By on May 14, 2009

Well, the worm has turned properly on government intervention in the auto industry, as General Motors now seems to fear a government takeover more than bankruptcy. Too bad the choice isn’t either-or. Recent 10-Q filings with the SEC indicate that GM accepts the inevitability of a Chapter 11 filing, but describes the ramifications of a possible government ownership stake with fear and horror. “In the future we may also become subject to new and additional government regulations regarding various aspects of our business as a result of the U.S. government’s ownership in (and financing of) our business. These regulations could make it more difficult for us to compete with other companies that are not subject to similar regulations,” figure GM’s professional worrywarts. These still waters of paranoia run deep.

“To the extent the U.S. Treasury elects to exercise influence or control over us, its interests (as a government entity) may differ from those of our other stockholders,” goes the GM line of thinking. Considering the Treasury and UAW VEBA trust will hold 89 percent of New GM’s equity following the proposed debt swap, the “other stockholders” would hold an 11 percent stake at most. A voting majority that ain’t. So what’s the problem?

“In addition, the U.S. Treasury’s ability to prevent any change in control of us could also have an adverse effect on the market price of our common stock. The U.S. Treasury may also, subject to applicable securities laws, transfer all or any of its portion of our common stock to another person or entity and, in the event of such a transfer, that person or entity could become the controlling stockholder.”

By the wounded tone, you’d think GM had never even considered doing something as sneaky as, say, diluting 90 percent of its stock to a one percent equity position. In order to give a controlling stake to (wait for it) VEBA and the US Treasury. It sounds like Sergio Marchionne is haunting someone’s nightmares.

“We currently are in discussions with the U.S. Treasury regarding the governance of our company following consummation of the exchange offers and therefore we cannot assure you as to what role the U.S. Treasury will play. Absent other arrangements, as a result of its ownership of our common stock, the U.S. Treasury will be able to elect all of our directors and to control the vote on substantially all matters brought for a stockholder vote. In addition, through its stockholder voting rights and election of directors, and its role as a significant lender to us, the U.S. Treasury will be able to exercise significant influence and control over our business if it elects to do so.”

Boo-freaking-hoo. You gotta serve somebody, as the poet once said, and taking bailout bucks makes the government master of your fate. It’s one thing to ask the government to be a lender of last resort, but it’s quite another to ask said lender to ignore its fiduciary responsiblity. Y’know, more than it already has.

Meanwhile, GM hasn’t served its stockholders well for years, as witnessed by the current, lamentable value of GM stock. The fact that it is also willing to diss its stockholders with a 100-1 reverse split speaks volumes about the sincerity of GM’s hypothetical crocodile tears.

Besides, later in the filing, GM admits that “Even if we successfully consummate the exchange offers, our indebtedness and other obligations will continue to be significant.” Why? Supplier failure, VEBA cash needs (even if VEBA takes equity), weak sales and more. Where’s that money coming from again? Not only is GM seeking an open-ended commitment from the Treasury, it also wants no strings attached. And even though GM desperately needs to be saved from itself, the Treasury seems almost too willing to allow GM to fall back into its old habits. To wit:

Although the agreements governing certain of our indebtedness, including the U.S. Treasury Loan Agreement, contain restrictions on the incurrence of additional indebtedness, these restrictions are subject to a number of qualifications and exceptions, and the indebtedness incurred in compliance with these restrictions could be substantial. If we or our subsidiaries incur additional indebtedness, the risks associated with our substantial leverage would increase.

Having heard the Chrysler in the coal mine start singing in Italian (and lose half its ad budget), it’s not entirely surprising that GM would be wary of government control of its operations. But if the $16.3 billion we’ve dumped into GM so far doesn’t buy the government a certain amount of control, then the tens of billions we will continue to dump over our “at least two year” ownership of GM certainly will.

Sure, there’s a question of whether the Treasury will force GM to build eco-freak-mobiles that nobody will buy. But that would be a problem for the GAO and other taxpayer advocates. Or, a possibility that should have been considered before the rush to bailout. Besides, if GM had its finger on the pulse of the American car market, we wouldn’t be having this discussion right now, would we?

