Game over, GM in Chapter 11...
 

http://www.msnbc.msn.com/id/31030038/

We have been predicting it for years, sad sign of the times.

It seems to have been built into the market so no negative reaction.

This is such socialist BS though, why is the government a 60% stakeholder? I don't want to own it, they should liquidate what they have to, to get our tax money back than like the market take care of it. What is GM going to be like VW and Airbus now? Wards of the state and burdens on the taxpayer?

OTOH since we own 60% I want a better deal on my trucks tranny fluid change!:D

1000.00 worth of stock at 37 cents gets you a bunch of shares!

If it ever goes up in the teens, you made yourself a nice chunk of change on 1000.00
:P

I agree. The govenrnment should never have been involved. So now we have a giant inefficient state controlled albatross around the neck of the American tax payer. Sounds rather like the Brit car industry years ago when it was all British Leyland, untill it all imploded and the carcasses were picked over by foreign companies.

Probably going to suck for my wife. Her Saturn Vue is paid for and coming up on 51K miles. I wonder if they'll honor the warrantee to 60K.

- Peter.

this blows.. we bought two new Chevrolet 4 years ago... Hope they are still around so we can buy that Camaro

Pray tell, just who else would have bought the 60% stake? The government is a 60% stakeholder because there were no other buyers PERIOD. Would you have preferred an immediate, total collapse? It would have left everyone with nothing, at least with this solution the company has a chance to remake itself. This "socialist" BS is tireing and stupid. None of the Democrats, and certainly Obama did not, run on a platform of "taking over the automobile industry", instead this was just some big fat mess that got dumped in Obama's lap, and considering how bad this could have been, this outcome seems like a pretty good deal to me. The auto companies and the Republicans fought CAFE standards and gas guzzler taxes for years, and now you guys want to cry "socialism" when this big, fat corpulent corporation that produced big, fat corpulent cars for big, fat corpulent surbanites finally crapped out, choking to death on over-priced SUVs and other vehicles that only appealed to a small segment of the world car market when they could have been making cars that sell overseas. We don't see Ford in this jam, do we? You think it might be because Ford didn't just roll over and die in the face of Japanese competition, it instead went head to head with them on the world market? The Ford Focus is a huge success story. So are it's fuel-efficient Escape SUVs, heck, they ain't no Hummers, and they don't have a seat designed for a size 64 ass, but for some reason, they sure have out-sold them. And where was GM's comparable car to the affordable Mustang? Oh yeah, its that ridiculous Camaro-clone over there, with an extra 10 grand added to the sticker for nostalgia. Tell you what, when Obama says he wants to nationalize Ford, get back to me with your whine.

In a word, yes. Business that do not succeed should be closed that they make way for newer enterprises that CAN compete. 60% stake owned by the Govt. Which one? The one that uses accounting tricks and can't even balance it's own checkbook or "fix" one thing but create another problem? Oh, yeah! I feel good now.

Who cares?

So I guess only the government was stupid enough to buy - with our money - what nobody else was stupid enough to touch?

Yes. That's what happens to companies that fail. It's the nature of capitalism.

It did not get dumped in his lap. It's none of his damm business. Get it? BUSINESS. Not government. Government should stay the hell out of BUSINESS. They will never make a profit while they are a state controlled organization beholden to eco freaks and the UAW. Who by the way, are the worst socilists of the bunch. So Billions more will continue to be wasted on them down the road. Switching from capitalism (where the company failed) to socialism to keep the corpse on life support is a fundamentally un american thing to do. It is a reward for failure and only those who think failure should be rewarded will support it.

Not yet.

- Peter.

I hear you JR. I wish republicans and people who lean toward them were a little more practical and less ideological. I don't think anyone really wanted to see GM or any other car maker nationalized, including Obama who's stated clearly he will NOT run GM, but obviously (maybe not obvious to some) this is being done for the greater economic good and most likely it will be temporary. Personally I don't care for GM and their products, and I don't like to see the govt spending even more money, but I can certainly see the economic benefits of this move vs. GM's total collapse and liquidation which would have far-reaching consequences well beyond GM's immediate business. Hopefully the govt will eventually make some money out of this too.

BTW, the Canadian govt is getting about 12.5%, so total govt ownership of GM will be close to 3/4.

