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  1. #1
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    Default Government to own 50% of GM, unions 39%

    Under the latest plans for GM's restructuring through bankruptcy, the plans being hashed out seem to predict that the tax payers/government will own some 50% of the company, and big unions will own 39%. That sounds... not favorable (understatement). Everything that has been done with GM, starting with the Bush bailouts, has been stupid as stupid gets.

    GM Control Would Create Host of Conflicts for Government - WSJ.com

    Control of GM Would Create Conflicts for Government



    By NEIL KING and JEFFREY MCCRACKEN

    The government could be exposed to a host of conflicts and potential unintended consequences if it ends up -- as now appears likely -- with a controlling stake in General Motors Corp.

    Under GM's latest restructuring plan, the U.S. would get at least a 50% stake in the largest Detroit auto maker. Even without a majority stake, the government was able to use its muscle in March to oust GM Chief Executive Rick Wagoner. But such a major holding would turn GM into a sort of Government Motors, making the federal government the company's de facto boss and bank lender.

    A direct stake could create other uncomfortable conflicts: The Obama administration would be setting emissions and mileage standards for cars in Washington while having to implement them in Detroit. It also would make the government a direct partner of the United Auto Workers, which would get a 39% stake in the company under GM's latest blueprint for survival.

    A final GM plan is still many months away, and early reaction from bondholders suggests that the plan won't come together in its current form. But even if it flops, the proposal reveals that the government, in close consultation with GM, is prepared to become more deeply immersed in the operations and rehabilitation of the auto maker.

    Both the Bush and Obama administrations have grappled with how to shore up the economy without getting directly involved in running companies. They were unable to avoid an entanglement with insurer American International Group Inc., in which the government now owns an 80% stake after committing more than $170 billion in emergency relief. It will soon own more than a third of banking giant Citigroup Inc., with which it has had a sometimes-fraught relationship.

    But in contrast with those cases, the GM proposal comes as part of an all-out administration effort to restructure the U.S. auto industry, including the country's third-largest car company, Chrysler LLC.

    "The big question is whether the government, as a shareholder, will be focused on GM making money, or it making clean and green cars, or whatever other political agenda they have for the auto space," says Peter Kaufman, president and head of restructuring at investment bank Gordian Group LLC.

    Administration officials dismissed suggestions that they were preparing to nationalize GM, saying that the plan put forward Monday was preliminary. "We're supportive of this offer and of this process, but no final decisions have been made," said one administration official.

    Another official said the administration has long planned to swap the government's debt holdings in GM for a large equity stake, but has no intentions of running the company.

    Under the GM proposal to bondholders, the government would forgive $10 billion in loans to the company in return for a 50% stake, while GM's tens of thousands of public bondholders would be asked to surrender around $24 billion in bond debt for a 10% stake.

    GM continues to pursue two tracks for its turnaround -- one outside bankruptcy court and one inside. One person involved in the situation says a late-May Chapter 11 bankruptcy filing by GM is "99% likely now, maybe higher."

    In either case, the government would be in a position to set policy for the company. GM is one of the largest sellers of full-size trucks and sport-utility vehicles in the world, vehicles that are notorious for fuel inefficiency. Yet such products, which include the Chevy Silverado pick-up and Cadillac Escalade SUV, have always been among the company's most profitable. That could present the government with a painful trade-off.

    Even after its restructuring, GM is expected to remain one of the country's largest employers of unionized workers, and it also does business with thousands of union and non-union employers.

    That raises such questions as whether the government would allow GM to buy parts from a supplier that has resisted organizing efforts by the UAW or other labor unions, or whether it would encourage suppliers to support UAW organizing efforts -- as GM had done for several years at the union's urging.

    The Treasury's current plan is to hold its GM ownership stake in some form of trust, say people briefed on the situation. The administration's auto team is now drafting documents that lay out how that trust and its government-appointed trustees will manage the government's majority stake.

    Still unclear is how long the government would maintain its ownership, these people say. There are differing views in the administration, with some advocating a quick sale of the stake while others argue the government needs to take a long-term view and hold GM for a long time to get a better price. One administration official said the government would likely sell its shares gradually, but only after GM had regained its financial moorings and rebuilt its reputation.

    "This ownership thing is a few-year process, three years maybe, until auto sales come back," said one person familiar with the matter.

    How and when to sell GM and whether to consider private-equity firms or foreign auto makers as potential buyers presents another set of complications.

    People familiar with the situation say that for now the government appears to have decided not to solicit buyers for equity stakes in a new GM, because it doesn't have all the information investors would want before making what would likely be a multibillion-dollar commitment.

    The government is still formulating financial projections and a capital structure for the new GM, which would be slimmed down to just a few brands—most likely Chevrolet, Cadillac, Buick and possibly GMC, as a niche truck brand, these people say. They say documents circulating in Washington show a radically smaller GM.

    "Investing in GM would involve a couple billion dollars, which is obviously not an impulse buy, so you'd want to analyze it in depth," said investor Wilbur Ross, who owns a large auto-parts supplier called International Automotive Components. "I'd think at some price there'd be some interest, especially as you remove debt and combine" that with relief from retiree health-care obligations and real wage-and-benefit concessions.

    Economists point to the government's intervention in the U.S. railroad industry in the 1970s as the best corollary to what may now happen at GM. In that case, the government created the Consolidated Rail Corp. in 1976 to absorb rail lines from two bankruptcy carriers. The company was sold to private investors 11 years later.