Again and again, GM betrays the belief that its only problem is liquidity. If an organization is so blind to its own structural problems, how could partial government ownership make the situation any worse?

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58 Comments on “Editorial: Between the Lines: GM Does Not Welcome Its New Governmental Overlords...”


  • avatar
    TonyJZX

    i am reminded of the fact that in some of the less civilised places in the world don’t have ‘bankrutpcy’ – you got to jail if you aren’t able to service your debt.

    In that case you are at complete mercy of whoever holds your lien.

    In this case that’s the government. You should have thought about that before you went down the path of loserdom. No-one has sympathy for people in this situation.

    Ford deserve every advantage they get.

  • avatar
    taxman100

    GM is screwed with Washington in charge. Sure, the government can print all the money they want to give to GM, but at the end of the day, Washington will force them to build (and try to get us to buy) little crackerbox cars that no one wants to buy.

    I’m a domestic car kind of guy, but I won’t buy a vehicle from a government subsidized, union dominated automaker.

  • avatar
    GS650G

    Either they are incredibly stupid, naive or stupidly naive to think they could remain in control at any level. A conservative government might have been more hands off but this crew is itching to get their hands on a car company as big as GM they can reshape the auto business with.

    And the Union payoff sweetens the deal. The Union goes along to get along and receive their slice of the pie.

    Ayn Rand is laughing from beyond the grave.

  • avatar
    lutonmoore

    Ayn Rand is laughing from beyond the grave.

    You got that right. Who in their right minds would invest a nickel in Chrysler or GM now? After the way the gov’t hosed those other investers? I don’t think so. This is just a ploy to prop up the unions a little bit longer. I’ll need a medium-sized car in two years. It might be a Ford. It sure as hell won’t be any company selling out like these two have done.

  • avatar
    John Horner

    Any time you read the Risk Factors section of a 10-Q you will be sure you never want anything to do with the company, so I’m not sure GM management is filled with fear and loathing of their overlords, and if they are … so what?

    Ya take da man’s money and ya have to take da rules.

    “Ayn Rand is laughing from beyond the grave.”

    I’m not sure about that. Her best boy Alan Greenspan didn’t exactly cover himself in glory.

    The real news in their 10Q is that GM now expects to go down the same road Chrysler is presently on:

    “General Motors Corp. says it likely would sell most of its assets to a new company and liquidate the rest if it has to seek bankruptcy protection.”

    http://finance.yahoo.com/news/GM-says-it-could-sell-assets-apf-15252266.html?.v=4

  • avatar

    Boo-freaking-hoo. You gotta serve somebody, as the poet once said, and taking bailout bucks makes the government master of your fate.

    Exactly. Beg for federal bucks and then don’t like the outcome. Too damn bad.

    John

  • avatar
    yankinwaoz

    Good! Then declare BK and get it over with. I’m sick and tired of my current and future tax dollars being wasted on these bozos.

  • avatar
    levi

    When Caesar prints horrendous amounts of money and gives your company billions of it to keep it afloat, you can just sort of figure Caesar is going to have a say in how your company navigates.

    Not understanding that concept provides plausible explanation of why said company has drifted aimlessly for a couple of decades or more.

    Render unto Caesar that which is Caesar’s.

    Or sink.

  • avatar
    buzzliteyear

    GM does have a legitimate cause for complaint.

    Given the lack of scrutiny that the financial sector received for much larger sums of government money, GM’s protests over being told “turn to the left and cough” have some merit.

    But the whole bailout process has been rife with class warfare from the beginning, why stop now?

  • avatar
    akear

    It looks like the US will have no domestic auto industry to speak of in ten years. By then we will have also lost our manned space program.

    The US has become UK II.

  • avatar
    McDoughnut

    Re John Horner :

    Ann Rand’s ‘best boy’ was Milton Freedman and the University of Chicago Econ Dept.

    Do the reading and you’ll see that Alan G, pretty much went off the economic reservation years ago.