Didn't he fire the last head of GM? Can we assume the new boss is there irrespective of whether he has govt blessing or not?

No, you can see the economic POTENTIAL benefits. If it screws up, well......

IF they can even break even, I think it will be a miracle. BTW, wasn't part of the money advanced to them so far already written off?

No doubt the govt will now have even more influence on the company and will probably participate in major strategic/long term decisions but Obama will certainly not run the company's day to day operations. Trust me, I don't like this either and I'd probably get some selfish joy out of seeing GM disappear from this Earth, but that's not what it should be about. I'm glad our present govt is mostly data-driven and not so much emotion/ideology driven like the previous one.

That's kinda splitting hairs, isn't it? Besides, I don't think Obama will run the day to day stuff but of course, if he doesn't like a direction GM is taking, well..... Wonder what the new boss looks like UNEMPLOYED?

Many in congress are incumbents so don't be too sure.

I think it's a good thing for the govt to have some power/influence over the company since it has invested so much taxpayer money into it, don't you think? Or would you prefer GM takes all this govt money and the govt has no input or control whatsoever? I wouldn't.

I meant the executive branch is more data-driven than the previous one. No comment on Congress.

Yes, having sunk much of OUR money, it has bought itself a stake hence a voice. HOWEVER, I wish Bush and now Obama wouldn't have gotten themselves into that mess in the first place.

But much of the country is run out of congress so that is kinda important.

Nobody likes a mess. But sometimes you gotta do what you gotta do.

No argument there.

I wish that they would just leave it alone. Right now, we have the blind leading the blind. Like I said, we'd be lucky to simply break even. However, I was reading that a large part of the advanced money is slated NOT to be recovered. If that is true, does that give you confidence we will not be sinking more money into a pit?

You should have voted for Herbert Hoover. Then again, you probably did.

Not that old. Not even an American then.

- Peter.

I'm getting pretty tired of the running around in circles screaming Socialism! Socialism!! Ahhh Soooociallismmmm! myself. Although it is a convenient way to avoid having to think about complexity. The universe is not doomed because the government has a temporary stake in a company.

The government bought a piece to allay the widespread economic damage GM disappearing would have. GM's failure is not nearly going to have the impact that failure of lots of financial institutions would have had. And the government's responsibility is to provide for fair markets, not to provide wealth to the status quo economy. Markets won't evolve if the government steps in to save them. Now, in the case of the financial markets, the government has provided aid without hindering evolution. I would've preferred punitive measures added that would've in fact accelerated evolution. If the temporary ownership of GM by the government does not hinder the evolution of the company and the market, then it is a paper tiger in terms of its threat to capitalism. In other words, the practice of government in the marketplace is not necessarily the monster people shouting socialism think it is.

The government is responsible for our national security. You cannot separate the economy from national security. Massive financial failure is/was an absolute threat to our national security.

How temporary? Also, you forgot, stake in a FAILING company. One that nobody else thinks will work.

But based on it's recent history, I don't see much hope.

Isn't that what the communist govts did? Kept enterprises afloat that should have died off?

Using that as a wedge, we can justify just about anything we want. Where do you think we can draw the line? Govt can now take over any industry it feels like taking over because it is economic and thus national security. Sure, it is a stretch NOW but who knows. Bit by bit they will creep in.

I don't care, thats for the free market to decide. If their are no other buyers than its a really bad deal for the taxpayer.

BTW what is the governments exit strategy from GM? 60 days? A few years? 30 years?

GM is still going to get rid of a ton of jobs, saving a few jobs is starting to cost more than they are worth.

I remember hearing the president mention not to worry because the government will warrent vehicles for the companies that go away.

If the government was going to step in and keep a car company going it is ashamed they did not rescue Dusenburg and Packard. Keep in mind that Cadillacs used to be considered the "Standard of the World". Those days are long gone. This day will be a mark in history in my opinion.

I quit buying new cars when they got over $10k:eek:.

The guy in charge of the breakup. 31 yrs. old.

http://www.nytimes.com/2009/06/01/business/01deese.html?_r=1

WASHINGTON — It is not every 31-year-old who, in a first government job, finds himself dismantling General Motors and rewriting the rules of American capitalism.


