GM declares bankruptcy, moves into public ownership
June 1, 2009 - 12:55pm
The bankruptcy filing, the largest for an industrial company in U.S. history, was essential for GM’s survival and part of a “viable, achievable plan that will give this iconic American company a chance to rise again,” said President Barack Obama at the White House.
The move will transform ownership of the century-old company. The U.S. government is to take a 60-per-cent ownership stake in the new firm and the Canadian government will now own 12 per cent of the common shares. The United Auto Workers will get a 17.5-per-cent share with unsecured bondholders receiving 10 per cent. Existing shareholders get wiped out.
http://www.theglobeandmail.com/report-on-business/gm-files-for-bankruptc...
I wouldn't want to be living in Oshawa about now. 
Apparently, Ontario will have a part of that 12% stake.
"In addition to the U.S. government's 60% stake, Canada and Ontario will own a 12% position in GM. The remaining shares will go to the United Auto Workers and bondholders.
http://money.cnn.com/news/newsfeeds/articles/djf500/200906011332DOWJONES...Well, I am living in Oshawa about now. Of my neighbours whom I know well enough to talk about such things, two were recently GM employees. They both recently grabbed the commuted value of their pensions and bugged out, and are pretty happy about it. I don't know any current GM employees particularly well, but there's a lot of general stress and tension. I usually run into GM types during election campaigns, so I'm hoping for a chance to catch up on things fairly soon.
GM's workforce in Canada was ~20,000 in 2005. It's down to ~7500 today.
Capitalism is a car that's constantly on blocks.
and you can use Lada as an example.
So we're spending something like 1.3 million dollars per GM employee to keep those jobs in Canada???
Why not give each employee an exceptionally generous two year severance at their current pay rate and let them take the time and money to retrain for a non-dead-end job? And use the savings for, oh, I don't know... social services and other issues of government? Whatever that money would have been spent on had GM not proven itself financially unviable?
its not just the jobs at GM. What about the dealerships, the parts suppliers. The businesses people shop at and pay taxes. What about the money we save on employment insurance and welfare?
and you can use Lada as an example.
Or British Leyland, another bunch of arrogant capitalists whose cars nobody wanted to buy
http://www.lada.ru/
So, some "trickle down" economics, then? Make sure the local kid and his lemonade stand don't suffer because the variety store owner didn't sell any bread to the banker who didn't make a loan to the barber who didn't cut the hair of the lawyer who didn't represent the grocer who couldn't sell a melon to the autoworker because the autoworker didn't get a bailout? And now nobody can buy Timmy's lemonade?
Surely all these very well paid employees must be quite skilled indeed, and should have no problem snapping up new jobs.
It's a bit late now, and the governments do get a tangible asset for that spending - that's why they now own GM. If the new leaner version of GM makes money, they could make that money back when it's privatized.
What if, instead of transforming half of US-GM into scrap metal for landfill, lackeys in government decided to nationalise, retool the rust and begin building mass public transportation for the future? Unlike NAFTA, a real plan could produce "jobs! jobs! jobs!, as Mulroney thought NAFTA would deal to Canadians, and at the same time weaning people off of the individualism of driving their bad selves around town in tin cans which are hardly ever full of passengers? The average person is capable of thinking further ahead than these redundant capitalists and their bailout partners in government.
*Our* government only owns a share of GM, not enough to do anything other than bob like a cork on the current when the United States government calls the shots.
If GM gets back on its feet and becomes viable again then we may live to see this be something other than a giant boondoggle, but my bet is we never see the return on our investment. That, or in 30 years we "break even", around the same time we're powering (affordable, Japanese) hovercars with clean plasma energy.
Grand Theft Auto: The Bankruptcy of General Motors
by Greg Palast (U.S.)
When a company goes bankrupt, everyone takes a hit: fair or not, workers lose some contract wages, stockholders get wiped out and creditors get fragments of what's left. That's the law. What workers don't lose are their pensions (including old-age health funds) already taken from their wages and held in their name.
But not this time. Stevie the Rat has a different plan for GM: grab the pension funds to pay off Morgan and Citi. . .
Here's the scheme: Rattner is demanding the bankruptcy court simply wipe away the money GM owes workers for their retirement health insurance. Cash in the insurance fund would be replace by GM stock. The percentage may be 17% of GM's stock - or 25%. Whatever, 17% or 25% is worth, well ... just try paying for your dialysis with 50 shares of bankrupt auto stock.
Yet Citibank and Morgan, says Rattner, should get their whole enchilada - $6 billion right now and in cash - from a company that can't pay for auto parts or worker eye exams.
"It doesn't make it any less of a crime if the President drives the getaway car."
