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RIP General Motors, hello Government Motors

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Strident

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Hi! Long time lurker, feel like well... not lurking for a change:

GM Files Bankruptcy to Spin Off More Competitive Firm (*cough*)

http://www.bloomberg.com/apps/news?pid=20601087&sid=apGq6S0Aoi.E

Cue schadenfreude.

It's been "going bankrupt" for a few months now, but now that it has finally bitten it this may potentially cause more problems with possible contagion effects on the suppliers, dealers, workers and for the US economy.

So it may mark the end of an era.
 
I think the biggest problem is that partial government (majority) ownership is going to mean they will remain inefficient. Why try harder when the government has your back?

In other news, I work for Holden and have recently had the kind offer of 6 months leave without pay. I think that indicates the optimism abounding in the industry right now.
 
Now that the Government is involved you will see GM go down the same old road that all Governments go, set up hundred's of people to look in to how we can in prove GM. GM is a dinosaur, cant compete with the japs. The only hope they may have is to get rid of all the union workers first. RIP GM:cool:
 
tehnoob said:
I think the biggest problem is that partial government (majority) ownership is going to mean they will remain inefficient. Why try harder when the government has your back?
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Worked for Telstra (lol). Recipe for disaster for capitalists but could aide the 'greening' of the planet.
 
pilots said:
Now that the Government is involved you will see GM go down the same old road that all Governments go, set up hundred's of people to look in to how we can in prove GM. GM is a dinosaur, cant compete with the japs. The only hope they may have is to get rid of all the union workers first. RIP GM:cool:
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Can't compete with China & India perhaps? These two alone, with their limitless zero/low cost labour, equals production deflation in the 'developed' economies and will make it that much harder to increase the 'making things' category of the GDP component.

Bottom line, manufacturing in high labour cost countries has been dealt a huge blow by C&I? So unless the new GM/Chrysler/"former US manufacturing company" can effectively compete at these same cost levels then they will have to compete on a niche level, either technology based or features based. But after time, C&I will soon match them and do it better & cheaper as well? I can't see a viable, self supporting car industry in Oz or the US in the very near future?
 
This strikes me as more of a government recapitalisation than a genuine bankruptcy.

That in part at least may explain the positive market response.
 
So are they changing the management of are they keeping the same people on staff that caused the company to go broke in the first place??
 
Just out from Mike's blog.

http://globaleconomicanalysis.blogspot.com/2009/06/gms-inglorious-conclusion.html

GM's Inglorious Conclusion

At long last GM has gone bankrupt and was booted from the DOW along with Citigroup. The world did not end as former CEO Wagoner suggested would happen. Indeed the markets seemed to be cheering the news. Let's take a look at some headlines.

GM Files Bankruptcy to Spin Off More Competitive Firm
General Motors Corp., the largest manufacturer to go bankrupt, filed for court protection with a government-financed plan intended to create a viable company that can compete in world markets.

The U.S. government will extend $50 billion of loans to the 100-year-old automaker and plans to convert that into a 60 percent stake in the reorganized company, according to a filing in U.S. Bankruptcy Court in New York. GM today missed a deadline to show that it could reorganize outside of court and reported debt of $172.8 billion, more than twice its assets.

“Any suggestion that an American corporate icon like GM could file for bankruptcy would have been laughable a few years ago,” said Lynn Hiestand, a lawyer specializing in restructuring with Skadden, Arps, Slate, Meagher & Flom LLP. ​
U.S. Gets Majority Stake in New GM
The United States will invest another $30 billion during and after the GM bankruptcy process, bringing the U.S. commitment to $50 billion. Following that infusion, "the U.S. Treasury does not believe or anticipate that any additional assistance to GM will be required," a senior administration official said Sunday night, calling the restructuring a "permanent" solution.

Under the proposed restructuring, about 60 percent of the new GM would be owned by the United States, about 12 percent by the governments of Canada and Ontario, a union health trust would own 17.5 percent, and the company's current bondholders would get 10 percent.

"The proposal seems to favor the rights and claims of the UAW, a political ally of the current administration and a powerful lobbying force in Washington, over the rights and claims of the company's diverse group of bondholders," according to a letter from 20 House members, led by Rep. Jeb Hensarling (R-Tex.), to Treasury Secretary Timothy F. Geithner. "Contractual rights of investors are being trampled by the government under the rationale of 'extraordinary circumstances.' "

A critical legal issue is whether the bondholders might be able to get more for their debt if the company were simply liquidated, the proceeds distributed among those with claims.
​
The first critical issue is fairness. And by that measure bondholders were robbed. The next critical issue is the taxpayer investment of $50 billion into GM that will never be repaid.


....... more....visit link
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GM was deemed too big to fail just over 3 years ago. Yeah right :)

Now the little component suppliers and dealers will be begging for a bailout. Their combined employment is definitely higher than the GM alone.
 
This quote says it all:

"Please, please, please don't save GM so that a smaller version of it will simply do nothing more than build Chevys or Cadillacs. This is not a long-term solution,''

FULL STORY HERE
 
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