Stephen Crowley/The New York Times

Brian Deese, who interrupted his law school career, is the little-seen force behind the revamping of the American auto industry.

But that, in short, is the job description for Brian Deese, a not-quite graduate of Yale Law School who had never set foot in an automotive assembly plant until he took on his nearly unseen role in remaking the American automotive industry.

Nor, for that matter, had he given much thought to what ailed an industry that had been in decline ever since he was born. A bit laconic and looking every bit the just-out-of-graduate-school student adjusting to life in the West Wing — “he’s got this beard that appears and disappears,” says Steven Rattner, one of the leaders of President Obama’s automotive task force — Mr. Deese was thrown into the auto industry’s maelstrom as soon the election-night parties ended.

“There was a time between Nov. 4 and mid-February when I was the only full-time member of the auto task force,” Mr. Deese, a special assistant to the president for economic policy, acknowledged recently as he hurried between his desk at the White House and the Treasury building next door. “It was a little scary.”

But now, according to those who joined him in the middle of his crash course about the automakers’ downward spiral, he has emerged as one of the most influential voices in what may become President Obama’s biggest experiment yet in federal economic intervention.

While far more prominent members of the administration are making the big decisions about Detroit, it is Mr. Deese who is often narrowing their options.

A month ago, when the administration was divided over whether to support Fiat’s bid to take over much of Chrysler, it was Mr. Deese who spoke out strongly against simply letting the company go into liquidation, according to several people who were present for the debate.

“Brian grasps both the economics and the politics about as quickly as I’ve seen anyone do this,” said Lawrence H. Summers, the head of the National Economic Council who is not known for being patient whenever he believes an analysis is sub-par — or disagrees with his own. “And there he was in the Roosevelt Room, speaking up vigorously to make the point that the costs we were going to incur giving Fiat a chance were no greater than some of the hidden costs of liquidation.”

Mr. Deese was not the only one favoring the Fiat deal, but his lengthy memorandum on how liquidation would increase Medicaid costs, unemployment insurance and municipal bankruptcies ended the debate. The administration supported the deal, and it seems likely to become a reality on Monday, if a federal judge handling the high-speed bankruptcy proceeding approves the sale of Chrysler’s best assets to the Italian carmaker.

Mr. Deese’s role is unusual for someone who is neither a formally trained economist nor a business school graduate, and who never spent much time flipping through the endless studies about the future of the American and Japanese auto industries.

He lives a dual life these days. He starts the day at a desk wedged just outside of Mr. Summers’s office, where he can hear what young members of the economic team have come to know as “the Summers bellow.” From there, he can make it quickly to the press office to help devise explanations for why taxpayers are spending more than $50 billion on what polls show is a very unpopular bailout of the auto industry.

Several times a day he speed-walks to Treasury, taking a shortcut through the tunnel under the colonnade, near the kitchens. The other day he talked about how sharply perceptions of the industry’s future changed after Mr. Obama’s election.

“At the first meeting with Rick Wagoner,” he said, referring to G.M.’s recently deposed chief executive, “they were in a very different place. He said publicly that bankruptcy was not a viable option. It’s been a long process getting everyone to look at the options differently.”

In fact, from before Inauguration Day, few in Mr. Obama’s circle saw any other choice. Every time Mr. Deese ran the numbers on G.M. and Chrysler, he came back with the now-obvious conclusion that neither was a viable business, and that their plans to revive themselves did not address the erosion of their revenues. But it took the support of Mr. Rattner and Ron Bloom, senior advisers to the task force charged with restructuring the automobile industry, to help turn Mr. Deese’s positions into policy.

“The president’s instruction to us was that we had to come up with a solution that would work on a commercial basis, that didn’t involve indefinite federal financing,” Mr. Deese said. “But we didn’t want liquidation, which would have even worse effects. So the question was how do you design a very substantial restructuring, and do it fast.”

Mr. Deese’s route to the auto table at the White House was anything but a straight line. He is the son of a political science professor at Boston College (his father) and an engineer who works in renewable energy (his mother). He grew up in the Boston suburb of Belmont and attended Middlebury College in Vermont. He went to Washington to work on aid issues and was quickly hired by Nancy Birdsall, a widely respected authority on the effectiveness of international aid and the founder of the Center for Global Development.

