General Motors has filed for Chapter 11 bankruptcy protection:
General Motors filed for bankruptcy protection this morning in a move that President Obama said was necessary to restore the auto manufacturing giant to competitiveness and help ensure the survival of the domestic auto industry.
In a speech at the White House hours after GM filed for Chapter 11 bankruptcy protection in New York, Obama hailed GM’s plan to emerge from its current woes as “credible” and “full of promise.” But he also sought to reassure Americans skeptical about the plan’s provisions to transfer a 60 percent ownership stake in the company to the U.S. government in return for an additional investment of about $30 billion during and after the bankruptcy process. The new infusion of cash will bring the total U.S. commitment to GM to about $50 billion.
“We are acting as reluctant shareholders, because that is the only way to help GM succeed,” Obama said. “What we are not doing — what I have no interest in doing — is running GM.” He vowed that the federal government would “refrain from exercising its rights as a shareholder in all but the most fundamental corporate decisions,” and he promised that a private board — not the government — would “call the shots and make the decisions about how to turn this company around.” For example, he said, the “new GM” would decide where to open new plants and what types of new cars to make.
“Our goal is to get GM back on its feet, take a hands-off approach and get out quickly,” Obama said.
The government won’t run GM. If Chrysler’s experience is any guide they’ll just tell them what to sell and who can sell it. And GM’s managers will know what to do without being told explicitly. If they know what’s good for them.
I’ll repeat the question I asked before: will the GM that emerges from bankrupcy be worth saving, at the price tag of $50 billion or any price tag? You can create or save quite a few jobs for that kind of money with or without a GM.
Much depends on whether a viable recovery plan for the company can be devised. I doubt that it can but I look forward to seeing what people come up with.
Meanwhile, how in the world does Ford have a fair playing field for competition if GM has a blank check from Uncle Sam for anything it wants?
Point 1. – I doubt its worth saving. Private capital (decisions) concur.
Point 2. – The notion that Team Obama will make the right design, production blah blah blah decisons is ludicrous on its face.
Point 3. – Ford is screwed. Play by the rules? Too bad. You lose for politics sake.
The worst government policymaking of my lifetime.
The worst government policymaking of your lifetime, eh, Drew? Not for long. Give him a few weeks, I’m sure Obama can top even this. Even money says in a year, we’ll look back on the days where GM getting usurped by the govt. was the worst we had to deal with from the One. Heh.
Drew:
So your position is that Obama’s team will necessarily mishandle GM but somehow gain advantage over Ford? Will they also have an advantage over Toyota? And if so wouldn’t that show that GM was doing pretty well, thus contradicting your first point?
Michael, please.
The point is twofold, and obvious: 1) Ford will continue to bear all of the legacy costs that the others will shed through bankruptcy. And those costs are huge, perhaps competitively decisive. Have you seen the cost per car? 2) Whatever GM’s future incompetancy, it now appears to have an evergreen taxpayer subsidy; a sugar daddy. Not the best news for a Ford shareholder. (But you knew that, Michael. You are informed; I’ve seen your posts. Why the BS remark?)
Now, on the other hand, if you care to make the case for the sparkling government stewardship of GM on the way…………please do.
Me, I was at the BMV just this week. “Now serving number 174, estimated wait time……….oy”
Look at it another way, Michael. Based on the market for automobiles in the United States at this moment half as many cars will be bought as were bought last year or the year before or the year before. I believe that’s going to be true for the foreseeable future, win, lose, or draw.
Half. That means half as many dealers, half as many cars to be manufactured, half as many auto workers.
If we want to maximize the long-term survivability of U. S. auto-making do we:
1) subsidize the least successful companies;
2) divvy the available market amongst weak and strong;
3) let the weak ones go?
I think the smart thing to do is to let Chrysler and GM go which will in turn maximize the likelihood of long-term survival for Ford, Toyota, and other carmakers who make cars here.
Note that there’s another complication: within the next few months, a year at the outside, we’ll be seeing imports here from China and India.
BTW, Felix Salmon has a post on car sales at his blog at Reuters today which is worth looking at in this context.
I’m not worried about Ford. In fact, I’m betting on Ford because I bought some of their stock a couple of months ago.
Yes, GM will have a government Sugar-Daddy, but that Daddy likely has very little competence regarding the Automobile market. I’m expecting that Ford will simply make better products than GM and will win in the marketplace. Throwing money at GM doesn’t do much to change that IMO.
I assume that with little effort and little in expense Ford will start grabbing some of G.M. and Chrysler’s talent.
I listened to a former United Airlines CEO this morning claim that he had experience competing against government run companies, and he’d rather compete against them than the private companies. YMMV, I was never that impressed with United.
But don’t Ford, Toyota and other domestic car makers have problems with the shared parts manufacturers?
Drew:
Why the BS remark?
Sometimes the urge just comes over me.
I’m actually paid to be juvenile. If people are going to reward this kind of behavior what can I do as a good capitalist but serve the market?
Ummmm..none of this was about GM or Ford’s viability. it was about preserving the UAW’s piece of the pie, because they spent millions getting Obama and other Democrats elected. As at Chrysler, the ones who really took the hosing were the bond holders, many of them retirees.
With the guv’mint as a 60% stockholder and the unions with a 17.5% stake, does anyone think that decisions on how to run GM are going to be made on a business rather than a political standpoint?
What’s likely going to screw Ford along with GM’s free pass on the taxpayer’s purse is the 39MPG CAFE standards, combined with the $5 per gallon gas guaranteed by Cap and Trade. Those standards won’t be achieved by making SUV’s and trucks more fuel efficient, but by eliminating them. So get ready for a bunch of US style Yugos. No one outside of wealthy elites is going to be able to afford anything else, and few of them will be built except to transport government functionaries like Obama and his entourage.
I certainly hope those of you who voted for Mr. Hope N’ Change are enjoying this. Trust me..you haven’t seen anthing yet.