  • avatar
    lw

    Maybe they will put Pelosi in charge of GM…

    The more she talks, the closer she gets to needing a new job…

  • avatar
    Pch101

    To be fair, they need to make these sorts of disclosures per SEC regulations. Management is supposed to disclose unique risks and circumstances, in order to avoid potential lawsuits later. It’s particularly true in this instance, given that they are close to filing bankruptcy and wiping out almost all of the value of the shareholder’s equity.

    Ayn Rand is laughing from beyond the grave.

    And why is the opinion of a dead novelist relevant to this discussion?

    What’s next, are we going to turn to Edgar Allan Poe or Kurt Vonnegut for investment advice?

  • avatar
    Cynder70

    These “professionals” have already shown they’re not up to the task. Incapable of thinking their way out of a box even with GPS OnStar. I don’t value their opinion.

    Every company has their challenges. The thing is to take your set of lemons and make lemonade.

    @pch101 if Poe offered economic structure and philosophy so stridently adhered to as did Ayn Rand then, yes, those failings would be pointed out as well. Supply-side capitalism has failed and the government is not the enemy.

  • avatar
    mad scientist

    So, we’re still taking it out on the government for this mess that a private industrial firm created for itself. It’s true that the people in D.C. screw up often enough (especially our last administration), but a country (and it’s firms) do not run themselves and I could go on indefinitely with the dire consequences of a totally “hands-off” system. [Friendly reminder: The financial crisis we have now is the result of many years of DE-REGULATION, so when the Wall St. bums got their freedom to go play, the country got screwed]. Since those conservative policy changes created the disaster, money had to be thrown at the banks quickly, or the whole planet would have gone into chaos.

    Like this editorial states, money doesn’t come without strings attached, especially when irresponsible management screwed up so big for such a long time. Intervention won’t make things any worse.

    Oh, and since some gearheads seem to forget, if it weren’t for the bailout (started by Bush & Co.) G.M would simply be out of cash and out of business for a few months now.

    Frankly, I wouldn’t have bothered to save GM (and Chrysler), but instread give some cash to Ford and let them mop up the domestic market.

  • avatar
    tulsa_97sr5

    My senior year in high school I started seriously considering moving out and making a go of it on my own. Then I did the math and realized how much it would suck. Therefore I sucked it up and followed the rules and did as told.

    If a headstrong 17 year old can do this math there is no reasonable reason that a company full of MBA’s couldn’t. They moved into the gov’t basement, there are gonna be rules. And they have no other choices now.

  • avatar
    lw

    As far as I’m concerned GM and the US Government are a match made in heaven.

    If the Government can keep GM distracted, Ford can produce some rocking vehicles and price them to be profitable.

    If we are really blessed, GM will keep congress distracted and we get a WIN-WIN!

    I long for the days when we had gridlock in Washington…

  • avatar
    indi500fan

    If liberals continue to buy foreign brands, and conservatives shun Government Motors, how many potential customers remain?

    It already looks like the CapNTrade bucks are gonna flow to Government Motors, but it may take a whole lot more taxpayer money than that.

    I think this has the potential go be a political sinkhole.

  • avatar
    Cynder70

    Figuratively speaking, if GM is like a the 24 year old college grad moving back home. There is no reason to believe they cannot successfully build cars–their primary business function.

    What everyone is whining about is that things will change from the the way they have been: misguided marketing, poor product direction, spotty quality control, random product cycles–simply not working.

  • avatar
    jkross22

    [Friendly reminder: The financial crisis we have now is the result of many years of DE-REGULATION, so when the Wall St. bums got their freedom to go play, the country got screwed].

    That’s not accurate. The crisis we have now has been a direct result of rules that the government created not being enforced. Where were the regulatory agencies when bad loans were being made? Where was the SEC when Madoff was ripping off people for millions? Where were they with Freddie and Fannie? AIG?

    Lack of regulation isn’t the root cause problem – lack of enforcement is.

    BTW, this willy-nilly enforcement isn’t limited to the financial sector – how many FDA related problems have we seen with tainted food over the last few years – again, the rules are there, but enforcement is weak. How about illegal immigration? Plenty of regulations there, but few are being enforced.

