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GM’s bankruptcy and government control/ownership

I also liked this post from the Coyote Blag:

Though it [General Motors] was able to shed some plants and employees, it will have most of the same stifling work rules on the shop floor. It did, however, manage to shed a lot of interest payments to creditors who entrusted their money to GM in return for claims on GM assets, only to be given the shaft by the Obama administration,

The main difference in the new GM is that it will have an ownership group whose primary concerns are NOT the financial success of the company. The UAW will be primarily concerned with keeping union members employed and happy and not shifting any manufacturing to lower-cost venues. The US Government will be primarily concerned with making sure the UAW is happy and promoting a number of its own goals, like “sustainable” plants and smaller cars, irrespective of whether these goals make business sense. It will be a company more concerned with whether plants have recycling programs and workers with American passports rather than cost or quality. Both the UAW and the US government can pursue such non-business goals secure in the knowledge that financial success is virtually irrelevant, as the US taxpayer can be counted on to make up any shortfalls.

The Obama administration has denied GM’s creditors the money that GM owed them and has assumed a majority ownership of GM. According to the Washington Post,

…the new GM will be an anomaly among American businesses because most of it will be owned by the U.S. and Canadian governments. The U.S. Treasury owns 60.8 percent of the new company’s common stock, the UAW retiree health trust has 17.5 percent and the governments of Canada and Ontario 11.7 percent.

…The company’s stock value would have to rise to unprecedented levels for the U.S. to break even on its investment [the bailouts].

As I wrote in April:

Also, don’t forget that the federal government will throw more money at the Big Three; it is unrealistic to assume they can remain profitable for long, if at all; artificial stimulation of sales will constitute a small portion of Obama’s interference with their restructuring and refocusing. More money, more incentives, more subsidies, more edicts from on high.

It is far from over. This is only the beginning of the auto bubble. It will be inflated while the Big Three stagger on the inadequate legs provided by the government, and when the bubble bursts because demand isn’t high enough and Americans can’t afford to keep buying cars—de facto or de jure nationalization.

We are basically at the de facto nationalization stage. Obama said the government has “no interest” in running GM or any other car company, from which we can conclude he and his cronies have an interest in running GM or another car company.

Posted in Obama failures, Obama predictions, Socialism