We were told last week that, by early next week possibly Monday, General Motors would join Chrysler in filing for the protection of the Bankruptcy Court. This could result in the US Government owning some 60% of GM – hence, it could then be called “Government Motors,” as some wags are now saying.
That was before the current feeding frenzy. Then last Friday, we learned that, like buzzards following the dying animal in the desert waiting for it to collapse for dinner, late NY Times breaking news had it that: “Negotiators from General Motors, Magna International and the German government reached a tentative agreement on Friday that would have Magna take a major stake in G.M.’s European operations alongside a Russian bank, a person briefed on the talks said.”
How the Mighty Have Fallen.
Last Wednesday, while some of us slept, the deadline ran out for GM’s tens of thousands of bondholders, big and small. GM had offered a restructing which would have involved exchanging $27.2 Billion of outstanding GM bonds for stock (equity) in the reorganized GM – the offer needed a 90% acceptance – saying only that “substantially less” had signed on, GM announced when the business day began Wednesday that this last hope had run out. Next stop? Bankruptcy Court. Then, that too changed as a deal with bondholders was tentatively announced by Friday. This past weekend, while you fired up the barbecue, many met all over the world to discuss carving up GM’s carcass.
Like Chrysler before it, GM still faces imminent Bankruptcy, all other efforts to avoid a Chapter 11 reorganization may or may not have failed to produce any alternative to a thought that we are becoming accustomed to over the months since last Fall, but a decade or two ago would have strained credulity and required the kind of willing suspension of disbelief that sustains interest in a science fiction novel. A Chapter 11 Reorganized GM would, under current thinking, be owned (a staggering) 70%, by the federal government; 20%, by the United Auto Workers union, and; a mere 10%, remaining in private hands. Visions of President Obama meeting with his Cabinet to mull over GM’s 2010 and 2011 new models – an even faster Corvette; a less gas-guzzling Suburban, perhaps – dance alongside sugarplum fairies in the mind grown weary of economic catastrophe and never-before-imagined news like this.
We are now told that GM’s winning models, like Chevies and Cadillacs, might emerge from the Bankruptcy Court by Summer’s end and that many of the remaining pieces of the GM model world would be severed from the MotherShip, to be sold off, perhaps to other foreign auto manufacturers or consigned to the dustbin of automotive history along with Nash, Packard, Studebaker, Hudson, Stanley Steamer and so many others.
Thus, as you read this, we could awake to find our blogs, online news sources, yes, even newspapers, and other Media all shrieking the news that America’s biggest, and the second of the Big Three US automakers, has now filed its Petition in Bankruptcy in its 101st year of existence, or not, depending on what happened over last weekend. GM led automakers in sales for an astounding 77 consecutive calendar years, from 1931 to 2007 – a record we may never seen again, surely not in our lifetimes. In 2008, GM sold 8.35 million cars and trucks (In 2007, 9.35 million) from manufacturing operations in some 34 countries and sales locations in nearly 140 countries – multiply 8.35 million times an average price – pick one: say, $15,000, and that’s quite an impressive cash flow passing through the hands of GM’s Bean Counters. But, still they could not make it work to produce a profit and the hemorrhaging had to end.
One William Crapo "Billy" Durant was a high school dropout who, by 1890, had built himself into one of the leading manufacturers of horse-drawn carriages; when the horseless carriage came along, Durant was in the right place at the right time. In September of 1908, Durant formed GM as a holding company for the auto brand he controlled, Buick, and in short order, Oldsmobile, Elmore (disappeared without a trace) and Oakland (you know them as Pontiac) came under the big GM tent. Just two years later, Durant lost control to a bankers’ trust due to declining sales and debt from just too many acquisitions too fast. Durant then bought Chevrolet and, quietly, operating through Chevrolet, garnered control of GM again through a legendary proxy fight – only to lose control of GM again shortly thereafter. Alfred Sloane then led GM to global dominance and, by the early 1980’s, GM employed some 349,000 workers around the world in 150 assembly plants pumping out GM cars and trucks as fast as they could sell them.
Taxpayers will not rest easy in our country with the US government owning 60% of a restructured GM, only a shadow of its former self. It is in nobody’s interests for the US government to run giant auto manufacturers. Naggin questions like how big and how bad the ripple effect from GM’s restructuring will be in terms of other companies who support, sell to, manufacture for and distribute – gloomy estimates vary, but none are reassuring – and what in the world will happen to all those retired GM workers living on their pensions right now, loom painfully large like a gaping wound in America’s economy and now will become the problem (maybe) of a Bankruptcy Judge and of GM’s majority taxpayer owners – you, me and the Federal Government. Whither goest GM?