{"id":7022,"date":"2009-06-01T07:12:56","date_gmt":"2009-06-01T12:12:56","guid":{"rendered":"https:\/\/www.thedetroitbureau.com\/?p=7022"},"modified":"2009-06-01T07:50:15","modified_gmt":"2009-06-01T12:50:15","slug":"government-motors","status":"publish","type":"post","link":"https:\/\/thedetroitbureau.com\/2009\/06\/government-motors\/","title":{"rendered":"Government Motors"},"content":{"rendered":"
\""My
"My administration feels we need to switch from 18 to 19-inch wheels..." Will the White House really sit on the sidelines, as promised, or exercise a day-to-day role in managing the "new" GM?<\/figcaption><\/figure>\n

Though the corporate logo never appeared on the FBI’s Most Wanted list, the U.S. government long viewed General Motors as one of the country’s biggest public enemies.<\/p>\n

Back in the 1960s, when the automaker controlled more than half the American auto market, the government began a long-running, but ultimately futile, anti-trust effort to break GM up.\u00a0 It hauled the maker into court to try to force the recall of millions of midsize cars equipped with allegedly faulty brakes.\u00a0 And time and time again, the government and GM lawyers battled over issues ranging from the environment to consumer rights.<\/p>\n

After today, such protracted legal battles might no longer be necessary.\u00a0 If General Motors emerges from the bankruptcy it will file for today, the federal government is expected to hold a 60% stake in the “new” GM.\u00a0 The White House, the steward for the multi-billion dollar taxpayer investment, has already shown the power it can wield, when it ousted former CEO Rick Wagoner, in March, replacing him with the company’s current chief executive, Fritz Henderson.<\/p>\n

But just how much control does the government actually intend to take?\u00a0 Not much, insisted several senior White House officials, speaking on background, Sunday night.\u00a0 The Obama Administration “does not intend to exert day-to-day control,” asserted one top member, despite holding a dominant share, and getting to not only name one of the reformed GM’s board members but influence the choice of others.\u00a0 “The government,” said the official, “intends to be extremely disciplined in how it uses even these extremely limited rights.”<\/p>\n

\"Subscribe<\/a>There is, of course, no guarantee as to what will happen once GM files for bankruptcy, though the Chrysler case is a good indication of what’s to come.\u00a0 That automaker’s carefully-orchestrated Chapter 11 filing has gone as smoothly as anyone could have hoped, with Judge Arthur Gonzales approving the sale of virtually all of Chrysler’s good assets to a new company that will be dominated by the Italian automaker, Fiat SpA.<\/p>\n

GM is a “more complicated company” and “we don’t expect this to be as speedy,” cautioned another senior White House official, last night, but that depends on your definition of speedy, as he went on to predict the giant automaker could be back, in a notably pared-down form, “within 60 to 90 days.”<\/p>\n

The United Auto Workers Union is likely to emerge as the second-largest shareholder, but the deal effectively neuters its ability to do much in terms of day-to-day management, beyond naming one of the members of the “newco” board members – “newco” being the legalese slang for a newly-formed company.<\/p>\n

Until the reformed GM resumes offering its stock on the open market, again – a process expected to take several years – the dominant forces would be the bondholders trading much of their $27 billion in debt for equity, and the feds.<\/p>\n

What seems hard for many to imagine is that the government would willingly sit on its hands and not try to exercise day-to-day control.\u00a0 Indeed, there are those who would like to see a more hands-on government, including some environmentalists who see this as the golden moment to start churning out millions of small, hyper-mileage cars, rather than the big trucks that have long dominated the automaker’s product line-up.<\/p>\n

“I think the media often make the mistake of saying, ‘Aha, now the government has you in its clutches and will make you build little, green econoboxes that get 45 miles a gallon,’ which, by the way, nobody will want to buy,” asserts GM’s retiring Vice Chairman Bob Lutz.\u00a0 “That’s not it at all,” he insists.\u00a0 “The government would like the taxpayers money come back out and the best way to make that happen is to make us financially successful.\u00a0 I think the government is going to want us to build the kind of cars Americans want to buy.”<\/p>\n

Achieving a moral victory is great, especially when you don’t have much to lose.\u00a0 But by the time the GM revitalization plan is complete, the U.S. taxpayer will be in for a total of $50.1 billion.\u00a0 In return, the government will get $8.8 billion in debt and a lot of stock.\u00a0 According to those senior officials, their goal will be to stabilize the company and sell off that stake as quickly as possible.<\/p>\n

Whether Washington – where the exercise of power is fundamental – really can sit on the sidelines is uncertain.\u00a0 And while the White House might try to maintain discipline, what Congress will do is another matter.\u00a0 After GM and Chrysler announced plans to drop roughly 2,000 dealers, Texas Republican Kay Bailey Hutchison quickly introduced a measure that would have barred federal aid to the two makers.\u00a0 The Senator backed down when Chrysler officials promised to help the dealers they were abandoning.\u00a0It didn’t help Hutchisons’ case that she was threatening to hold\u00a0up funding for U.S. soldiers fighting Iraq and Afghanistan, thereby creating a Republican led hostage crisis. But there’s no guarantee lawmakers won’t try to intrude again in management matters.<\/p>\n

Ironically, Lutz says the government actually should become more involved<\/em> in the auto industry – though not on a daily management basis.\u00a0 For decades, he laments, Detroit’s makers have been Washington’s “least favorite stepchild.”\u00a0 Now, however, the government is actually listening “for the first time,” and considering the cost of its rules and regulations.\u00a0 Considering the way other governments, around the world, watch out for their own auto industry, it’s a model the U.S. might want to consider, going forward, said the septuagenarian executive.<\/p>\n","protected":false},"excerpt":{"rendered":"

If General Motors emerges from bankruptcy, a planned the government will hold a 60 percent stake in the “new” GM. What role will Washington play in running the company?<\/p>\n","protected":false},"author":1,"featured_media":7023,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_mo_disable_npp":"","footnotes":""},"categories":[8],"tags":[],"make":[],"post-state":[],"category_old":[151],"acf":[],"_links":{"self":[{"href":"https:\/\/thedetroitbureau.com\/wp-json\/wp\/v2\/posts\/7022"}],"collection":[{"href":"https:\/\/thedetroitbureau.com\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/thedetroitbureau.com\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/thedetroitbureau.com\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/thedetroitbureau.com\/wp-json\/wp\/v2\/comments?post=7022"}],"version-history":[{"count":0,"href":"https:\/\/thedetroitbureau.com\/wp-json\/wp\/v2\/posts\/7022\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/thedetroitbureau.com\/wp-json\/wp\/v2\/media\/7023"}],"wp:attachment":[{"href":"https:\/\/thedetroitbureau.com\/wp-json\/wp\/v2\/media?parent=7022"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/thedetroitbureau.com\/wp-json\/wp\/v2\/categories?post=7022"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/thedetroitbureau.com\/wp-json\/wp\/v2\/tags?post=7022"},{"taxonomy":"make","embeddable":true,"href":"https:\/\/thedetroitbureau.com\/wp-json\/wp\/v2\/make?post=7022"},{"taxonomy":"post-state","embeddable":true,"href":"https:\/\/thedetroitbureau.com\/wp-json\/wp\/v2\/post-state?post=7022"},{"taxonomy":"category_old","embeddable":true,"href":"https:\/\/thedetroitbureau.com\/wp-json\/wp\/v2\/category_old?post=7022"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}