    We don’t lack the laws or regulation – we lack the follow through.

  • avatar
    Cynder70

    If liberals continue to buy foreign brands, and conservatives shun Government Motors, how many potential customers remain?
    Conservatives buy plenty of Toyota, Honda and Nissan models. Brand isn’t really all that important when GM and Ford build a significant share of vehicles outside of the United States.

    I’d rather have American’s working at a Honda plant in Ohio than not at all.

    GM and Chrysler are in the mess they’re in because they made choices about profit over product and drove the consumer to shop elsewhere.

  • avatar
    lw

    Cynder70:

    I don’t follow your logic….

    What the US government did was to provide billions of $ so GM could avoid a disorganized liquidation.

    In return they required GM to massively reduce it’s size in pretty much every way possible.

    So if GM was a 500lb gorilla with “misguided marketing, poor product direction, spotty quality control, random product cycles–simply not working.”, after Ch. 11 they will be a 200lb gorilla with “misguided marketing, poor product direction, spotty quality control, random product cycles–simply not working.”

    The people, the processes and the technology is the same as before.. there is just less of everything…

    Don’t confuse motion with progress…

  • avatar
    Robbie

    It’s a realistic worry that the government will force GM into making decisions that make no sense business-wise. Obama will not like seeing GM manufacture more vehicles abroad, and will not like seeing GM produce profitable gas guzzlers…

  • avatar

    Well, government control and business moves in the government’s interest (ie politics) could make GM’s situation a whole Hell of a lot worse.

    Take GM out of the demonized fullsize truck and SUV game and what exactly to they have left? They build plenty of smallish cars already that nobody wants to buy. If they’re forced to produce more (and import them from China) while ditching their truck lines then what exactly does that net GM or the government?

    Aside from making Nancy Pelosi’s ideal green people’s car in China and destroying a US automaker to do it. All they’ll do is further emanciate GM while continuing to burden it with the weight of the UAW monkey on it’s back.

    Yes, I think it can get a whole lot worse for GM.

  • avatar
    Cynder70

    No, LW, you’re right, I missed a step…

    If GM is currently the 500lb gorilla. then bankruptcy is the tool to use to focus their strategy and implementation.

    The bankruptcy process doesn’t just reduce size. It can and should implement structure changes including new leadership. This point is where I am admittedly hopeful.

    Without new/effective leadership, you’re right, it’s just another 200lb. gorilla who still plays with poop.

  • avatar
    lw

    Cynder70:

    I can’t think of anyone sane who would leave Toyota, Honda or Ford to tackle GM…

    I just don’t see it.. I think they a doomed, but hey maybe I’m wrong…

  • avatar
    johnny ro

    J Horner and PCH101 are right, this is just lawyerese trivia required to be printed by the ineffectual SEC, it does not purport to represent GM mgt beliefs.

    Sad, I am an SEC fan, but they are ineffectual outside their tiny scope of operations, by design, thats by Congress design. They are strictly limited.

    The crash is due to lack of regulation, and also laws getting broken. AIG broke no law writing virtually infinite amounts of naked CDS. CDS are unregulated, deliberately, Obama is proposing to regulate now.

    Wall street collapsing, they were allowed to over leverage. No law broken.

    Bad mortgages, well, it is fraud when you claim income you don’t have to get a mortgage. Or your broker lies for you, with or without your knowledge.

    But rating agencies did not break the law when they gave too high ratings to mortgage securities. They just, well, did their job badly, with obvious neglect and likely evil intent and definite conflict of interest, but they were unregulated in that respect.

    Carwise, if GM ever makes a car worth considering I will give it a fair shake. Corvette is not appropriate for my driving envelope otherwise I would certainly buy one yesterday. Only one I can think of that I would buy if it fit my needs. its about the cars, stupid. I would rather have Dacia truck than any Detroit, except getting into medium duty zone.

  • avatar
    TonyJZX

    i wanna see the 1st Government designed committee car.

    I reckon it’ll look like that green Homer Simpson mobile. Or a sister car to the Sebring.