But he wanted to learn domestic issues as well, and soon ended up working as an assistant for Gene Sperling, who 17 years ago in the Clinton White House played a similar role as economic policy prodigy. Eventually, Mr. Deese headed to Yale for his law degree. But his e-mail box was constantly filled with messages from friends in Washington who were signing up to work for the Obama or Hillary Rodham Clinton campaigns. Mr. Deese chose Senator Clinton’s.

“He was pretty quickly functioning as the top economic policy staffer through her campaign,” Mr. Sperling said. “He could blend the policy needs and the political needs pretty seamlessly.” On the day that the Clinton campaign ended, Mr. Deese left her concession speech and received a message on his BlackBerry from a friend in the Obama campaign urging him to sign on immediately to Mr. Obama’s team.

He resumed his policy work there, and found himself stuck in Chicago — unable to fly to Washington with his dog — as the economic crisis deepened. Finally, one night, he decided to get into his car with his dog and just started driving back to Washington. Tired, he pulled over to catch some sleep in the car.

“I slept in the parking lot of the G. M. plant in Lordstown, Ohio,” he recalled. The giant plant, opened during G.M.’s heyday in the mid-1960s, is where the Pontiac G5 is produced. Under the plan Mr. Deese worked on when he arrived in Washington, Pontiac will disappear.

“I guess that was prophetic,” he said, shaking his head.

Kick the "60 billion dollar can" down the road.
 

A brutally honest piece by none other than Robert Reich.

Politics and social engineering, baby. Nothing more.


General Motors holds a mirror up to AmericaBy Robert Reich

Published: May 31 2009 21:03 | Last updated: May 31 2009 21:03

As president of General Motors when Eisenhower tapped him to become secretary of defence in 1953, “Engine Charlie” Wilson voiced at his Senate confirmation hearing what was then the conventional view. When asked whether he could make a decision in the interest of the US that was adverse to the interest of GM, he said he could.

Then he reassured them that such a conflict would never arise. “I cannot conceive of one because for years I thought what was good for our country was good for General Motors, and vice versa. Our company is too big. It goes with the welfare of the country.”

Wilson was only slightly exaggerating. At the time, the fate of GM was inextricably linked to that of the nation. In 1953, GM was the world’s biggest manufacturer, the symbol of US economic might. It generated 3 per cent of US gross national product. GM’s expansion in the 1950s was credited with stalling a business slump. It was also America’s largest employer, paying its workers solidly middle-class wages with generous benefits.

Today, Wal-Mart is America’s largest employer, Toyota is the world’s largest carmaker and General Motors is expected to file for bankruptcy. And Wilson’s reassuring words in 1953 now have an ironic twist. There will be little difference between what is good for America and for GM because it is soon to be owned by US taxpayers who have forked out more than $60bn (€42bn, £37bn) to buy it.

But why would US taxpayers want to own today’s GM? Surely not because the shares promise a high return when the economy turns up. GM has been on a downward slide for years. In the 1960s, consumer advocate Ralph Nader revealed its cars were unsafe. In the 1970s, Middle East oil producers showed its cars were uneconomic. In the 1980s, Japanese carmakers exposed them as unreliable and costly. Many younger Americans have never bought a GM car and would not think of doing so. Given this record, it seems doubtful that taxpayers will even be repaid our $60bn. But getting repaid cannot be the main goal of the bail-out. Presumably, the reason is to serve some larger public purpose. But the goal is not obvious.

It cannot be to preserve GM jobs, because the US Treasury has signalled GM must slim to get the cash. It plans to shut half-a-dozen factories and sack at least 20,000 more workers. It has already culled its dealership network.

The purpose cannot be to create a new, lean, debt-free company that might one day turn a profit. That is what the private sector is supposed to achieve on its own and what a reorganisation under bankruptcy would do.

Nor is the purpose of the bail-out to create a new generation of fuel-efficient cars. Congress has already given carmakers money to do this. Besides, the Treasury has said it has no interest in being an active investor or telling the industry what cars to make.

