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As expected it was announced today that GM filed chapter 11 bankruptcy. While this is no surprise and many

General Motors Head Quarters

believe it is the best thing that could have happened to the Auto maker it will be a bitter pill to swallow. Already the Obama administration has handed over another $33 billion of government (taxpayer) funds. This brings the total to well over $50 billion leaving many Americans are skeptical including myself.Don’t take my word for it, here’s a poll conducted by Fox Forums. At the time of this writing 92% think we will never see the money we “sank” in GM also known as Government Motors.

I for one would like to know exactly what Obama’s intentions are.

“Our goal is to help GM get back on its feet … and get out quickly,” Obama said.

He said the government would act as “reluctant shareholders” and that he has “no interest” in running GM. Yet the federal government now holds a 60% interest in General Motors.

Foxnews.com supplied an outline of GM’s bankruptcy plan.

The outlines of the restructured GM are as follows:

• Cut GM’s production break-even point from 16 million annual unit sales to 10 million.
• UAW concessions include allowing GM to shed its $20 billion obligation to its pensions and health care fund, otherwise known as the VEBA. The White House said the UAW concessions were more substantial than those sought by the Bush administration when it was considering throwing the company a taxpayer lifeline.
• Bondholders representing at least 54 percent of the company’s unsecured bonds have agreed to trade their portion of GM’s $27.1 billion in unsecured debt for a pro-rated share of 10 percent of the equity in the so-called new GM. In addition, the bondholders will receive warrants for an additional 15 percent of the company. The bankruptcy process, which the White House said should take between 60 and 90 days, will enforce this distribution as well as adjudicate proceeds for bondholders who do not participate in the White House deal.
• The reorganized GM will buy most of the old GM assets needed to carry out its business plan. The purchase will happen in the Chapter 11 process. In exchange, the U.S. government will relinquish a majority of its loans to GM.– The new GM will create an independent trust (VEBA) that will finance health care benefits for GM’s retirees. The VEBA will be funded by a note of $2.5 billion payable in three installments that end in 2017. There will be an additional $6.5 billion purchase that will create 9 percent perpetual preferred stock. The VEBA will also receive 17.5 percent of the equity of New GM and warrants to purchase an additional 2.5 percent of the company. The VEBA will be able to chose one independent director for the new board. It will have no right to vote its shares or other exercise other governance rights.– The GM-qualified pensions for current hourly and salaried employees will be transferred to the new GM.
• Treasury will provide $30.1 billion of debtor-in-possession financing to support GM through an accelerated Chapter 11 process. Officials anticipate no additional funding for GM. “There is no plan of any kind for future support beyond this point,” an official said.The government will receive $8.8 billion in debt and preferred stock and 60 percent of the company’s equity. Treasury will appoint all new board of directors members not appointed by the VEBA and the Canadian government.
• Governments in Canada and Ontario will lend $9.5 billion to GM and the new GM. The Canadian and Ontario governments will receive approximately $1.7 billion in debt and preferred stock, and approximately 12 percent of the equity of the new GM. The Canadian government will select one director to the new GM board.
• The new GM will, as part of the government-supervised restructuring, build a new small car in an idled UAW factory. The goal is to increase the share of U.S. production for U.S. sale from 66 percent currently to 70 percent.

These are the White House “principles” for managing the ownership stake:

• The government will sell equity stakes as “soon as practicable.” The goal is a profitable company without government involvement.– The government will reserve the right to set up-front conditions to protect taxpayers, promote financial stability and encourage growth.
• The government will manage its ownership stake in a hands-off, commercial manner. It will not interfere with day-to-day company operations. No government employees will serve on the boards or be employed by these companies.
• The government will only vote on core governance issues, including the selection of a company’s board of directors and major corporate events or transactions.

So the sale of equity stakes will take place, “as soon as practicable.” Kind of like all of the Banks the government currently owns which are not allowed to pay back the TARP money they received a few months ago?

The government will only vote on core governance issues,like the selection of the company’s board members and major corporate transactions. This still allows them to stack the deck with whom ever they want to run the company. After all Obama did fire former CEO Richard Wagner. So I would expect him to put in place a puppet board to run the company as he sees fit.

Shortly after the filings were made official President Obama made a speech, something he seems to be making a pass time of, to address the bankruptcy issue. In this speech he made some ghastly statements concerning it’s effect on the state of the economy.

I will not pretend the hard times are over. Difficult days lie ahead. More jobs will be lost. More plants will close. More dealerships will shut their doors, and so will many parts suppliers. But I want you to know that what you’re doing is making a sacrifice for the next generation, a sacrifice you may not have chose to make, but a sacrifice you are nevertheless called to make so that your children and  of our children can grow up in America that still makes things, that still builds cars, that still strives for a better future.

Sacrifice? Sacrifice? Sacrifice for a better future. President Obama didn’t care about our childrens’  future when he squandered it away in all of his ridiculous spending plans that he has shoved down our throats over the last 4 months.

We already know that the government is going to control the kinds of cars and trucks that the Auto makers will be allowed to make by imposing new emissions and fuel economy restrictions on the car companies; and in doing so he is guiding GM and Chrysler in the direction he wants them to go in. Ford Motor Co. will stand alone in its ability to produce what ever vehicles it chooses until 2017 when new Auto standards go into effect.

The closing of a multitude of auto manufacturing plants and, by extension, their parts suppliers, as well as about 2600 GM dealerships won’t sit well with the tens of thousands of people that will loose their jobs. None of these people will have that “future” that he spoke of.

Sorry folks but I think the community organizer has bitten off more than he can chew this time. He has never ran any company let alone a car company. I fail to see where he will be able to implement a viable solution to these problems through, what has become a favorite tactic of his, government intervention. It will, I think, lead to the death of an American Icon; The American Auto Industry.

Tags: Auto Industry