Monday, June 1, 2009

GM Goes Bankrupt, Uncle Sam Now Owns 60%

General Motors filed for Chapter 11 bankruptcy today. The 101-year-old automaker said it has $172.81 in debt and $82.29 billion in assets. The U.S. government has invested close to $20 billion in GM and will invest another $30 billion, bringing the total aid to $50 billion. I remember when a billion dollars was a lot of money. The purpose of this bankruptcy is to restructure the company into a smaller, less debt-ridden, viable company, according to the Obama Administration. The proposed bankruptcy restructuring will leave U.S. taxpayers with a 60% share of the company. The Canadian government will own 12%, the United Auto Workers 17.5%, and current bondholders 10%. Canada? The UAW? What's going on here? The U.S. and Canadian governments add up to 72%, and the term "Government Motors" is being used to describe the new company. GM is following a similar course taken by smaller rival Chrysler in April. After taking billions in government money, Chrysler sold most of its assets to Italian automaker Fiat. This was largely seen as a successful move on the part of Chrysler, which will be out of bankruptcy soon, with Fiat running the show. One question remains: With GM and Chrysler being bailed out, what happens to Ford Motor Company? Even though Ford has reported years of losses as well, it had more cash on hand than GM or Chrysler going into this economic mess. But now Ford is at a competitive disadvantage. After all, the U.S. taxpayer owns 60% of GM, and that's a strong incentive to favor the company over its rivals. And now that Chrysler has its independence thanks to Fiat, Ford is on its own. Ford executives have shown they are smart enough to keep the company out of bankruptcy by restructuring on their own. They are hoping to exploit their status as the only one of the Big Three to keep from taking government handouts. But can they stay competitive without resorting to bankruptcy? Maybe - Maybe not. I'm buying a GM car. I'm told I can get a really good deal on a Buick. After all, I'm a part owner.


  1. I can't wait to read Chapter 12. As Sen. Everett Dirksen once said, "A billion here, a billion there, and pretty soon you're talking real money."

  2. This is just another step in the Democrats' master plan to push the American economy toward socialism. Do you think a Republican administration would attempt to nationalize the auto industry?