  • avatar
    Cynder70

    LW:

    Oh! You wanted sane? LOL

    Possibly a slightly younger top level executive? Perhaps from another industry? I’m thinking that the people that might be best able to handle such a large task aren’t going to be found in the traditional places.

    No matter what there is a high probability for failure.

  • avatar
    monsenor

    Presenting the 2010 GM-US-UAW…….LADA!

  • avatar
    Luther

    It is an incredibly poor idea to borrow money from a Mafia…Whether they are “free market” or “legal” Mafia. If they break your knees, then it is your own fault.

    The Hopenchange Parasite (aka, Mafia Don) will flop a big ‘ol taxpayer titty on Michigan (It’s a big part of his vote-buying strategy) so I don’t know why they are complaining about “competing”…They no longer have to compete…A taxpayer titty means never having to “compete” again.

  • avatar
    Alcibiades

    The only prior example was the Chrysler bailout in the 80s. There wasn’t nearly the government intervention then. I don’t feel too sorry for GM and Chrysler, but nobody could have anticipated the disgusting moves this administration has made to pervert the rule of law to favor the unions, the government, and eco-socialism.

  • avatar
    Rastus

    Imagine showing up to your 20-yr High School reunion. The one girl who some 20 years ago was the hottest babe, who had every guy trying to catch her attention…comes up to you and give you a bear hug…saying “What, don’t you RECOGNIZE me?!?! It’s ME!!!!”

    Well, GM’s glory days are long gone. Let the Pete DeLorenzo’s reminisce nostalgically all they want about the GTOs, blah, blah, blah…and GTOs.

    The reality is GM has destroyed itself. Much like the corpulent, obese person giving himself/herself a coronary with their own eating habits.

    GM- you did it to YOURSELF. Suck it up, there baby. Momma still loves you.

    Yes, that thong really DOES show your fat ass!!! And NO, I will NOT run and get you another bean burrito and a Diet Coke!!!

    http://www.njweedman.com/fatass.jpg

  • avatar
    cardeveloper

    Rastus,

    GM sales are down
    Chrysler sales are down
    Ford sales are down
    So are Toyota, Honda, etc etc, etc
    The entire industry’s sales are down, way down. All the companies are losing money, big time money. Kill the entire industry?

  • avatar
    mel23

    I don’t see any indication that Obama & Co. have any interest in running a car company. Exhibit A is that they seem happy to let Fiat run off with Chrysler for free. What are the odds that Fiat will make a go of what they’re biting off? Very small IMO, but Obama seems happy to avoid having to get involved. What they do seem interested in is preventing the collapse of the domestic industry at least now when our economy is moving sideways on the slippery slope. My expectation is that they’ll administer life support to GM for a time until they can pull out without the immediate crash of all concerned. And then GM will fail, thrive or gradually shrivel. I expect the latter unless they can somehow clean house at the top several layers and get a crew in place who gives a damn and has a clue. Henderson ain’t going to get it done. If we’re lucky Ford will carry on and gain until they screw up again. This is a wickedly competitive industry with excess, but shrinking, capacity. Lots of flux with China looming as an additional potential disruptive source. Toyota, although currently stressed, seems poised to gain given their complete coverage of the market, and take up slack created by GM’s shrinkage. Honda will be Honda.

  • avatar
    Rastus

    cardeveloper,

    “Kill the entire industry?”

    Your question is biased…very much so. You are implying that *I*, or some external “entity” will be doing the “Killing”.

    Nothing…and I repeat NOTHING could be further from the truth.

    You’re placing blame where blame does not exist. It never has.

    Yes, all companies are hurting. But a junkie high on heroin will tell you the same thing if you don’t give him another “fix”…that YOU’LL be KILLING him!!!

    The question you should pose is “What opportunities should I have taken, vs. pissing them all away in the past, to have prevented this situation? What have I learned from 30+ years of failure which will carry me forward?”

    Furthermore, it’s not enough to just “know” what you need to do…you need to ACTUALLY DO IT!! Take action! Stop your self-destructive behavior and take positive action…and no, that does NOT include crushing and destroying each and EVERY (save for museum pieces) EV-1s.

