount of the degree that has us worried.”
Edward Cohen, Honda’s vice president for government and industry relations, said Honda supports the Obama administration’s effort to sustain the domestic auto industry, but added, “At some point, it crosses a line and begins to have some competitive implications, and I think we’ve asked about that.”
Obama administration officials have insisted their actions to prop up GM and Chrysler are necessary to save jobs and prevent further damage to a fragile economy. They said the intervention is reluctant and intended to be as brief as possible.
“We are going to play as minimal a role as we can responsibly play,” an official close to the government’s negotiations told reporters last week.
The prospect of the U.S. government owning 60% of GM for an indefinite period raises a host of other questions, including whether policy decisions will ultimately be influenced by the health of GM. Those decisions will cover matters such as car-emissions standards, safety regulations and compensation to GM’s workers.
The Obama administration has said it would not run the daily operations of GM, and that its main role would be to appoint board members, thereby prevent politics from influencing the company. But Douglas Elliott, a fellow at the Brookings Institution, a Washington-based think tank, said politics coming into play might be inevitable.
“There are going to be a lot of decisions over time which will have differential effects on foreign auto makers and U.S. auto makers,” Elliott said. “If those decisions are made in a context in which we own GM, there’s going to be questions, and more than that, there’s going to be actual pressure to favor the U.S. auto makers.”
He said he believed the government’s intentions were clearly out of necessity.
“Certainly, I think the reason we’re doing it is to not particularly favor GM,” Elliott said. “But, of course, that kind of logic is the same reason foreign countries have done what they’ve done.”
Foreign car companies have largely supported the government rescue of GM and Chrysler because of the industry-wide impact a collapse would have on the fragile network of auto suppliers, which serve multiple companies.
Stanton, of AIAM, said the administration risks crossing a line when it explicitly endorses U.S. vehicles, as Obama appeared to do last month during the announcement of Chrysler’s bankruptcy filing.
“We believe it is vital to retain and encourage a level playing field for all,” he wrote in a letter to Obama, adding that “actions that lead to discrimination on the basis of company ownership will harm” Americans who work for international auto makers.
Stanton said foreign auto makers will continue to scrutinize the government’s efforts to prop up the industry.
“We want GM to be successful,” he said, “but we don’t necessary want them to be successful at our expense.”
And of course the obvious result of this…
General Motors Corp. (GM) and Citigroup Inc. (C) will be replaced in the Dow Jones Industrial Average by Cisco Systems Inc. (CSCO) and Travelers Co. (TRV), respectively.
GM filed for bankruptcy Monday as part of a government-aided restructuring effort. Bankruptcy is an automatic disqualifier for membership in the benchmark stock index.
Citigroup is being removed as “the bank is in the midst of a substantial restructuring which will see the government with a large and ongoing stake,” said Dow Jones editor-in-chief Robert Thomson. “We genuinely hope that once the bank has refashioned itself that we will again be able to consider it for inclusion - Citigroup is a renowned institution, not only in this country, but around the world.”
Travelers was spun off from Citigroup in 2002.
The component changes will be effective June 8.
Citi shares were recently up 1.3% premarket to $3.77 amid a broad rally in the futures market while GM was inactive.
General Motors Corp has lost approximately 76.6% of their value in the last year with a total current valuation of only 457.9 Million
Ford Motor Company, who managed to miss the Obama Kiss of Death is currently valued at 16.5 Billion, that is an increase of 151.1% this year.
I predict (and I hope I am wrong) that GM stock will be trading at about $.10 by the end of the day today. Not a good time to own stock in any company that Obama wants to own.
I wouldn’t buy that stock. Everyone knows they are gonna booger this up.
Let’s not lose sight of Citigroup today as well, they are being de-listed from the Dow.
And the market is spiking upwards. Two of the biggest companies in our economy sink and the market spikes. WTF over, do you need any more evidence of market manipulation via the Fed.
