GM AND THE BAGGAGE LEFT BEHIND..

Posted on June 1, 2009. Filed under: News And Politics... |

 
My comments are in green throughout this article.  Take a look at the picture below.  Does it look like everyone in attendance is in agreement with CEObama’s current venture?
 
QueenBee
 
 

June 2, 2009

Obama Sees ‘Painful’ Birth of New G.M.

This article was reported by David E. Sanger, Jeff Zeleny and Bill Vlasic, and written by Mr. Sanger.

Doug Mills/The New York Times
President Obama discussed the G.M. bankruptcy on Monday at the White House.
 

General Motors filed for bankruptcy on Monday morning, submitting its reorganization papers to a federal clerk in Lower Manhattan in a move that President Obama said marked “the end of an old General Motors and the beginning of a new General Motors.”

The bankruptcy of a once-proud auto giant that helped to define the nation’s car culture and played a part in creating the American middle class immediately rippled across the country, part of a process that the president said would take “a painful toll on many Americans” but lead ultimately to a strong company ready to compete in the 21st century.

But for the moment, auto workers braced for news about their jobs as G.M. said it would shutter plants in Michigan, Indiana, Ohio and Delaware, and plants in Tennessee and elsewhere in Michigan were put on standby. In financial markets, shares of foreign automakers and Ford surged ahead.  Do you think that Ford surged ahead because they didn’t get a bailout from CEObama?

President Obama, speaking at the White House, emphasized that investing more billions of taxpayer dollars in General Motors was not something he wanted to do, but something he felt the government had to do to avert a calamity that would hurt millions of people.  This is the same rhetoric he uses when he’s done something questionable.  With this move, he is hurting millions of people…people who have worked hard all their lives and who are now at the mercy of the government…just the way CEObama and the Democrats wanted.  The only ones who are making out in this deal is the Terrible Twos…our government and the auto industry CEOs.

“We are acting as reluctant shareholders, because that is the only way to help G.M. succeed,” Mr. Obama said, asserting that the government’s backing, coupled with the painful restructuring that the once mighty company is undergoing, “will give this iconic American company a chance to rise again.”  If CEObama really wanted this company to rise again, he would have let them do it themselves, and then they all would have learned a very valuable lesson–that Americans are resilient and can overcome severe obstacles.  It’s a shame that they weren’t afforded that chance.

“I will not pretend the hard times are over,” Mr. Obama said, adding that the sacrifice needed to be made for the next generation.  Hmmm…The flip-flopper has pretended on several occasions that the economy is getting better, only to revert to saying things like this. 

In its bankruptcy petition, G.M. said it had $82.3 billion in assets and $172.8 billion in debts. Its largest creditors were the Wilmington Trust Company, representing a group of bondholders holding $22.8 billion in debts, and affiliates of the United Auto Workers union, representing nearly $20.6 billion in employee obligations.

In a court affidavit, Fritz Henderson, G.M.’s chief executive, said that bankruptcy and a Treasury-sponsored sale of General Motors’ assets to a so-called “New G.M.” were the automaker’s only option to move forward. Failing that, he said, the company faced liquidation.

“There is no other sale, or even other potential purchasers, present or on the horizon,” Mr. Henderson said.

In a bit of good news for the company’s hometown, G.M. said Monday that it planned to keep its international headquarters in downtown Detroit, rather than move to the suburbs. It said it responded to concerns by city officials fearful of losing the only one of the Detroit companies to be based in the Motor City.

The company was forced into the filing by President Obama, who is betting that by temporarily nationalizing the onetime icon of American capitalism, he can save at least a diminished automaker that is competitive.  This is another step closer to CEObama nationalizing the rest of the United States, all under the "we had to do it" guise.

With the filing, G.M. follows its crosstown rival Chrysler in bankruptcy. And G.M. hopes that it can move as swiftly. Chrysler, which sought court protection on April 30, could emerge in the next few days. A bankruptcy judge in New York gave approval on Sunday night for most of its assets to be acquired by Fiat, a decision that President Obama hailed on Monday morning.

“A new, stronger Chrysler” is emerging, the president said, and a new, stronger General Motors can emerge too. But first, he said, more difficult times lie ahead, for those thousands of workers and retirees affected by the car industry. The president urged those affected to see themselves as making “a sacrifice for the next generation.”  Making a sacrifice for the next generation?  He didn’t think that way when he brought forward the biggest pork-laden stimulus package in history, where the next generation will be forced to contend with.  We’re all making sacrifices, especially since CEObama took office.

The bankruptcy of General Motors culminates a remarkable four months of confrontation between Washington and Detroit that is expected to result in a drastic downsizing of the company. It also places the government in uncharted territory as a business owner, as it takes a majority ownership stake in the company during its restructuring.  It also takes a [Democrat] majority to cause an economic collapse as well.

The company’s Saturn unit, which G.M. began in 1990 to compete with foreign-made cars, also filed for bankruptcy on Monday. G.M. has said it will phase out the Saturn brand by 2012.

G.M.’s Saab unit is already under bankruptcy protection in Sweden. The German government last week picked Magna International, a Canadian car-parts maker, to buy G.M.’s Opel unit, which is based in Germany.

Reflecting the government’s extraordinary intervention in industry, aides say, Mr. Obama reiterated his hope that G.M. can be brought back from the brink of insolvency, even if the company looks almost nothing like the titan of old.  His hopes and dreams have slowly turned into nightmares in the past 120 days.

The new G.M. will be leaner and better run and its cars more fuel-efficient, the president said, in yet another acknowledgement that the days of high-finned gas-guzzlers are gone forever.  Hmmm…GM was saying the same thing when they debuted the revolutionary "Impact" concept car at the Los Angeles Auto Show in 1990 (see my previous post, CEOBAMA AND GENERAL MOTORS…).  It was the first car with zero-emissions marketed in the U.S. in over three decades, so what happened to this "revolutionary" vehicle?

