Who Wants to Go Halfsies on a Chevy Cobalt?

Nick Gillespie | April 27, 2009

GM has announced a new "ambitious" restructuring plan that would stick the U.S. government with a majority stake in the carmaker:

General Motors Corp. outlined a revamped survival plan Monday that would leave the U.S. government as its majority owner in return for an extra $11.6 billion in federal aid.

The plan includes an ambitious debt-swap offer that could move the auto maker closer to restructuring through bankruptcy court.

GM plans to cut another 7,000 staff, halve its dealer network and kill its Pontiac brand in an effort to secure government support after its existing proposal was rejected in March.

More here.

Reason.tv explored the problematic economics of GM and Chrysler not long ago. And I ran through some of the reasons why the government should not being dumping money into GM on CNBC's Power Lunch:

In other news, the United Auto Workers has agreed to "'painful' concessions to save Chrysler." It's not immediately clear if that means each UAW must adopt at least one PT Cruiser.

Comments

Cool Cal|4.27.09 @ 5:20PM|#

So my finance acumen may be a bit rusty, but are we to understand that this means the Gubment would then have controlling interest in GM? And if so, can people like Andrew Sullivan stop telling those who worry about nationalization they are bitter moonbats who should shut up and offer deference to the Great and Powerful OZ.

|4.27.09 @ 5:23PM|#

But it's not socialism, damn your hide!

I have visions of GM being run like Amtrak, with constant, ahem, "bailouts."

JB|4.27.09 @ 5:31PM|#

Each UAW member will bend over and allow a PT Cruiser to be placed where the sun doesn't shine.

Geotpf|4.27.09 @ 5:32PM|#

Keep in mind that the choices aren't between nationalization and a healthy GM; the choices are between nationalization and GM going out of business. Also, Obama hasn't signed on to this yet, and we don't know if he will.

|4.27.09 @ 5:38PM|#

the choices are between nationalization and GM going out of business

GM should go out of business. It's a wealth-destruction machine that will continue to waste our hard-earned money for as long as its permitted to live on the government teat.

-jcr

hmm|4.27.09 @ 5:40PM|#

My old "blue oval" truck and Japanese cars just keep looking better everyday.

|4.27.09 @ 5:42PM|#

"They didn't get bailed out, it's a loan"?

Is that guy serious?

-jcr

Geotpf|4.27.09 @ 5:44PM|#

Of course GM should go out of business. However, nationalizing a failing business to protect jobs is not the evil that business nationalization usually implies.

Fluffy|4.27.09 @ 5:48PM|#

Here's the only way to know what will happen to GM:

Find out if GM actually filing bankruptcy will lead to certain well-connected major Wall Street firms actually having to pay out on the credit default swaps they sold.

Because that will be the deciding factor.

|4.27.09 @ 5:49PM|#

the choices are between nationalization and GM going out of business

Gee, tough one. Lemme think . . . .

However, nationalizing a failing business to protect jobs is not the evil that business nationalization usually implies.

No, protecting jobs is the pretext to nationalize a business that opens the door to the evils that nationalization brings. See how this works, Geoptf?

GC|4.27.09 @ 5:50PM|#

Of course the UAW will be doing better than the bondholders, whose $27 billion in bonds will net them a 10% stake in the company. The unions $10 billion will somehow net them 40% or so. The bondholders would be crazy not to call the bluff and force them into bankruptcy. I imagine there is much arm-twisting going on behind doors.

|4.27.09 @ 5:50PM|#

"They didn't get bailed out, it's a loan"?

Is that guy serious?

It WAS a loan. Now it's being traded for worthless stock.

GM will never be profitable again. Not after the Obama administration has their way with them. They'll be making Green Trabants, which will be subsidized indirectly with tax incentives and directly with more "loans" and tax breaks.

The only question is how long before the government starts slapping tariffs on foreign automakers to protect their "investment".

|4.27.09 @ 5:57PM|#

It WAS a loan.

It's a matter of semantics in the end, but it wasn't a loan in any real sense. There wasn't any due diligence done on it's financial state and its ability to repay the loan wasn't taken into consideration in the same way that it would if you or I went to the bank for a $1,000,000 loan.

The gummint basically just shoved money at GM with some vague threats about changes being made at the company and oh yeah, you'll pay it back eventually. Did they even think about a repayment schedule?

BTW, excellent appearance, Nick. They guy was pwned, but he'll never understand why.

|4.27.09 @ 5:57PM|#

Coulda restructured. Coulda gotten acquired by a healthy automaker. Instead, we're going to have it be the USPS of auto manufacturers. Like it wasn't bad enough before.

