Government Motors

GM and Citigroup are stripped of the Dow Jones index Cisco and Travelers have replaced them. Hilariously Citigroup owned Travelers till 2002.

Germany’s ‘Der Spiegel’ writes: “After months of hand-wringing and hard work, the German government, in conjunction with the Canadian auto-parts supplier Magna and its Russian partners, finally managed to find a way over the weekend to save Opel from being dragged down by its US parent General Motors. The price tag for German taxpayers was, at €1.5 billion ($2.12 billion) in bridge financing, not insignificant. But Berlin hopes that most of the 25,000 German jobs at Opel will be saved.”

That's the good news. The bad news is that, with Opel safe and snug under the government umbrella, there are a number of other German companies that would like some taxpayer-funded shelter as well. “Top on the list is Arcandor, owner of the enormous department store chain Karstadt—and tens of thousands of jobs may depend on what the government decides to do.”

Some comments on GM’s filing for chapter 11:

•    "They plan to call it "Government Motors" If your Chevy breaks down - call Obama to fix it! Large unionized companies can never be successful over the long run. Poor quality and high costs.
•    General Motors, once the backbone of US manufacturing, is officially bankrupt. As you've no doubt heard, the company declared bankruptcy this morning. But since it's 2009, lord knows it can't be run-of-the- mill insolvency. The Obama administration has its hands deep in this thing... here's the fine print of the biggest industrial bankruptcy in US history:
•    Why do analysts use the term "profitability" when referring to the future GM and Chrysler? Profit will not be a consideration. Those two companies will be the Amtrak of the auto industry. They will run deficits every year and the Democrats in Congress will fill the void every year with subsidies. We are creating a perpetual welfare fund for the members of the UAW."

And here the fine print of the deal:
•    Uncle Sam gets a 60% stake. The government will pump an additional $30 billion into GM (on top of the $20 billion already squandered). In exchange, the government will be the largest shareholder... leverage it will use to usher GM through bankruptcy and convert it to this "leaner, stronger company" we've been promised
•    Once the UAW is fully funded, this FAKE bankruptcy will turn into a REAL bankruptcy, minus 50+ billion taxpayers dollars.
•    Half of the UAW's $20 billion health care fund will be converted to GM stock, which will give it a 17.5% stake in the company. 12-20 factories will be closed, at the cost of approximately 21,000 union workers. 40% of the 6,000 GM dealers will have to close, too
•    The Canadian government gets a 12% stake, given all GM's design/manufacturing activity up north
•    Bondholders were bought (bullied?) out. They'll swap their $27.1 billion in unsecured debt for 10% of GM, with warrants to own 15% more. Surely, they learned from Chrysler's bondholders, who were publicly vilified by President Obama for demanding what was lawfully theirs... so much for that hallmark of American capitalism
•    Current shareholders get nothing. At least that rule of bankruptcy is still intact. If you were long GM investor, please consider letting someone else manage your money.

"GM Bankruptcy to Bring Taxpayer Ownership," headlined Bloomberg. US government to blame, being responsible for this "taxpayer ownership".

The taxpayers must have been asleep when they got any say in this deal. Wealthy politicians in Washington own GM, under threat of custody, they forced their constituents to finance the deal. Insinuating the public has any control is more like an "Orwellian in the extreme"

Taxes haven't gone up to cover the GM bailout, or any credit crisis expense, but government borrowing certainly has. If any "taxpayers" truly own GM, their tax returns will be forwarded to Beijing and Tokyo.