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Since it's pretty clear that GM and Chrysler will become a new American Leyland (just like I predicted), I thought we could finally just throw all the news posts about "Government Motors" or Obama Motors into one thread. I'll get it started.
From the Obama Motors department and Marketwatch:
Also from the Obama Motors department and Marketwatch:
From the "We told you idiots that this was a bad idea but you wouldn't listen" department and the notoriously left-wing Washington Post:
From the Obama Motors department and Marketwatch:
Report: GM finds buyer for Hummer; Opel sale clears hurdle
By MarketWatch
SAN FRANCISCO (MarketWatch) -- General Motors Corp. reportedly is nearing a deal to sell its Hummer brand to an undisclosed investor, while the sale of its Opel unit to Magna International cleared another hurdle in Germany as the automaker moves to raise cash ahead of an expected bankruptcy filing on Monday.
According to a story in The Wall Street Journal citing people familiar with the matter, the Hummer sale could save as many as 3,000 jobs U.S. jobs in manufacturing, engineering and at dealerships.
The Journal noted GM (GM 0.75, -0.37, -33.04%) began a review of the Hummer brand a year ago and has been in talks with several potential buyers, including Chinese investors and parties in the U.S.
It has picked a buyer for the brand, and hopes to close the deal by the end of the September, according to the Journal report.
Recent offers for the Hummer brand were in the $200 million range, according to others involved in the bidding. It is unclear what the final price for the brand will be. The Journal also quoted a GM spokesman as saying the company is "working through the final details of an agreement," but said the company does not have an announcement to make at this time.
The report said the buyer has committed to invest in future Hummer products, according to people briefed on the deal. One potential condition of the deal could be a move by the new investor to acquire a manufacturing plant in Louisiana that builds Hummer models, the Journal reported.
Meanwhile, Reuters reported the budget and finance committees of two German states with large Opel plants OK'd the deal with GM's Opel unit, Magna and the U.S. government to save Opel from bankruptcy.
About 15,600 of Opel's 25,000 workers are based in Hesse and 5,200 in North Rhine-Westphalia.
Also from the Obama Motors department and Marketwatch:
GM to get $30 billion in bankruptcy financing
U.S. taxpayers to own 60% of pared-down GM
By Steve Gelsi, MarketWatch
NEW YORK (MarketWatch) -- Senior officials in the Obama administration said late Sunday the U.S. government will provide $30 billion in financing to General Motors Corp. to allow it to continue to operate through a historic Chapter 11 bankruptcy, expected to last an estimated 60 to 90 days.
Officials confirmed that a majority of GM /quotes/comstock/13*!gm/quotes/nls/gm (GM 0.75, -0.37, -33.04%) bond holders approved the deal to allow the ailing car maker to restructure $27 billion in debt. See full story on GM bondholders.
"For the better part of a century, the General Motors Corporation has been one of the most recognizable and largest businesses in the world," one senior U.S. official said in a prepared statement to reporters. "Today will rank as another historic day for the company -- the end of an old General Motors, and the beginning of a new one."
Describing the process as "painful but necessary," officials said GM will move ahead with plans to close 11 facilities will idle three more. Specific numbers of layoffs will come from GM, officials said.
The U.S. government will own 60% of equity in the new General Motors, with little or no control over day-to-day affairs. The U.S. government will receive approximately $8.8 billion in debt and preferred stock and will name some of the new company's board members.
Officials did not confirm or deny reports that Al Koch, a turnaround specialist, will serve as chief restructuring officer.
An additional $9.5 billion will be lent to GM by Canada and the Province of Ontario, with the Canadian government in line to own 12% of the new GM and receive approximately $1.7 billion in debt and preferred stock. The Canadian government will also have the right to select one initial director.
President Barack Obama is expected to speak about the GM bankruptcy on Monday, with the company also planning a formal announcement before the stock market opens.
Government says it's done lending to GM
Officials said the government would eventually sell its stake in General Motors, but did not lay out a target date. On the conference call with reporters, the officials said they didn't expect GM to require any more funding from the government.
"The government has no desire to own stakes in companies and will actively seek to dispose ownership interest," an official said. "The goal is to promote strong companies that can become profitable quickly."
As a result of this restructuring, GM will lower its break-even point to sales of 10 million cars per year. Before the restructuring, GM needed to sell about 16 million car sales a year to turn a profit.
The UAW made "important concessions" on compensation and retirees health care, Obama administration officials said.
