Feds to Pony-Up an Additional $30 Billion for Post C11 GM
Automotive News [AN, sub] bears the glad tidings that the Presidential Task Force on Automobiles (PTFOA) has decided how much of your hard-earned money they want to plow into “new” GM: $30 billion. For now. Here’s the deal [ as laid down in today’s 8-K SEC filing]: “the $30 billion federal loan would be converted to equity, with $8 billion of the total U.S. funds to be repaid by GM, the officials said. Most of the rest would be converted to equity, with the government initially holding a 72.5 percent stake in the new company. That portion could be reduced to 55 percent if a UAW trust fund and bondholders exercise warrants.” So how much is this boondoggle going to cost me, really?
Try this on for size: “The new GM would likely be a private company for about 6 to 18 months before it makes an offering of public shares and reverts to being a publicly traded company,” AN‘s source says. Perhaps we should change the PTFOA to the KBISB (Keep Believing It, Shit for Brains). ’Cause they want us to believe that this is it. The last time. Honestly. Swear to God. “Is it financially equipped to operate in the current environment for a long period of time and operate well if there’s any modest improvement in the car-sale situation?” a senior administration official asked. “Yes, it is.” Is that like “Yes, we can” only a LOT more expensive? Yes, it is.
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@mattstairs: GREAT explanation of how the high costs and featherbedding affected the product design - it's all true - believe me I was there. As for the UAW going forward, I believe the plan was to use "card check" to organize all the US transplants and essentially drag them down to the same level as GM/Chryco and greatly expand the ranks of the union. For whatever reason, this didn't happen, now the UAW is in a much more vulnerable position. I doubt that many transplant workers will freely vote to join the UAW now. And with the Chinese holding a massive amount of US debt, what great leverage in trade negotiations they now have relative to importing their cars to the US.
I appears that even Congress is getting cold feet about "card check". The UAW will now only have Obama and the Dems to prop them up directly. I agree with indi500fan that few transplant workers, or too many others for that matter would sign up for membership. The simple statement "look what they did to the Detroit automakers" would be enough.
Seven months in and GM has now received $50B from the Feds. We're well on our way to way over $100B. How high will it go? Nobody knows.