    Sorry buddy, I don’t accept blame for the death of GM.

  • avatar
    carlos.negros

    Obama did this. He destroyed GM and Chrysler all in a little over 100 days!

    They were in perfect shape with no chance of going under. Oh, the poor investors!

    Why does he hate America so much?

  • avatar
    lw

    GM Management are the parents..

    The UAW is the wild child…

    The wild child turns 16 and torches 10 Mercedes at a local dealer…

    The parents are held liable in civil court and lose everything they spent 20 years building.. the home, the dream retirement… everything…

    They all move into a trailer, the 16 year old runs off, the husband starts drinking, the 14 year old daughter is left to fend for herself and becomes pregnant, the wife is working 2 jobs just to keep the lights on.

    Who do you blame? Once you figure out who to blame, how do you punish them?

    These lines from Casino sum all of Detroit up:

    “Nobody knew all the details,
    but it should’ve been perfect.
    I mean, he had me, Nicky Santoro,
    his best friend, watching his ass..
    and he had, Ginger,
    the woman he loved, on his arm.
    But in the end,
    we f_cked it all up.
    It should’ve been so sweet too.
    But it turned out to be the last time
    that street guys like us…
    were ever given anything
    that f_ckin’ valuable again.”

  • avatar
    CarnotCycle

    With GM on the titties for “only” two more years…what “revolutionary” eco-car could they crank out short of the Volt? Especially given the new Prius has a bigger motor and better gas mileage, for under $25k…and its still not running Li-ion. So, you can get a Prius with every widget on the options list for something like $10k less than a bare-bones Volt. And you can buy it today, not forty-billion dollars of tax-chum later in 2010. Put Li-ion in the Prius, and the Volt really looks bad now.

    With Barry, Nancy, and Ronnie on the case, they will manage to kill-off ladder-frame trucks and therefore remove any positive cash-flow from any division anywhere in GM.

    It takes awhile to completely re-tool to a product no one wants or a product everyone wants. Throw in the standard doubling of both time and cost associated with government operations, and I don’t see how this is going to work in the time allotted, even if I was an enthusiast for this Government Motors situation, I just don’t see how this can work product-wise in the projected timespan of suckling.

  • avatar
    educatordan

    jkross22 :
    May 14th, 2009 at 7:36 pm

    Lack of regulation isn’t the root cause problem – lack of enforcement is.

    We don’t lack the laws or regulation – we lack the follow through.

    Abso-freaking-loutely the truth. I teach social studies to middle school kids in Gallup, NM. Guess what? Whey you ask the kid the question, “A road has a 35mph speed limit, you drive 45mph down it and blow past a cop and he does nothing, do you need new, tougher speed limits?

    Their answer? “No, Mr. Fruchey.”

    “If you already have the law you need what should you do with it to make it effective?”

    Student: “Enforce it.”

  • avatar
    HEATHROI

    Abso-freaking-loutely the truth. I teach social studies to middle school kids in Gallup, NM. Guess what? Whey you ask the kid the question, “A road has a 35mph speed limit, you drive 45mph down it and blow past a cop and he does nothing, do you need new, tougher speed limits?

    Their answer? “No, Mr. Fruchey.”

    “If you already have the law you need what should you do with it to make it effective?”

    Student: “Enforce it.”

    One could just repeal the 35 mph law.

  • avatar
    tony7914

    @Rastus :
    May 14th, 2009 at 9:07 pm

    http://www.njweedman.com/fatass.jpg

    Damn, it’s going to take awhile to get that image out of my mind. Thanks!

  • avatar
    ruckover

    Again, I enter into TTAC to make a comment that is not about cars, but I do want to say that I come to this site several times a day because of my love of cars.

    Honest to goodness, there was a long list of deregulations that led to our fiscal breakdown. It was not a matter of a few regulators turning their eyes from their duties, it was a matter of powerful politicos changing laws: Phil and Wendy Gram being two examples. These are not evil people, but I believe them to be misguided.