I remember a commentator talking about the air industry and how it has cummulatively lost billions of dollars in the last 30 years and has slowly but surely dropped out as a major industry. Same thing is going to happen with automobiles. Any government money that is spent is money wasted in my opinion unless it is for short term expedient considerations.
Now that the US and Canadian governments have taken control of GM, it's time to reiterate louder and clearer our demand that the government retool the auto plants to produce solar panels, mass transit vehicles, and zero emission cars. This is the only course of action that both keeps people working, and helps to address the climate crisis.
Future generations will judge us harshly for not taking this course of action.
Harper did this because he had to, and it's a favour to McGuinty. If GM went down totally, Ontario would have been on the hook for the GM pensions, right. A big help to McGuinty. I suspect you'll not see Dalton attacking Harper for a while now.
The dealership and parts supplying spin off spin-talk confuses me. Where would the job losses be exactly? There are a lot of other parts suppliers out there, and some dealerships have already been cut loose. I know one GM dealer who was, and he's staying open, and there's some talk that he might actually be better off without GM hanging around his neck, with the rules and overhead that went with being a GM dealer. It's not as if GM parts will not be made anymore. In fact, making parts and selling them as "authentic" GM, ie more expensive by branding alone, is probably the only way the company is making money right now. Servicing shitty vehicles full of badly designed electric gadgets will be a growth industry very soon. See the Right to Repair bill.
There's still a lot of GM vehicles out there, and they all need servicing. The dealerships that remain and have gone under will likely retain some kind of aura of being better at fixing GM vehicles.
Lewenza admitted that it was unlikely all Canadian plants will be spared.
I admit I'm with Snert a little on this. That's a lot of money to save those jobs... and political face. Maybe it's just a stock market thing, where if the US and Canada didn't prop up GM the stock markets would have nosedived and Canada would be blamed for inaction in the face of a fresh "meltdown". We all know the stock markets must be taken into consideration, right? Especially now that we're shareholders in a bad market. If the company can make more money offshoring those jobs, or moving them to Mexico, will they? Canada will have a seat on the board now. Who will be appointed?
Hopefully this will stop the daily assault of auto industry headlines.
When does Ford hold out it's hand? Chrysler, previously though in worse shape, seems to be restructuring better and faster than GM.
Ford doesn't need handouts because it is scooping up loose business. Like everybody they will have a hard time making a profit, but they are well positioned. They'll be hands down the largest North american manufacturere very soon- even if GM does fairly well. And its easier for them that they don't have to negotiate with 'partners' everything they want to do.
The spin-offs problems had GM simply been liquidated are very real. A few dealers being cut loose can make it selling used cars and what not. Had all of them been cut loose, the vast majority would have gone under. Ditto for the suppliers- shrinkage is one thing, a big chunk of the market gone instantly is another. Plus the chaos that would have been set in motion by so many suppliers going under- productiong lines shutting, and further cash losses that cannot be afforded, with all of the remaining vehicle manufacturers having problems getting supplies. Plus the chaos set in motion by all the unfunded obligations cut loose.
And thats just the first closest 'ring' around GM. No small deal.
And even if GM doesn't make it in the end, it will be a far softer landing /readjustment for everyone who would have been swamped by the waves had GM gone under suddenly.
Yeah, I don't know what to think about all this either. I also wonder why the government doesn't just pay out all the workers with huge severance packages.
I guess the problem is, a lot of workers, especially ones nearing retirement, aren't going to be able to retrain for other jobs, and even if they do, age discrimination will ensure that many of them won't get hired anywhere. A lot of employers won't hire a 55 year-old right out of school when they can hire a 25 year-old.
Why should the government pay severence pay packages to GM workers? What about the poor shnuck that is not part of the auto industry and lose their job? And they cant even get UI thenks to Harper.
Are they less important?
That's a good question. I only suggested the payout because it's clear that somehow, somewhere, it was decided that GM employees are a special case.
But ya, if my employer had to let me go because of the economy, and the government had no similar plans to ensure that MY paycheque keeps arriving and MY pension is shored up with public funds, I'd be a hell of a lot less than impressed.
Michael Moore: Goodbye GM
But you and I and the rest of America now own a car company! I know, I know -- who on earth wants to run a car company? Who among us wants $50 billion of our tax dollars thrown down the rat hole of still trying to save GM? Let's be clear about this: The only way to save GM is to kill GM. Saving our precious industrial infrastructure, though, is another matter and must be a top priority. If we allow the shutting down and tearing down of our auto plants, we will sorely wish we still had them when we realize that those factories could have built the alternative energy systems we now desperately need. And when we realize that the best way to transport ourselves is on light rail and bullet trains and cleaner buses, how will we do this if we've allowed our industrial capacity and its skilled workforce to disappear?
