And General Motors is now certain to file for bankruptcy protection sometime in the next few days. To no one’s surprise, the now famous, if shadowy, bondholders seem to have overwhelmingly rejected what’s being called a debt-for-equity swap.
They were asked to trade the money that GM owes them - $27 billion, all told, for a small ownership stake. Since Wall Street values GM these days as next to worthless, the bondholders said no. That would seem to make sense, till you consider that when the company goes bankrupt, the odds are that they will get close to nothing.
What actually is going to happen is that General Motors will now become Government Motors. Two governments, actually. Under bankruptcy reorganization proposals being bandied about, our federal government will own more than half of GM and the government of Canada would get perhaps 20 percent.
Most of the rest would be owned by the United Auto Workers union. Yes, I this sounds exactly like some socialist-syndicalist novel from the revolutionary 1920s. How will this all play out in the real world? Who will make the major investment decisions? How will new cars be approved? I haven’t a clue. There are hints that the U.S. government may sell off its share once General Motors gets healthy again. But no one can really say.
By the way, the Canadian stake in all this is much larger than commonly realized. Bloomberg reports that our federal government is going to propose lending a bankrupt GM about $30 billion, while Canada is to come up with about $9 billion.
When you consider that Canada’s economy is only one-tenth our size, that is a huge investment for them to make. But if GM were to disappear, Ontario’s economy would be as devastated as our own.
Everything indicates this will all go smoothly, though I am not optimistic that GM will emerge from bankruptcy as quickly as Chrysler. Chrysler’s problems were simpler, and had a bridegroom named Fiat waiting at the altar.
General Motors essentially has to heal itself. They’ve been doing a lot to prepare us for this bankruptcy. But still, there may be lumps in a few throats. This was once the biggest corporation in the world. GMs was an American icon in the 1950s, a company of which a Secretary of Defense once said, “if it’s good for America, it’s good for General Motors, and vice-versa.”
You can’t really imagine saying that about Microsoft. Yesterday Matthew DeBord, who is essentially a California-based wine critic, wrote this on Slate’s Big Money website: “Anyone in America who really values his freedom and citizenship owes a debt to GM.
“From a cultural perspective, GM’s impact was pervasive. It introduced a sort of tenure for the middle class.” We’ve lost our tenure now, and are struggling to retool for our future.
Let’s hope Detroit’s next chapter is a little less.
GM can still be a anchor our nation's future by shifting from auto's to mass transit..
Mass Transit is the best model for Michigan and the nation..Mass Transit can allow for massive labor intensive employment, the construction and teardown of old property venues into new structures, the green payoff will reduce global warming( less cars, less emissions)...
The ticket to the future is not an electric car but MASS TRANSIT!!
Posted by: Thrasher | May 28, 2009 at 09:45 AM
The era of V8's is long gone, but they got it too late... Stop making junk!
Posted by: factoringmaster | May 28, 2009 at 12:37 PM
Quick Thrasher ... name one mass transit scheme in this nation that DOES NOT puke red ink and take massive taxpayer injections to keep it afloat. (Yes, even at $4 gas). This is not France and things aren't about what we wish for it's about what is. Likewise V-8s ... A mistake? They're one of the few things that GM built and consumers actually wanted to buy and GM could make money on. GM, given the UAW, did nothing but lose money on the PC cars you so wish for.
Posted by: Matt | May 28, 2009 at 06:48 PM
Matt,
Quick name one auto maker in the this nation making money??
Clearly a MASS TRANSIT system as our primary mode of transportation not only will make money but make the air we breath better and planet greener and jobs for all..
Posted by: Thrasher | May 28, 2009 at 10:01 PM