GM Bankruptcy | 06/01/2009 9:00 am
GM Files for Bankruptcy Protection. Will Government Really Stay Out of Its Business?
President Obama, GM, address nation today on bankruptcy details and what it means for you, the taxpayer.
Image: Flickr
"The GM that you knew - the GM that let many of you down - is history."
That’s the message GM CEO Fritz Henderson sent today in detailing his company’s vision for a leaner, cleaner, and meaner GM. "From here on, we move up," Henderson added, saying it’s the beginning of a new chapter for one of the nation’s biggest car manufacturers.
GM headed into bankruptcy today, and President Obama says he that even though the federal government will be a majority stakeholder when all is said and done, he has no interest in "running GM."
Restructuring will be the next move for America’s largest automaker of 77 years. GM will get $30.1 billion in bankruptcy financing from the government, and the federal government will have a 60 percent equity stake in the new company; 12 percent will be held by the Canadian government, while the United Autoworkers Union will own 17.5 percent, and bondholder will own 10. Eleven assembly plants will be closed, while another three will be idled, which means another 21,000 job cuts. You can find details on the bankruptcy here. There are still many questions about how everything is going to work. We’ve told you a little bit about what GM’s bankruptcy means for you, but we’re sure to hear more as the day goes on. What do you think it all means?
The Obama administration says that despite the fact that the taxpayers will own a majority stake in the new and, hopefully, improved GM, the government has no intention of getting into the day-to-day operations of the company.
"We are acting as reluctant shareholders because that is the only way GM can succeed," Obama said today. "What we’re not doing - what I have no interest in doing - is running GM." He also described the government’s approach a "hands-off" one, and the feds will "get out quickly" after the taxpayers’ money is recouped. He and Henderson also called for additional "sacrifice" to be made by GM union members, workers and their families, suppliers and others who may feel the crunch even more under the reorganization, and as more dealerships and plants close.
"What you’re doing is making a sacrifice for the next generation … so that your children and all of our children can grow up in an America that still makes things, that still makes cars, that strives for a better future," Obama said.
You can watch the GM press conference live here.
Read more about: Bankruptcy, Business, Car Manufacturers, Chrysler, Detroit, GM, News, Obama Administration, President Obama, Treasury Department, U.S.
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73 Reader Comments (so far…) Sign In or Register to comment
I don’t know how anyone can think the economy is rebounding on its own. There is still so much uncertainty. Just eight months ago, Rick Wagoner told hundreds of GM employers who were celebrating the company’s 100th anniversary, " We’re a company that’s ready to lead for another 100 years!".
GM made costly and foolish mistakes , such as creating the Jobs Bank and also allowing the "launch and leave" practice… flooding new cars on the market ( the EV1 electric) but then failing to support them with advertising. Honda attracts many thousands of buyers to its Accord with relentless advertising. Ditto for Toyota and the Camry. The only thing GM really hawks is its truck lines.
Now GM wants to blame everyone but themselves, including the Japanese government and the UAW. Unless GM stops making subpar vehicles, how will they win old customers back?
GM’s got a great portfolio of high-quality cars. But, you’re right, the Detroit automakers dropped the ball when it came to making quality small vehicles. Americans demanded larger vehicles, and the automakers gave them what they wanted. People in other countries weren’t demanding the larger vehicles. And they didn’t have the high health-insurance and legacy costs that added a total of $2,500 to the cost of every vehicle. Simply put, they weren’t playing on a level field with their foreign competitors, who pay their workers $2-an-hour.
That’s the real issue: the outsourcing of America’s manufacturing base, and our standard of living.
It is my opinion that Rick Wagoner lied to his employees. Plain and simple. The economy is, in fact, recovering on its own. GM must know that they ran the company into the ground with poor business models and spending. IMO they shouldn’t gone into bankruptcy a along time ago…on their own…..without a government bailout.
This new administration is making great strides in government control in less than 200 days in office. Obama himself stated, "We cannot sustain this debt." President Obama, I have to agree with you on that one!
A company needs one thing to succeed: A customer.
That being said, the only way Government Motors can succeed is if they make cars that people want to buy. We may be saying “Bye-bye” to the domestic auto industry very soon.
Deber,
Yep, many of our businesses seem to have forgotten that the customer is what really makes or breaks you. My first car was a Buick. Consistently crappy service made me swear off ever buying a Buick again; my subsequent cars have been Japanese because they were cheaper, better, tougher, got better mileage, and the service was better too. I’m not against buying GM, it’s just that any time I have gone car hunting, GM was not the best quality. I believe in supporting American-made; but I won’t burn myself to do it.
One good thing about the Buick, though - that car (in 1985) got 40 mpg. Now it seems like even 30 mpg is considered really good. They don’t build ‘em like they used to…
I heard a comment on the news over the weekend, that if car dealers are forced to stop making the big autos that some people want to drive, then they will continue to hold on to what they have now, which will in turn hurt new car sales in the future. Just a thought!
I agree…seems I will have to keep my FORD Expedition and Escape forever! Do they no realize that some of us need those vehicles to haul trailers, cargo or passengers.
It is not the car..but how you drive it. I live a mile from my office and use a tank a month most of the time.
SJ…it’s just another way of letting "big govt." control our lives…sounds like we had better start getting use to it…I see it worsening everyday.
George W. Bush stuck the key in the bailout ignition.
Barack Obama floored the gas pedal.
The taxpayers got stuck with a lemon for life.
***
Here’s what some are asking today:
“Tell me again why we had to give billions to GM and Chrysler? Oh yeah, to avoid bankruptcy and all of the attendant problems associated with it. RIP America. We hardly knew ye.”
" A community organizer is now auto-exec-in-chief. And a 31-year-old (almost) law school grad with no knowledge of the auto industry is in charge of dismantling GM. Huh??"