GM filed for bankruptcy protection on June 1, 2009. The U.S government now owns 60% of it in return for $50 billion in funding to keep the company afloat while it is being reorganized. Canada owns 12%. A union health trust received 17.5% ownership in lieu of the $20 billion needed to cover benefits for 650,000 retirees. Bondholders received 10% ownership in lieu of $27 billion in bonds. GM will shut-down 11 factories and close 40% of its 6,000 dealerships. In May, GM stock fell below $1 a share for the first time since the Great Depression. (Source:CNN ; Washington Post)
1. What's Good for GM Is No Longer Good for the Economy
In 1953, former General Motors President Charles Wilson said "What's good for our country was good for General Motors, and vice versa." In those days, auto production was the heartbeat of the American economy. However, that statement is no longer true. GM's bailout and subsequent bankruptcy was a result of it not remaining competitive. It should have cut production, jobs and dealerships years ago.
2. Feds Take Over GM, Chrysler to Protect U.S. Auto Industry
In March 2009, the Federal Government took control of GM and Chrysler. The Feds fired GM CEO Rick Wagoner, and required Chrysler to merge with Italy's Fiat SpA. In return, the government lent both companies enough funds to stay afloat and provided incentives to spur new car purchases. In effect, the government nationalized the two auto-makers to force them to be more competitive.
3. Obama's Auto Efficiency Standards Good for Competitiveness
In May, the Feds set new auto efficiency standards to increase the competitiveness of the U.S. auto industry. National leadership is required to motivate car makers to make the expensive changes needed. Once U.S. autos are more fuel efficieent, they will compete more effectively against foreign automakers, who have been leading the global auto industry in this arena.