The president was envisioning a much smaller, retooled G.M. can make money even if new car sales remain at a sluggish 10 million a year in the United States and even if G.M., once the giant of the industry, drops below its current 20 percent market share in this country.

But to get there, American taxpayers will invest an additional $30 billion in the company, atop $20 billion already spent just to keep it solvent as the company bled cash as quickly as Washington could inject it. Whether that investment will ever be recovered is still an open question, although the president said he was optimistic, and that Washington really had no choice.  That’s what CEObama wants everyone to believe, but they had the choice of letting GM fall.  Only then would General Motors have picked themselves up and fought to make it work, simply because they would have had no other option.  With CEObama’s intervention, they never had to learn from their mistakes, so more mistakes will most likely continue.  The same thing happened with the bailout with foreclosures…a lot of those foreclosed homes are foreclosing anyway, even with CEObama’s help.  Why?  Because those idiots bought homes that they couldn’t afford in the first place.

The company will also have to shed 21,000 union workers and close 12 to 20 factories, steps that most analysts thought could never be pushed through by a Democratic president allied with organized labor.  I’m wondering if those unions who supported Obama are still onboard with his agendas and singing his praises.

Forty percent of the company’s 6,000 dealers will close, the workers’ union will be forced to finance half of its $20 billion health care fund with stock of uncertain value in the restructured G.M. and bondholders, including many retirees, will be forced to take stock worth 10 cents for every dollar they lent the company.

G.M. will also lose its spot on the Dow Jones industrial average, a crucial stock-market gauge of 30 blue-chip stocks. The car maker had been a member of the closely watched stock index since 1925. In press releases and public statements, General Motors tried to put the best face possible on its bankruptcy filing. 

“We see the path to the future for G.M.,” Ray Young, G.M.’s chief financial officer, said at a briefing Monday morning. “This is a once in a lifetime opportunity to get our balance sheet healthy. I feel very blessed to have this opportunity. It’s a huge responsibility.”

Judge Robert E. Gerber of United States Bankruptcy Court in Manhattan will oversee the bankruptcy. He was appointed in 2000, and oversaw the bankruptcy of the cable company, Adelphia.

Before that, he was a partner in the Manhattan firm of Fried, Frank, Harris, Shriver & Jacobson, which he joined in 1971 after graduating for Columbia Law School. He specialized in securities and commercial litigation and, thereafter, bankruptcy litigation and counseling.

The company’s last steps toward bankruptcy took place over the weekend as a majority of G.M. bondholders agreed not to challenge the filing in court and to exchange their debt for stock.

To assist in the restructuring, the automaker is expected to hire the consulting firm Alix Partners, which has worked on several major bankruptcies, including those for Enron and Kmart. One of the firm’s partners, Al Koch, is expected to manage the liquidation of corporate assets that G.M. will shed during its Chapter 11 restructuring, people with knowledge of the bankruptcy strategy said.

Mr. Obama is taking several risks under the plan. None may be bigger than the decision that the United States government will take a 60 percent share of the stock in a new G.M., leaving taxpayers vulnerable if the overhaul is not successful. (Canada, for its part, is taking a 12 percent stake.)  But he asserted that any alternative to his plan would be worse, and that a liquidation of G.M. — the only other real option — would send the unemployment rate soaring over 10 percent and would radiate damage throughout the economy.  I don’t believe that our government’s intervention was necessary.  In the past, other companies prospered after near collapses, without any government intervention at all.  This is nothing but hearsay.

“We are acting as reluctant shareholders, because that is the only way to help G.M. succeed,” the president said, declaring as he has before that his administration has no interest in running a car company and will stay out of all but the most fundamental decision-making as the new G.M. takes shape.  He should have done that in the beginning…stayed out of the car business altogether!

Aware of the hardships the plan will impose on regions across the country that depend on auto production, the White House is dispatching a dozen Cabinet members and other officials across four states this week to reassure residents.  This is the recurring snowball effect where CEObama has had to send recruits to do damage control to help squelch the damage his administration has been stirring up since he took office.

Although the president said that, once the government sets up new management and a board it will remove itself from G.M.’s day-to-day operations, his aides anticipate intense pressure as the company’s managers are called to testify in Congress and face questions like why they decided to build new cars in Mexico and South Korea, rather than in Michigan or the South.

“Congress and many Americans are going to say, if we own it, why can’t we make these decisions?” one of Mr. Obama’s top economic aides said, “and it’s going to be a challenge to answer that.”  I’m sure Obama’s speech writers will research a way out of this dilemma.

The president, anticipating those issues, said on Monday that a bigger share of the fuel-efficient cars to roll off G.M.’s assembly lines will indeed be made in the United States.  Hmmm…he says this now.

Mr. Obama has laid out goals for all the Detroit automakers that will presumably affect their major strategic decisions. He has urged them, for example, to build smaller cars with significantly better fuel efficiency. But under the new principles, the White House would be discouraged from getting involved in G.M’s decisions about when and where to build such a car, or how long to keep producing it if it sells poorly.  The Obama administration will not stay away from calling the shots at GM, even though they say otherwise, and they will use the "majority rules" card on this one.

Six months ago, even the suggestion of such deep intervention into G.M.’s operations would have raised huge objections. But by the time the denouement came, the company seemed almost relieved. Robert Lutz, G.M.’s vice chairman, said that “for the first time in our history, the American auto industry has the ear of the administration. Their number one goal is to make us successful.”  We’ll see how that works out for them in the coming months.

Michael J. de la Merced, Jack Healy, David Stout and Micheline Maynard contributed reporting.

 

 

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