    One cannot enforce laws and safeguards that have been eliminated. I am glad that your middle school kids are smart enough to recognize the problem you described; unfortunately, that is not analogous to the economic problems we face.

  • avatar
    wytshus

    Funny how last year’s oil spike is never mentioned, even in passing, about the current financial crisis.

    Oh well, Make Mine Freedom!

  • avatar
    John Horner

    “With Barry, Nancy, and Ronnie on the case, they will manage to kill-off ladder-frame trucks and therefore remove any positive cash-flow from any division anywhere in GM.’

    Pure delusional speculation. So far we have seen GM announce plans to import more vehicles, many of those from China (a first). GM and Chrysler are closing factories and dealerships at a record pace, hardly the sort of thing Government Owned Failing Businesses are exactly known for. UAW members and non-UAW members are getting shown the door at an ever faster rate. How do you square the actual news with these fantasies about what you are just gosh darn certain the Democrats are going to do?

  • avatar
    GS650G

    Her best boy Alan Greenspan didn’t exactly cover himself in glory.

    It’s hard to believe he was once considered a follower of Rand. His last years as Fed Chairman were part of the housing bubble.

    And why is the opinion of a dead novelist relevant to this discussion?

    There is a term for this the Rand followers have, and it is virgin.

  • avatar
    seanx37

    “Funny how last year’s oil spike is never mentioned, even in passing, about the current financial crisis.”

    Wait until the next spike, due any minute, and see what happens to sales then.

    But, if GM is not happy with the government control, just pay back what they have “borrowed” to the government and go off on their own. Oh wait, they can’t.

  • avatar
    "scarey"

    The 3 biggest lies:
    1) I’m from the government. I’m here to help you.
    2) The check is in the mail.
    3) I promise I won’t $#@* in your mouth.

  • avatar
    GS650G

    The government is trying hard to paint the current economy as recovering but it’s not working. Later this year another crash will occur, and that is going to be a big one.

    15% unemployment, Dow below 6000, and car sales non-existent.

    I see used cars for sale everywhere, no one is buying anything they don’t need.

  • avatar
    CarnotCycle

    @John Horner

    Pure delusional speculation. So far we have seen GM announce plans to import more vehicles, many of those from China (a first). GM and Chrysler are closing factories and dealerships at a record pace, hardly the sort of thing Government Owned Failing Businesses are exactly known for. UAW members and non-UAW members are getting shown the door at an ever faster rate. How do you square the actual news with these fantasies about what you are just gosh darn certain the Democrats are going to do?

    Delusional speculation? Look at Chrysler. The government essentially spent billions of tax-payer dollars in order to basically give a corporate version of Terry Schiavo to Fiat. Why? To preserve the collective bargaining agreement currently in place. Slashing workers? I don’t think anyone on the UAW has been “laid off” in the context I understand that phrase. The more accurate term is “buyout” in my dialect. If you’re not in the union, well, now that’s a layoff.

    Frankly, importing cars under GM’s nameplates from China kinda proves the point that GM can’t make a econobox worth selling in this country with its current labor environment. I also find it insulting that my tax dollars are being used to subsidize a corporate shell to import Chinese cars. What’s that subsidy work out to be if GM imports a million rides from Maoistan?

    The government would rather have that arrangement – importing Chinese rides with UAW collective bargaining in place (like Chrysler) – rather than blow the union up in Chapter 11 and maybe see American cars (cars, not trucks) being made profitably by GM in THIS country? Sounds like Democrats to me, what am I missing here?

  • avatar
    Dynamic88

    It’s a realistic worry that the government will force GM into making decisions that make no sense business-wise.

    You mean the govt. is going to make GM buy up failing Eurpean automakers? Or the govt. is going to make GM slash and burn it’s suppliers so they get lower quality parts? The govt. is going to tell GM to make their small cars as crappy as possible so that most people will prefer the competition?

    Why worry about the govt. decisions? Is it even theoretically possible that the govt. men are more incompetent than GM execs? No.