The only practical purpose I can imagine for the bail-out is to slow the decline of GM to create enough time for its workers, suppliers, dealers and communities to adjust to its eventual demise. Yet if this is the goal, surely there are better ways to allocate $60bn than to buy GM? The funds would be better spent helping the Midwest diversify away from cars. Cash could be used to retrain car workers, giving them extended unemployment insurance as they retrain.

But US politicians dare not talk openly about industrial adjustment because the public does not want to hear about it. A strong constituency wants to preserve jobs and communities as they are, regardless of the public cost. Another equally powerful group wants to let markets work their will, regardless of the short-term social costs. Polls show most Americans are against bailing out GM, but if their own jobs were at stake I am sure they would have a different view.

So the Obama administration is, in effect, paying $60bn to buy off both constituencies. It is telling the first group that jobs and communities dependent on GM will be better preserved because of the bail-out, and the second that taxpayers and creditors will be rewarded by it. But it is not telling anyone the complete truth: GM will disappear, eventually. The bail-out is designed to give the economy time to reduce the social costs of the blow. :eek::eek::eek::eek:


Behind all of this is a growing public fear, of which GM’s demise is a small but telling part. Half a century ago, the prosperity of America’s middle class was one of democratic capitalism’s greatest triumphs. By the time Wilson left GM, almost half of all US families fell within the middle range of income. Most were headed not by professionals or executives but by skilled and semi-skilled factory workers. Jobs were steady and health benefits secure. Americans were becoming more equal economically.

But starting three decades ago, these trends have been turned upside down. Middle-class jobs that do not need a college degree are disappearing. Job security is all but gone. And the nation is more unequal. GM in its heyday was the model of economic security and widening prosperity. Its decline has mirrored the disappearance of both.

Middle-class taxpayers worry they cannot afford to bail out companies like GM. Yet they worry they cannot afford to lose their jobs. Wilson’s edict, too, has been turned upside down: in many ways, what has been bad for GM has been bad for much of America.

The writer, former US labour secretary, is professor of public policy at the University of California at Berkeley. His most recent book is ‘Supercapitalism’

I don't know if that's true and it would be worth researching before discussing it further. I must admit my support for these bailouts is wearing thin.

Well, isn't true that the people who are going to be involved in this company which is way behind in it's bills is the same group that cannot balance their checkbook? If that isn't the blind leading the blind, I don't know what is. The only difference is the govt can print more money and play more shell games and use cash accounting to fool the voters while GM cannot.

You like that checkbook balancing argument, don't you. I think I've heard it like 20 times from you. If you think that the primary reason our govt has a deficit is incompetence, you are sadly mistaken. The government can do just about anything if it really wants to. Ultimately it has to answer to the people, and therein lies the problem. I'm not saying it shouldn't answer to the people, but I'm saying people need to be a bit smarter, more educated, and willing to take short-term pain for long-term gain.

I liked the comment on the news today, might have be Robert Reich, we could have given all the workers a Million dollars.
Close the doors and come out ahead.

How temporary is unknown. Once it returns to profitablility, it can be reprivatized. It is failing now, but many a company has failed, entered bankruptcy, and returned to profitability.



There's no 'now' about it. The government has always had the power to take over an industry - which it hasn't done here, it's taken the lion's share of one company. As long as government exists, it has the power to take over anything.





I in fact do not support the government purchase of GM. I don't think the impact will be that bad. I think this is a case where the government is not acting on behalf of the nation's economic security. I think it's acting out of fear. I do not like government policies based on fear. The President, and Congress, is supposed to have the balls to lead. To make tough decisions.

But that is just it. The people are not willing to take short term pain for a long term gain when Mr Sleeze #2 is waiting to tell them that it is going to be good with just a little tweak and a nudge. So, they play a game of "one upsmanship". Instead of telling the people "Sorry folks. We can't afford this. It is going to be tough till we get back on our feet." they will try pander to the people. Hence the budget being out of whack.

Now what makes you think that anything has changed so that this will not be repeated?

I understand that. HOWEVER, this is a company nobody else wants to touch. So either they know something that the govt refuses to acknowledge or they are too scared. Maybe there is good reason why they are not optimistic. Maybe it cannot be done easily. So far, when govt has stepped in to "help" me, my life gets more complicated. Why would I even imagine that govt can step into this project and make it good when it itself is having issues?

I don't see the difference between having 60% share and 100% share. Either way, you have controlling interest.