The lies will catch up but the consequences will be paid for by the poor. The rich and the Fed have always escaped culpability for mismanagement and the rule of the day is for taxpayers to pay for failure. The newly implemented race war brought to us via democrats plays into everything we’ve seen take place since last October. It’s coming people, you might want to get the hell out of the city if your in one.
OK,OK,OK… Taking wagers on how many of those 14 plants will be right here in the Good Ole USA?
Why would they want to close a plant in Mexico or India and lose the CHEAP Labor?
I REFUSE to buy a Govt. Motors vehicle!
Why PAY DOUBLE the Taxes? Think about it, right now your paying a Fed. Tax when you purchase a new/used vehicle. If the Govt. ownes the damn Manufacture you WILL be paying them twice…
Whoa… now hold on a second. Let’s look at both sides of this one before you make any decisions.
What is ACTUALLY happening here?
The Government is forcing GM to bankruptcy.
What is the logical reaction to that action? Fear, Uncertainty and Doubt (FUD). The inevitable reaction to FUD is a drop in confidence, drop in sales and a lack of investor capital. What does that mean? Well no sales means that the Obama regime will take more and more of the company as the stock spirals down and fewer cars are sold to a public that is scared to death that their cars will not be serviced and parts will not be available. This is what Obama wants! He wants GM to become a completely 100% Government owned entity so he can dictate what is made and how the company is run.
I disagree completely with anyone who wants to just run away from these companies and leave them to die in the hands of the Obama Bull-shit Buy-outs (OBSBO). We want to buy GM products to get them out of bankruptcy as fast as possible and get them away from the Government by repaying those bonds/bailouts.
Now is not the time to participate in this FUD and allow the OBSBO to have their plans supported by a frightened public. Fear is their biggest and most effective weapon, and those who are running away from GM and even Chrysler are just feeding the flames of nationalization.
GM makes great high-quality cars right now - that won’t be the case when the OBSBO starts dictating what they make and how they are made. Don’t believe the marketing from the other car makers that American cars are crap. It simply is not true. Do your homework on the quality and stop participating in the fear reaction in the market. That is the sure-fire way to ensure that the company will become nothing but a socialist union gulag for crap production.
I have to say bud, it’s too late to reverse GM. They are done–go buy a Ford instead. I understand what your getting at, I simply know it’s too late. I’ve done allot of work for autolive, delphi, and what I can tell you is for the last 6years 90% of the automation equipment to manufacture cars and their components has been shipped to China and Taiwan.
The days of American cars as we knew them are gone, you’ll never again see a vehicle worth owning from GM. They WILL BE ushering in golf-carts from here on out.
The unions once again got a larger share then the bondholders who owned a bigger stake. WTF
I respectfully disagree. Keep in mind that GM’s most successful subsidiary is in … wait for it… China.
GM is only done if we allow the Obama asses to succeed with their plan. Go ahead, buy into the gloom and doom and FUD - that is exactly what they want from you.
Their biggest tool is fear. Not just in this issue, read any other article on this site and that is what you can see as the underlying issue - the propagation of fear and the taking of YOUR power as an American, as a consumer, and as an individual. They don’t need to take away your rights, you are giving them away freely when you buy into the fear.
Thanks obama! ugh.
Did you listen to the government appointed CEO. Wow, he totally gave away the fact that this is the model for NAFTA and the North American UNION. Dude, the economy was taken down prior to implementation of this. I gotta say if you buy GM, your buying socialism.
I respect you DoubleTap, your a pretty fart smeller.
But I guarantee to that the only ones running to buy GM are Obombats. With the incentives he announced in regards to trading in your older vehicle for a newer energy efficient model to get a tax rebate. Count me the fuck out of that shit pal, and it isn’t fear based, it’s based on common sense and business sense. I’m sticking to my guns on this one.
From the WSJ:
“In bankruptcy, the auto maker will split apart into two companies: a leaner new GM and a so-called old GM, which will include the pieces that will be wound down. GM intends to accomplish the split through a Section 363 sale, which would transfer the new GM assets to an entity owned by the U.S. and Canadian governments, the United Auto Workers union and the company’s unsecured creditors.
