For a guy who supposedly “can’t wait” to stop being an auto tycoon, President Obama is getting even deeper into GM:
General Motors Corp’s (GM.N) plan for a bankruptcy filing involves a quick sale of the company’s healthy assets to a new company initially owned by the U.S. government, a source familiar with the situation said on Tuesday.
The source, who would not be named because he was not cleared to speak with the media, did not specify a purchase price. The new company is expected to honor the claims of secured lenders, possibly in full, according to the source.
The remaining assets of GM would stay in bankruptcy protection to satisfy other outstanding claims.
GM has about $6 billion in secured debt, including a secured revolving credit and bank debt.
The government’s plans include giving stakes in the new company to GM’s union and bondholders, although the ownership structure of the company is still being negotiated, said the source who is familiar with the company’s plans.
In addition, the government would extend a credit line to the new company and forgive the bulk of the $15.4 billion in emergency loans that the U.S. has already provided to GM, the source said.
The good news: Unlike the Chrysler bankruptcy fiasco, it seems like GM’s bondholders will get their money back.
The bad news: We, the taxpayers, are on the hook for about $20 billion dollars. More will follow, as surely as day follows night, especially since Uncle Sam will own a maker of autos people won’t buy. If you think GM’s market share is bad now — down from over 50% in the ’60s to maybe 20% today — wait until they’ve chopped off four of their eight brands, axed another thousand dealers, consumers get pissed off about the endless bailouts, and their cars are designed by Washington and bolted together by a Federally-enhanced UAW.
The question nobody is asking: When it comes time for Obama to wave bye-bye to that car company he really, truly, 100% never wanted to run — what if there’s no one willing to buy?
Subsidized manufacturing always leads to mandates to limit consumer choice. It will start with incentives to get you to buy the new 2010 suckmobile, and then it will go to fees and taxes to get you to get rid of your current car in favor of the 2010 suckmobile. Doesnt that sound lovely?
Change. I got yer change right here pal…
What’s going to come first; Obama waving bye-bye to Government Motors or the literal end of the world?
I’ve got my money on the Apocalypse.
their, not there.
Frank Martin writes:
Subsidized manufacturing always leads to mandates to limit consumer choice. It will start with incentives to get you to buy the new 2010 suckmobile, and then it will go to fees and taxes to get you to get rid of your current car in favor of the 2010 suckmobile. Doesnt that sound lovely?
How right you are. A first step here might be in the new “mandate” that all new cars must conform to the California standards. The second step will probably be to make it illegal after a couple of years to operate any car that doesn’t conform to those standards. By that time the dollar will probably be almost worthless, so buying an import will be out of the question.
Call me paranoid if you will, but I having a sneaking suspicion that a lot of the crap that is going down now was planned some time back. All they needed to get the ball rolling was the election of the big Zero.
Once upon a time we made cars because manufacturing cars made good money for the investors, now we make cars because it makes good politics. What was once the output of a car company, the cars themselves, has almost become irrelevant in the process. GM will lose only slightly less money every year by making new cars than it will if they just had everyone sit in the factories and read the paper all day. What cars are made by GM, how they are made and how much money they make is now completely off the table in terms of measurement of success of “The New GM”.
Once the government decided to become a player in the market, the free market ceased to be, that is to say that once the government took it upon itself to own the market, it ceased to be a market. As a result of this deal there is no competition in the manufacturing of domestic cars and worse, if there is any competition that arises from another domestic manufacturer(Ford), it will be legislated out of existence.
Government hates competition, while the free market thrives and depends on it.
There was an alternative move, I suppose, that GM management could have taken, and that would have been to shut down the US component of the company, and move headquarters to Turks and Caicos, or somewhere with nice beaches and only marginal extradition agreements.
GM could then import cars to the US, and keep somewhat more of the money. Or possibly even begin manufacturing cars in Ohio or Mississippi, with non-union labor like everybody else.
When I hear the words “President Obama” or see him behind the presidential seal, I get the shaky sensation of riding in the backseat of my own car rolling down the road with no one in the driver’s seat.
Stephen, it’s the government. Willingness has got nothing to do with it.
So basically, Dear Leader’s lips are saying “no” but every other square inch of His body is saying “yes.”
Ain’t Mussolini-lite fascism grand?
If there breathes anyone so gullible as to believe GM was ever going to repay those “loans”, I’d like to discuss some investment opportunities with them.
Why won’t I buy a car from GM? Because their cars contain tracking devices and remote shutoff controls. Can you imagine anything more antithetical to individual freedom?