Thus, as GM is "reorganized" by the federal government and the bankruptcy court, here is the plan I am asking President Obama to implement for the good of the workers, the GM communities, and the nation as a whole. Twenty years ago when I made "Roger & Me," I tried to warn people about what was ahead for General Motors. Had the power structure and the punditocracy listened, maybe much of this could have been avoided. Based on my track record, I request an honest and sincere consideration of the following suggestions:
I've never owned a GM product in my 60 years, but my mother had a hot Chevy Camaro - she had been a solid Chrysler product person (including a 1968 Plymouth Road Runner, while one of my brothers had a superfast Dodge Challenger). I've had a couple of Ford products, but mostly my vehicles have come from overseas, including a 1960's Sunbeam sports car, and a few Hondas, including a gorgeous 1992 red CRX Si.
Yeh boomboom does your family have any of thise cars still? Those are my some of my favs of all time.
I hear where you're coming from, KenS, but I don't agree.
GM was never going to disappear in a puff of smoke. It would have bought up and pieced off... oh, shit, that's what happening now.
It's just that the US and Canadian-Ontarian govs are buying a stake in hopes that'll save jobs and political face. A GM vehicle isn't really worth any less to the greater economy if the company had collapsed. Someone will buy it and it'll eventually need servicing. That's the nature of the game. "Genuine GM" parts are made in Ontario but the aftermarket for parts is massive and there are often exact replicas, made overseas.
Having said that, GM's parts biz is being pushed by electronic gadgets and other computer driven crap that then feeds the need for high tech GM mechanics to put hyper-expensive parts on overbuilt vehicles. It's like trying to keep ahead of hackers.
The oversupply of vehicles in North America is a big problem, exaggerated by the nervous eco times. Keeping current vehicles on the road is big business and it wouldn't have disappeared if GM went down.
Having done a tour of duty as a grease monkey, and having known mechanics my entire life, I would steer clear of GM's fancy offerings (and most other companies', as well). The people to fix them don't currently exist.
Anyhow, back to the case at hand: I am fucking tired of all this auto sector shit. GM has been bilking Ontarians for years, with fifty year loans here and there, no interest until 2050, that kind of crap. The workers are clearly pawns but if I hear one more auto worker crying because his retirement benefits are being trimmed I'm going to puke. It's almost as if they never considered the possibility that many Canadians live with as a fact of life - working in a dead end, low paying job, with no escape, and no retirement packages whatsoever beyond what the gov may or may not be able to afford in the coming years.
Theres plenty of argument for just having let GM go, and even better argument: what about the rest of us?
But its more than a misnomer that there would have been buyers for the pieces. There would have been plenty for the vultures to pick over- but not the vehicle assembly. Without being a going concern that would have been worthless / no one would have had the pockets to run any of it. The vultures would cherry pick brands, and some models... but they' be built elsewhere. Meanwhile, it would have been the spreading chaos.
If it was just autoworkers at the plants Harper would have taken the lumps. But no PM wants to to pay the price for a rapid wide collapse.
More from the Michael Moore article that Catchfire posted above:
We are now in a different kind of war -- a war that we have conducted against the ecosystem and has been conducted by our very own corporate leaders. This current war has two fronts. One is headquartered in Detroit. The products built in the factories of GM, Ford and Chrysler are some of the greatest weapons of mass destruction responsible for global warming and the melting of our polar icecaps. The things we call "cars" may have been fun to drive, but they are like a million daggers into the heart of Mother Nature. To continue to build them would only lead to the ruin of our species and much of the planet.
The other front in this war is being waged by the oil companies against you and me. They are committed to fleecing us whenever they can, and they have been reckless stewards of the finite amount of oil that is located under the surface of the earth. They know they are sucking it bone dry. And like the lumber tycoons of the early 20th century who didn't give a damn about future generations as they tore down every forest they could get their hands on, these oil barons are not telling the public what they know to be true -- that there are only a few more decades of useable oil on this planet. And as the end days of oil approach us, get ready for some very desperate people willing to kill and be killed just to get their hands on a gallon can of gasoline.
President Obama, now that he has taken control of GM, needs to convert the factories to new and needed uses immediately.
Michael Moore is now echoing one of the Key demands of ecosocialist. Bravo!
Yeh boomboom does your family have any of thise cars still? Those are my some of my favs of all time.
Sorry - all gone. However my oldest brother (66) still rides a hot vintage Ducati bike every day in Surrey, BC.
I'm shopping for either an original Willys Jeep or a Jeep from any of the past 30 years. An American friend is helping out.
Someone on Don Newman's show tonight suggested GM will have a really tough time selling its cars in the future, because a lot of folks are quite upset at taxpayer's dollars going to prop up this lousy company.
On the same show, Newman had a segment of forestry workers converging in Ottawa to demand the same kind of financial help that GM and Chrysler got.