Even if a new GM emerges swiftly from bankruptcy, the administration will face a thicket of challenges, including closing more than a dozen factories and shedding the Pontiac, Saturn, Saab and Hummer brands. Shepherding these unwanted parts of GM — the so-called Old GM — through liquidation in court could take years, with potential extra costs to taxpayers if the process bogs down.”
I will not buy a GM vehicle unless/until it is owned by private investors, period.
Would you fly on a plane whose entire development was funded by the government (Boeing)? Would you fly on a space shuttle to the moon built by the government (NASA)? Would you drive on roads built by the government? Would you serve in a military which is owned, operated and run by the government? I rest my case.
Veritas - Boeing is not funded by the government. They sell the best airplanes in the world around the world and the profits from these airplanes fund their R&D. Just like any normal company. You must be confusing Boeing with Scarebus.
The space shuttle is incapable of flying to the moon, so no that would be impossible.
Roads are not built by the government. They are built by private companies and funded by your taxes.
You got one out of 4 right. Care to try again?
Hopefully these bigwigs are right and this declaration will purge all things wrong with this company. Its good to hear that some of the employees will be getting at least a small portion of the business, I hope this eases their pain a little bit.
Please tell me if I am wrong here OK?
Since OUR Govt. now owns GM & Chrysler, and possibly soon Citi… Should the American Taxpayer Not Recieve a Divident Check quarterly from OUR Businesses?
The UAW should by rights tally up also because WE are the Majority Shareholders.
Might as well Fuck with them, its about all they are good for now.
OK. The reason ‘Bama and Miz Shelly are celebrating is that they’ve accomplished what former super-powers and rogues could not: they’ve–
1) destroyed the manufacturing spine via forced bankruptcies
2) attacked the oil production mechanisms and constricted the lifeblood of this Nation via fake ‘global warming’ alarms
3) infiltrated the finance nerve centers with lackeys and crooks
The MAIN REASON, though, why ‘Bama and ilk were successful is that they knew from the outset, that the American People truly had NO IDEA how, why and what made this country great, and the synergies and mechanisms that made it run. THIS IS WHY THE BATTLEGROUND WAS ALWAYS THE ELEMENTARY AND HIGH SCHOOL CLASSROOMS! Just when civics, history, and our Government was supposed to be taught, our children were being INDOCTRINATED with Communist dogma.
… and you just SAT THERE !!! You FORGOT that FREEDOM IS NOT FREE !!! The VERY FREEDOMS you parents FOUGHT AND DIED FOR in the Pacific and European theaters, YOU ALLOWED YOU OWN CHILDREN TO DISCARD !!!
‘Bama is nothing but an opportunistic politician … the sad part, though, is that most of you reading this made it all to easy for him to succeed.
And let me be clear: Blacks did not get ‘Bama into office. Communism would have never set foot on our precious soil, had it not been for the White, ’smarter-than-thou’, college rabble-rousers.
As for Blacks, I fear we are entering a renewal of what I’ll call “quiet slavery’.
… you heard it here first.
God Save This Country.
VertiasLuxMea
June 1, 2009 at 5:49 pm
Would you fly on a plane whose entire development was funded by the government (Boeing)? Would you fly on a space shuttle to the moon built by the government (NASA)? Would you drive on roads built by the government? Would you serve in a military which is owned, operated and run by the government? I rest my case.
ob doesnt have direct control of those yet.
ob decided who would run the government purchased companies.
As to the military, they are volunteers.
Volunteering is the practice of people working on behalf of others without being motivated by financial or material gain. Volunteering is generally considered an altruistic activity, intended to promote good or improve human quality of life.
Wikpedia.
Yeah, I worked there as well as a machinist.
I also can’t help but notice you didn’t use Amtrak as one of your shinning examples of government run projects. It would seem your cherry picking now doesn’t it. Do a little research there pal on how long Amtrak has been under Federal control and how much worse off they are for it.
So where at with Boeing, Seattle or Wichita?