General Motors will today file for bankruptcy protection, bringing an icon of American industry to Chapter 11. President Obama will speak to the filing this morning. (I will attach video to this post as soon as it is available). From the Washington Post:
Under the proposed restructuring, about 60 percent of the new GM would be owned by the United States, about 12 percent by the governments of Canada and Ontario, a union health trust would own 17.5 percent, and the company’s current bondholders would get 10 percent.
The bondholders have voted to move forward with the debt for equity swap, with 54% voting in favor. That should clear the way for a relatively quick exit from bankruptcy. The new G.M. that emerges will have shed thousands of dealerships, as well as the Hummer, Saab, Pontiac, and Saturn brands. The United States government, after contributing $30 billion in debtor in possession financing, will have $50 billion into G.M. Those loans would be converted into the equity stake of 60%.
G.M. will emerge in short order with a cleaned up balance sheet, labor concessions, and a trimmed down operation. But despite that they are nowhere near out of the woods. Auto sales in the U.S. have dropped below 10 million, to about 9.5 million. Most of the analysis points to the 10 million car mark as what would be necessary for G.M. to break even at its current market share. Continued slide in market share, or a failure of the domestic market to rebound sales wise will put G.M. in trouble again.
It is a big risk that the Obama Administration takes here. But what are the alternatives? Just letting G.M. collapse into liquidation, whether people want to admit it or not, would be a severe shock to this economy when we can least afford it. Maybe we could just absorb that shock in better times, but I question whether we can today.
Bill Manzi.com 
Your Honor,
I find that Obama is working to implement his social engineering programs. He is using the ‘economic crisis’ as a cover.
In retrospect, there has not been such a economic wide crisis as the President and His Democratic allies lead us to believe.
There was a banking crisis that needed attention. Once stabilized, all the rest could have righted itself. There would be failure and displacement but all would come out OK in the end.
Now that he has left us with ‘no money’ (Obama’s words) he is working to add taxes to our burden. Even a VAT, a form of a sales tax is being considered with much joy by the Democrats.
I think he will ruin this country. Don’t give me the Bush thing. Obama ran with the bad stuff after he took over. He is not going to leave this country free.
And while he’s sucking all the cash he can out of your constituents, where are you going get the money to run the town?
Jules
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No doubt that what’s left of the car industry would not survive without support right now. Not only the dealerships, but the supplier chain would collapse, along with the tax revenues they generate. Think we’re in bad shape now …
Let’s hope today marks a new beginning for American industry, and for the people who actually build things with their hands. I only hope that they clean enough management deadwood out of that forest so that they can innovate and make more things worth buying.
Good luck, General.
-FM
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Your Honor and Fred,
If the car industry cannot survive it should go and let those that can compete.
Fred, this is a new begining for American industry all run by the Nanny State. With the Government appouinted (or approved) managers running subservant to the UAW and greta Governmemt markateers this thing will fall apart. There will be no losses as you and I will subsidize losses. No one in the ‘new’ GM, as it is now constituted, cares a fig about running a profitable company.
Gentlemen, Polotics is the new ‘profit motive’.
Jules
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Jules:
My friend: write it down. Put it in an envelope. Open it up in four years time. Let’s see what it says then.
It’s surely better than liquidating the company, losing the jobs, killing the supplier chain, and pretty much ending American branded car engineering as we know it, no? If the Japanese and Germans were here as long as Detroit has been, they would end up with the same pension problems.
And, if it weren’t for that protectionist anti-free market Ronald Reagan, you would not see a Harley-Davidson motorcycle as you drive down the road today (It’s one of about a handful of things I give him thumbs up for).
Let’s hope this little piece of intervention allows a better GM to emerge. Of course they care about being profitable: UAW’s pensions are what bought them the stock. Looks like they retire if and only if the stock does well …
-FM
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Fred,
What is GM going to make with Obama at the helm? SUVs, Vans, Trucks? He will see to it the new Government entity will make ‘green cars’.
Jules
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Jules:
I hope so. That would be pretty much in line to what the Germans (see Volkswagen for TDI, Mercedes BluTec technology) or Japanese (better diesels, hybrids, soon to be full plug in hybrids, hydrogens) are working on and selling, no? Or are you now rooting for GM to fail, and do exactly what put them in this position to start with?
-FM
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