I think the ladies of the night should be "helped" out too -- afterall they don't have a union to fight for them!
I think the ladies of the night should be "helped" out too -- afterall they don't have a union to fight for them!
Not sure what the hell this comment is doing in this thread. Here's a clear moderator's warning: don't drift thread topics. As to the content, there's a current thread open on issues relating to prostitution.
If we are to be so right wing in our approach to autoworkers, maybe it should be applied across the board.
OH, but that would be different when it comes to you.
Making Sense of a U.S. Owned General Motors Shamus Cook (U.S.)
This large discrepancy in numbers means, obviously, that taxpayers could lose tremendous amounts of "investment" money if Obama's "profit first" plan is put into effect. What is this plan? Strip the company to a fraction of its former self, using far fewer workers and making far less money in the hopes that GM will then out-compete the foreign competition on the world market.
Will Obama's plan benefit anybody? Yes, a small group of ultra-rich investors will likely buy GM at a bargain basement price so that they may pursue their profits in private after the public laid down the enormous "restructuring costs."
Obama has made it extremely clear that "he doesn't want to run GM." He will instead appoint a "private board of directors and management team," meaning, a typical group of corporate CEO's who are concerned about nothing but blindly chasing profits. . .
But what about Obama's promises of "transforming" the U.S. auto industry so that electric and hybrid vehicles are produced? Wouldn't this require that the government "take the reins" and make it so? Apparently, this was nothing but a ridiculous propaganda stunt, meant to distract the public away from the gruesome dismembering of America's proudest union, the United Auto Workers (U.A.W.).
Shamus Cook said, "Orwell would be horrified by such doublespeak, while the Republicans are studiously taking notes."
It's an unwritten rule of capitalism that taxpayers money should never be used to compete with private enterprise. They dont fool us, because these phony capitalists are now declaring to the world, SOCIALISMO O MUERTE!!
It's hard to deny that it is a new world for GM and the other North American auto companies. Tata and Chery are coming and that means the Big Three need to shape up or they'll be put out of business anyway.
. . .
Michael Moore is now echoing one of the Key demands of ecosocialist. Bravo!
That would make sense if there were a shortage of transit vehicles, but there's not. There are plenty of firms out there making trains, buses, trams, etc. if the government wants to order the vehicles.
The bottleneck is in government spending, especially on the necessary infrastructure. Moore's plan would give us plenty of stock but nothing to run it on . . . unless he's also suggesting that the government nationalise all of the civil engineering, construction and cement firms out there.
And I think some Ontario cities buy a certain low percentage of new transit vehicles from Canadian manufacturers.
We have everything we need in Canada to be an economic powerhouse of the future. We have raw materials and energy up the wazoo but being siphoned off the USSA instead for too many years. And Canada has masses of under-utilized talent
And speaking of Darwinan competition...
So, Ontario is back in business Christina Blizzard
Back in the late 1970s and early 1980s, Ontario, Alberta and the federal government invested in energy companies.
Canada and Ontario now own 12% of GM and 2% of Chrysler. While both Prime Minister Stephen Harper and Premier Dalton McGuinty have said they want out of ownership in the car companies sooner rather than later, experience demonstrates perhaps they should hang in for the long haul.
Ironically, it was the Progressive Conservative government of long-time premier Bill Davis that first bought in to the private sector. It was a controversial move and he was slammed by the right and the left.
In 1975, U. S. energy company Atlantic Richfield (now a subsidiary of BP) pulled out of its 25% stake in Syncrude.
This was a devastating blow. At that time, Alberta's oilsands potential was seen as underdeveloped, yet natural gas and oil prices were soaring. To allow the development to slide didn't make sense.
To fill that gap, Alberta put in 10% of that 25% share, Ontario put in 5% -- about $100 million -- and the feds put in another 15%.
It was seen as this province's contribution to holding the oilsands development together. Three years later, this province made a tidy profit when it sold its stake for around $160 million.
The second deal they got into was less successful. Ontario bought 25% of Suncor in 1981 for $625 million. In 1985, David Peterson's Liberal government wrote off its investment in Suncor.
Ironically, it was the cash-strapped socialist government of Bob Rae and his treasurer, Floyd Laughren, who catastrophically sold off the province's 13.6-million shares in Suncor for a fire-sale price of around $300 million. They needed the cash to balance the books.
Yep, that's right. A Conservative government bought into the company. A socialist one sold it.
What's remarkable is that had the socialists not sold those shares, they would be worth more than $5 billion today
Blizzard appeals to our socialist heart strings when reminiscing about nationalistic and publicly-minded old line parties pre-neoliberal era. But she at least understands what mistakes the two old line parties will repeat in spite of recent history guiding them not to.