  2. #2
    Senior Member miked277's Avatar
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    one more step in the long history of government power-grabs... all in an effort to "save us."
    I'm feeling rough, I'm feeling raw, I'm in the prime of my life.

  3. #3
    Senior Member Galusha's Avatar
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    I can kinda understand why those right-wing nut jobs say that Obama is like Hitler (the fuhrer took over vw in 1937), but I think detroit's economy deserves a little punishment for forcing people to get a car before they can get driver's licenses.

    it is crazy though. obama hasn't accepted yet, and GM just is trying anything at this point to get more of a bailout.

  4. #4
    Per Ardua Metamorphosis's Avatar
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    I'm not pro-government owned business, but really...who cares?...it's not even a profitable business. It would be different if we were talking about something like Boeing. On top of that, they didn't have to accept the bailout.
    "You will always be fond of me. I represent to you all the sins you never had the courage to commit."

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    than to serve and obey them. - David Hume

  5. #5
    The Unwieldy Clawed One Falcarius's Avatar
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    Quote Originally Posted by Galusha View Post
    I can kinda understand why those right-wing nut jobs say that Obama is like Hitler (the fuhrer took over vw in 1937)...
    That's a bit misleading for anyone to say, right-wing nut jobs or not.

    During the early 1930's, ex-chief designer for Daimler-Benz and founder of Porsche, Ferdinand Porsche, started his company. At the time his company did not make cars but rather offered motor vehicle development consulting and research to other parties. Hitler asked Porsche to modify and help develop his design for the people's car, Volkswagen; eventually resulting in the Volkswagen Beetle.

    Volkswagen essentially started off a public-private partnership, Kraft durch Freude ( 'Strength through Joy' in German, a leisure organisation which was part of the larger Nazi trade union.) and Porsche. It was only later when the project was not progressing as well as Hitler hoped that he took total control. Hitler went as far as stealing metal allocations of other manufacturers and confiscating the private estate of Earl Von Schulenberg to build a brand new manufacturing city for his car; the city became known as Wolfsburg.





    As for the other big car manufacturers in Germany: Opel was bought by Ford in the early 1930's, it only got seized when the US joined the war because Henry Ford admired and supported Hitler chiefly as they were both adamantly against Labour Unions. The Daimler-Benz company also supported Hitler, becoming one of Hitler's first big corporate backers and being rewarded with the leading armaments contract in Nazi Germany. Daimler-Benz went as far as using concentration camps as slave labour. Like Daimler-Benz, BMW owner and founder, Günther Quandt, used concentration camps as slave labour and even joined the Nazi Party out of his own will. Quandt's first wife, Magda Ritschel, married Joseph Goebbels after they got divorced. Quandt’s first son with Magda was supposedly brought up by Goebbels from the age of 13 years old. Hitler even appointed Günther Quandt to the position of Wehrwirtschaftsführer (Leader of the Armament Economy). :sad:

    Hitler's apparent car nationalisation is little more than a myth.
    Quote Originally Posted by Thalassa View Post
    Oh our 3rd person reference to ourselves denotes nothing more than we realize we are epic characters on the forum.

    Narcissism, plain and simple.

  6. #6
    Order Now! pure_mercury's Avatar
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    BRILLIANT! The absolute BEST way to turn an unprofitable company into a profitable one is to make the government the biggest shareholder. Does Jack Kevorkian do corporations?
    Who wants to try a bottle of merc's "Extroversion Olive Oil?"

  7. #7
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    Quote Originally Posted by Falcarius View Post
    That's a bit misleading for anyone to say, right-wing nut jobs or not.

    During the early 1930's, ex-chief designer for Daimler-Benz and founder of Porsche, Ferdinand Porsche, started his company. At the time his company did not make cars but rather offered motor vehicle development consulting and research to other parties. Hitler asked Porsche to modify and help develop his design for the people's car, Volkswagen; eventually resulting in the Volkswagen Beetle.

    Volkswagen essentially started off a public-private partnership, Kraft durch Freude ( 'Strength through Joy' in German, a leisure organisation which was part of the larger Nazi trade union.) and Porsche. It was only later when the project was not progressing as well as Hitler hoped that he took total control. Hitler went as far as stealing metal allocations of other manufacturers and confiscating the private estate of Earl Von Schulenberg to build a brand new manufacturing city for his car; the city became known as Wolfsburg.





    As for the other big car manufacturers in Germany: Opel was bought by Ford in the early 1930's, it only got seized when the US joined the war because Henry Ford admired and supported Hitler chiefly as they were both adamantly against Labour Unions. The Daimler-Benz company also supported Hitler, becoming one of Hitler's first big corporate backers and being rewarded with the leading armaments contract in Nazi Germany. Daimler-Benz went as far as using concentration camps as slave labour. Like Daimler-Benz, BMW owner and founder, Günther Quandt, used concentration camps as slave labour and even joined the Nazi Party out of his own will. Quandt's first wife, Magda Ritschel, married Joseph Goebbels after they got divorced. Quandt’s first son with Magda was supposedly brought up by Goebbels from the age of 13 years old. Hitler even appointed Günther Quandt to the position of Wehrwirtschaftsführer (Leader of the Armament Economy). :sad:

    Hitler's apparent car nationalisation is little more than a myth.
    So... if even hitler didn't nationalize the car inustry... then doesn't that make Obama worse than Hitler? lol

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