  • avatar

    As John Horner said: Don’t read too much into a Risk Factor statement. Lawyers are paid to come up with anything awful that might happen, including meteor strike, so that if it happens, you can say: “We told you so.” Its the financial equivalent of “Content is hot and may scald your mouth.”

    When I saw the first Risk Factor statements in a prospectus for one of my companies, I was appalled and wanted to fold. Both financial guys and lawyers said: “Calm down. Nobody reads that stuff.”

    And nobody did.

  • avatar
    jpcavanaugh

    What I really love is GM management’s repeated use of the phrase “our company.” One more example of the arrogance of these people. The company belongs (for now) to the shareholders who have seen all of their value flushed down the toilet. Management thinks that GM is there for the benefit of management. There is a culture of entitlement there, a culture that wants to keep steering the ship even after it has been bashed onto the rocks. Amazing how they still think they know better than everyone else and remain entitled to a place at the buffet even after the food is gone.

  • avatar
    nocaster

    Sounds like we have a new government agency…The Department of General Motors.

  • avatar
    Pch101

    what am I missing here?

    If the companies are going to be restructured and sold, they need these things:

    -Working capital
    -Some, although not all, of the production facilities
    -Some, although not all, of the dealer network
    -As few pre-existing liabilities as possible
    -A workforce to make the stuff they want to sell

    You’ll notice that all of those things are underway.

    I know that people here love to hate the union, and that’s your right. But if somebody is going to take over these companies, they are going to want to build stuff. Which makes having all of the workers bail out not a positive.

    The new owner of Chrysler is getting better terms and an ability to start making product, which is what a new owner would want. For the sake of expediency, starting without the blue collar workforce makes no sense because rehiring from zero would itself take months or years of effort and expense, while preventing the production needed to make the business work.

    When Toyota began running the NUMMI plant, it kept 85% of the workforce, even though it was one of the worst plants in the GM system with a nasty relationship with the UAW. Toyota renegotiated the terms, but didn’t clear out most of the workforce, because they needed to keep workers if they were going to build cars. They did, and it became of one the best plants under new management.

    Your focus is on the wrong place. You need to think of what a buyer would want. They want equipment and people ready to work, not massive debt and labor disputes. It may be great symbolism for you, but it would be highly impractical for putting a deal together.

  • avatar
    AKM

    Boo-freaking-hoo. You gotta serve somebody, as the poet once said, and taking bailout bucks makes the government master of your fate. It’s one thing to ask the government to be a lender of last resort, but it’s quite another to ask said lender to ignore its fiduciary responsiblity. Y’know, more than it already has.

    Best summary of the situation I’ve ever read.

  • avatar
    wsn

    # cardeveloper :
    May 14th, 2009 at 9:32 pm

    Rastus,

    GM sales are down
    Chrysler sales are down
    Ford sales are down
    So are Toyota, Honda, etc etc, etc
    The entire industry’s sales are down, way down. All the companies are losing money, big time money. Kill the entire industry?

    ————————————-

    Only kill the harmful ones, i.e. the parasites living on taxpayers.

  • avatar
    bobcat74

    some good points made in the comments so far.

    however, let us not forget the most overlooked reason, why gm has no right to complain about government intervention: LOBBYISTS.

    apparently it’s ok for gm to throw billions of dollars at high priced lobbyists over the years to bribe lawmakers to cater laws to their company and industry, so that they can yield higher profits at the expense of smaller companies and more importantly the environment. yet when the government throws billions at them to save their unethical behinds, suddenly the government doesn’t have a say?

    so according to gm, it’s ok for government to intervene only when it involves “behind-the-scenes” deceit, and not ok when it involves “in-the-public-eye”, good will aid?

    we’ve had the technology and know-how to build efficient electrical cars at normal cost for nearly 75 years, but there is more money to be made producing vehicles the way they are produced now. ESPECIALLY when you throw in the impact of the oil industry and their lobbyists. who cares about the environment and out descendants future, right??

    don’t mean to single out gm and the entire auto industy, as this obviously occurs in all industries. financial and synthetic chemical / pharmaceutical industries are possibly the worst.

    and people wonder why democrats want regulation…


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