The new GM will establish an independent trust, known as a voluntary employee beneficiary association (VEBA), to provide health-care benefits for GM's retirees. The VEBA will be funded by a note of $2.5 billion, payable in thee installments ending in 2017 and $6.5 billion in perpetual preferred stock. The independent trust will also receive 17.5% of the new GM and warrants to purchase an additional 2.5% stake in the company.
The UAW's existing $20 billion pension obligations will disappear as part of the bankruptcy.
The new GM will pursue a commitment to build a new small car in an idled UAW factory, which, when in place, will increase the domestic-sales share of U.S.-produced vehicles from its current level of about 66% to over 70%.
Officials confirm $27 billion debt deal
The steering committee for a portion of GM creditors has confirmed that bondholders representing at least 54% of GM's unsecured debt have agreed to exchange their portion of the company's $27.1 billion unsecured paper for their pro-rata share of 10% of equity in the new GM, plus warrants for an additional 15% of the new company.
"The bankruptcy court process will be used to confirm this treatment for those bondholders and other unsecured creditors that failed to accept or did not participate in the offer that was accepted by the aforementioned majority," the U.S. officials said.
GM will continue to honor its consumer warranties. This past week, the U.S. Treasury made available the Warranty Support Program to GM, with $361 million in funding to provide a backstop for the orderly payment of warranties for cars sold during the restructuring period.
Employees will continue to receive regular compensation, including salary, wages and ordinary benefits. GM will seek authority at its first-day hearing to continue to pay suppliers as normal.
Steve Gelsi is a reporter for MarketWatch in New York.
From the "We told you idiots that this was a bad idea but you wouldn't listen" department and the notoriously left-wing Washington Post:
The GM Quagmire
Congress should question the need for nationalization.
Saturday, May 30, 2009
IN MARCH, we cheered President Obama when he extended a federal lifeline to General Motors and Chrysler. He was risking a fair bit of tax dollars -- $6 billion, on top of $17.5 billion in emergency loans tendered since December -- but he said he was setting tough conditions for anything beyond that. "We cannot make the survival of our auto industry dependent on an unending flow of taxpayer dollars," he said. "These companies -- and this industry -- must ultimately stand on their own, not as wards of the state."
So how did we get from there to here? Here, according to media accounts this week, is an imminent transformation of General Motors into a government-owned company, infused with upward of $50 billion in federal money. The United States will accept stock in lieu of the cash the company owes, and Washington -- that is, you, the taxpayer -- will become the owner of 70 percent of the new GM. When might the company stand on its own, to paraphrase Mr. Obama? When would the government exit the stage? The Post reports today that administration officials hope to depart within five years, but the truth is that nobody knows when or whether taxpayers would recover their investment. If you think the federal government is well equipped to manage a failing automobile manufacturer into profitability, you should jump at this deal.
The bailouts were distasteful from the beginning, in December, but with the economy so fragile, a GM implosion might have been calamitous. Dealerships and auto-parts suppliers would have followed the once-mighty manufacturer into bankruptcy, taking a huge toll on employment. Even today, with the economy looking less shaky, that logic may still hold. Economists have warned against assuming too soon that the recession is waning. It could be too dangerous even now to leave GM to its own devices.
But is a massive, unbounded federal commitment to a company that evidently still can attract no private capital really the only option? It doesn't take much imagination to forecast the political pressures that will buffet the government-as-auto-executive. We've seen one effect already in the preferential treatment of the autoworkers' union at the expense of private creditors. The government sweetened its offer to creditors in the past couple of days, but they're still getting less return on their debt than the union is. Meanwhile, the union can boast that it has been promised no loss in "base hourly pay, no reduction in . . . health care, and no reduction in pensions." Influential members of Congress will insist on jobs in their districts; environmentalists will want electric cars; overseas sourcing will be frowned upon. How such decisions affect profits could become secondary.
In an essay this week on http://theatlantic.com, federal Judge Richard A. Posner argued that a further bailout may be justified -- if GM's failure to attract private investment stems from continuing problems in the overall credit market and not its own inefficiencies. If so, he wrote, the aid should take the form of additional loans, not ownership. "We should be concerned lest GM become a kind of economic Vietnam, where the federal government throws good money after bad, year after year, in a vain quest for victory."
When the Bush administration first assessed its unpalatable options, Congress played an active and constructive role. Where are the legislators now? They should at least be pressing the administration to explain why nationalization is the best option.