GM files for bankruptcy, closes plants nationwide
Cameron Birch
Issue date: 6/5/09 Section: News
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To contribute to the success of the "new" General Motors, The Economist reports that the company's move to file bankruptcy will remove debts and other obligations that have been holding the company back. Additionally, many of the carmaker's plants will be closed and the Pontiac, Saturn, Hummer and Saab brands will be either sold or discontinued.
Bloomberg reported June 3 the Chinese company, Sichuan Tengzhong Heavy Industrial Machinery Co., is purchasing the Hummer sport truck brand. According to court documents, the brand is worth $500 million; Tengzhong will be controlling dealer agreements and the senior management team.
The European branch of General Motors, Opel, will also be sold. The German government will provide loans to Opel and, according the Economist, this will shield the subsidiary from GM's bankruptcy filings with the United States. Magna, a Canadian auto parts company, will control the Opel branch as GM's holdings shrink.
"Piling an irresponsibly large debt on top of the new GM would mean simply repeating the mistakes of the past," Obama said in an address on the car company.
The downsizing of GM's plants is expected to cost around $30 billion dollars in addition to the $20 billion December bailout. Of the new corporation, the United States government will hold 60 percent.
The other 40 percent will be divided. The government's plan gives 10 percent of the company to current bondholders; 17.5 percent will be owned by the United Auto Workers Union and the last 12.5 percent will be owned by the Canadian government.
On June 8 GM will also be removed from the Dow Jones Industrial Average and will be replaced by technology company, Cisco Systems Inc., according to The Wall Street Journal.
Contrary of the president's remarks, some think the government's stake in the car company will not be short-lived.
"I think that President Obama is planning on staying in the automobile industry for quite some time," Rep. Pete Hoesktra (R-Mich.) told FOX News Radio. Some analyst are drawing parallels between the auto bailout at the government's support of the nation's failing ailing rail system.
Over the past 40 years, the government has backed Amtrak, a company that has needed the United States' billions to sustain itself.
"GM will be run by a private board of directors and management team with a track record in American manufacturing that reflects a commitment to innovation and quality. They - and not the government - will call the shots and make the decisions about how to turn this company around," Obama said.
The president also said the government will exit as soon as possible, and will do so as soon as it is practicable in terms of being "good custodians" of taxpayers' money.
Viewing Comments 1 - 3 of 3
asa
posted 6/05/09 @ 1:09 PM EST
Where does a company like GM with no money, end up buying a company with 2 billion dollars? This FAKE bankruptcy is a farce. GM is paying workers to leave, paying workers not to build cars, buying billion dollars Delphi, but yet they are cashless. (Continued…)
ace
posted 6/05/09 @ 7:57 PM EST
Where does GM with no cash, and in bankruptcy buy a company for 2 billion dollars. They pay workers to leave, they pay workers to not build cars, yet the judge appoves business as usual. (Continued…)
Dan Dillabough
posted 6/05/09 @ 11:12 PM EST
Not being a rocket scientist! Perhaps if our governments would have signed a contract with Toyota to build all the ambulances that would be required to get our sick people to the hospital to receive the care we deserve, and the remainder of the money into our health care, we might be placing the aid of our tax paying dollar to the right place. (Continued…)
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