Therein lies the problem. The DON'T.

give me the money and ill invest it back into the economy, instead of throwing it into the burning pile of money

Good riddance to 'em!
 

They built crappy products, lost their market share, and poof, the government runs/owns 'em. What a laugh.

It is probably out of fear but I think it's out of fear for the nation's or at least's the rust belt's economy. As has been discussed GM's complete meltdown would have far-reaching consequences, though probably not as severe as the meltdown of Wall Street which was saved by the govt as well.

You can't create wealth just by printing money. If you gave everyone a million dollars, you'd create a shock wave of inflation and shortages, not much else. As usual, things are not as simple as some like to believe.

On the budget side, not much has changed, I'll give you that, at least for now. But I understand that balancing the budget can't always be the #1 priority.

No truer words have been posted on this forum in quite some time.

I can't help but wonder just how many threads here that line could actually apply to.

no, the problem is with idiots in Detroit...the chosen ones, so they believed....not!!! that day is (has been) over and now it's time to pay the piper....watch what happens here...this should be fresh. I find myself both
sad (because of all of the turmoil this is sure to create in countless lives) and happy (because this may free us in America from this belief that we are always the best, in everything..always). We have to get over this self proclomated view of ourselves and I think this will help that towards that
end.

I haven’t read this thread.

Has anyone read an analysis of the implications of the union holding a dominant ownership stake in 2 US auto companies? This seems an inherent conflict of interest that will serve to discourage some of the current labor practices and to ultimately put labor at a greater disadvantage – for the same reason labor has always been at a disadvantage – to permit raising profits by squeezing labor. Except now it is the union that can benefit from increased pressure – on their own membership!

It could be the beginning of the end for the UAW and usher in a new era of anti-union practices.

Has anyone found a study on this?

Doubt we'd get that lucky. The only auto unions I'm aware of that were ever effectively broken were the british ones that were broken by a conservative prime minister with the balls to bust them, metaphorically speaking of course. Here you have a government with a majority interest in the company, in bed with the unions and no reason why they wont simply keep bailing them out down the road.

- Peter.

Its not the unions who decided what products to build and market...nor what materials to put in the cars....nor what design each car would have.

It wasn't that long ago that these car companies were making over a billion a quarter. They can be profitable again, if they can look to the future instead of relying on the principles that got them into this mess. This should have been a wake up call, guess we'll see if they just roll over and hit snooze.

t. while you are correct with the fact that the unions didn't design or okay the materials used (am paraphrasing). The unions did increase labor cost and hence added to the total cost of the car/truck/whatever. And sorry to say I belive the union fosters laziness. I worked in a union run place and the workers were so freaking lazy. I got yelled at for "working too hard".

OK. So what has changed besides some faces in Congress and in the White House? I haven't noticed any changes in my life where it was more complex before the govt helped and now it is simpler and better without some sort of price we pay at the end.

It was the unions that had an indirect effect by making the cost of each car $2000 more because it was built in a union shop vs across the road by Mitsu, Yoda, etc, etc. $2000 is a huge hurdle to overcome when you consider the "bread and butter" cars. Now if we are talking Maybach, sure. On a 15K car, it is huge.

Problem is that while they were profitable, they were steadily losing market share. This economy accelerated their demise a little faster. Sooner or later, it would have come to this. I mean, how can you continue to be profitable when you are losing market share on a daily basis?

I agree.

But I wouldn't call it "indirect".

$2000 less on the price tag doesn't make it a better car. Or a streamlined company. I always see so much grousing about the UAW but never any about redundant white collar positions or lousy engineering designs. I guess it's a lot easier since there's no 3 letter shortcut for useless middle management. I wonder how much they added to the cost of every car. Strangely, no one's seemed to have counted it.

tank I belive that everyone has been complaining about the crappy engineering for years and I for one as have many others complained about it. Also been complaining about the crappy management.

http://www.rv.net/SharedContent/cfb/images/doh.gif

What does a budget matter, when taxpayer dollars to the tune of $19,000,000,000 dollars (so far) already have been spent as welfare payments to them?

I wised-up in 1977.

That's all it took for me to realize I would never buy another crappy one from gm. Some still haven't caught on, apparently.