And let's not pretend that the government--all levels of it--didn't play a role in this collapse, either.

|4.27.09 @ 6:00PM|#

However, nationalizing a failing business to protect jobs is not the evil that business nationalization usually implies.


Yes, it is. If anything it is far worse because of the precedent it sets.

Imagine... any failing business can be nationalized to "save jobs". That pretty much declares there's no such thing as unproductive labor. All jobs are worth saving. Regardless of whether they produce anything someone is willing to pay for.

|4.27.09 @ 6:07PM|#

JW, yes, the fact that the loan was never going to get paid back was obvious from the beginning.

However, there is hope. The new government-run GM is going to be such a horror story that it may well discredit the entire neo-merchantilist/neo-socialist program.

Seriously, in a coupel years when GM is still getting subsidies and the deficit continues to skyrocket the public is going to be pissed that their tax money is going to subsidize cushy union jobs making cars they don't want to buy.

Jordan|4.27.09 @ 6:17PM|#

All hail American Leyland.

|4.27.09 @ 7:17PM|#

For very car they sell, three will have to be dumped into a lake. Good thing the Government is immune to EPA regulations, or they might have a problem.

|4.27.09 @ 7:28PM|#

Looks like they got the Marketer-in-Chief's message about brand consolidation. The producer of such automotive marvels as the Aztek and the Sunfire deserves a better fate than this, though.

</sarcasm>

hmm|4.27.09 @ 7:49PM|#

Of course GM should go out of business. However, nationalizing a failing business to protect jobs is not the evil that business nationalization usually implies.

No it's the first step in business nationalization for all. 1000 grains of rice theory. Many small steps to achieve your larger goal. Why support the starting point? American auto makers have an antiquated business model and the market says it is time to change. A few didn't change fast enough.

Jr Accountant|4.27.09 @ 8:14PM|#

I wanted to say something snarky about this along the lines of "Let them FAIL! I don't care! I ride public transportation!"

Then I realized I am in California and my wheels are likely to go bankrupt before GM.

Bizarro World indeed.

Bingo|4.27.09 @ 8:15PM|#

Please please please, for the love of Zeus, PLEASE spin off the Corvette division into a separate company before the federal takeover!

|4.27.09 @ 8:28PM|#

The 2012 Corvette will be powered by a vegetable oil sipping 3 cylinder turbo-diesel.

Bingo|4.27.09 @ 9:06PM|#

Brotherben, don't joke about that. The jump from C5 to C6 was a complete game-changer for Corvette. Add a Lexus-quality interior to that performance and you are in Ferrari territory. The Chevy brand (and subsequent union obligations) is holding back Corvette from becoming the American Automobile.

I'd give an arm and a leg for a 4-door Corvette-brand sport sedan... but that would inhibit down-shifting and popping the clutch on such a beast.

Holes|4.27.09 @ 10:13PM|#

Imagine... any failing business can be nationalized to "save jobs". That pretty much declares there's no such thing as unproductive labor. All jobs are worth saving. Regardless of whether they produce anything someone is willing to pay for.


Just start digging your holes...

|4.27.09 @ 11:26PM|#

Keep in mind that the choices aren't between nationalization and a healthy GM; the choices are between nationalization and GM going out of business.

Stop pretending GM is "essential" to anybody or anything other than the UAW. Fuck GM. Let them die.

|4.27.09 @ 11:30PM|#

The new government-run GM is going to be such a horror story that it may well discredit the entire neo-merchantilist/neo-socialist program.

I wish I could believe that.

I don't.

|4.28.09 @ 12:25AM|#

The new government-run GM is going to be such a horror story that it may well discredit the entire neo-merchantilist/neo-socialist program.

I wish I could believe that.

What, you think GM is going to get profitable selling "Green Cars" to the rest of the world?

|4.28.09 @ 8:03AM|#

What, you think GM is going to get profitable selling "Green Cars" to the rest of the world?

It will be used to prop up the UAW, which will funnel money and volunteers to the Dems. It will therefore never die.

|4.28.09 @ 10:00AM|#

It WAS a loan.

Just like when the drunks in the subway stations ask if they can "borrow" a dollar, right?

-jcr

|4.28.09 @ 10:59AM|#

So here's a question, if they needed to be bailed out because they were too big to fail. But they're restructuring plan makes them < too big to fail. Wtf are we still bailing them out?

johnl|4.28.09 @ 5:46PM|#

Now that BHO is an auto CEO, shouldn't he give up his private plane? That would also save on frightening NYC photo ops. Anyway BHO travels too much. He needs to stay in Detroit where his work is.