Well it's official now, GM is going bankrupt. Something that should have happened a long, long time ago. The problem (at this point) is not really "that" GM is going bankrupt, but rather "how" and "when".
Here we have a company (and an industry really) that have been operating under a doomed business model for the longest time, constantly borrowing more and more money to forestall the inevitable. And just when the inevitable was about to happen last fall, in jumps the government with the first of several infusions of "bailout" money.
And as a result, what's happened? GM is going bankrupt anyway.  Except now they're going bankrupt with tens of billions of taxpayer dollars invested...dollars that are, again, invested in a company with a failed business model.
General Motors filed for bankruptcy protection this morning, marking the end of financial independence for the 100-year-old industrial leviathan that once conflated its interests with the country's and -- counting jobs at the company and its suppliers -- employed well over 1 million people....
The Obama administration had been pushing the bankruptcy as the most viable way to to restructure General Motors, just as the government has been attempting do with Chrysler. Officials said their hope is that GM would emerge from the process smaller, with fewer workers and brands, less debt, but also more viable.
Under the proposed restructuring, about 60 percent of the new GM would be owned by the United States, about 12 percent by the governments of Canada and Ontario, a union health trust would own 17.5 percent, and the company's current bondholders would get 10 percent.
It's worth pointing out however that Obama didn't "push" for the bankruptcy until AFTER the government got its claws into the company deep enough to have greater control over the process...and in a position to dictate the ownership split in the company outlined above.
In other words, it's not a "regular" bankruptcy, in the people who normally have a good deal of leverage, private creditors, are being pushed to the back of the bus and taking about a 90% haircut on their investment...while the government and the unions (part of what led to the failed business model to begin with) are in the catbird seat. Which means we should all feel REALLY good about getting our money back.
Realistically speaking, the only two groups who've got what they wanted out of this process so far are the labor unions (who were deathly afraid of a regular bankruptcy which would have put GM management in greater control of the outcome) and big government liberal (ex. Obama) who are all to happy to see the government take over a greater stake of the American economy, all Obama protestations to the contrary notwithstanding.
And it gets better...
The United States will invest another $30 billion during and after the GM bankruptcy process, officials said last night, bringing the U.S. commitment to $50 billion.
Following that infusion, "the U.S. Treasury does not believe or anticipate that any additional assistance to GM will be required," a senior administration official said last night, calling the restructuring a "permanent" solution.
It seems that the business community is either just now figuring out what Obama's up to, or they've just now got enough gumption to speak out about it...
This morning, the U.S. Chamber of Commerce said its biggest concern with the bankruptcy is the "potential for governments and unions to influence production, product, workforce, and management decisions in ways that could jeopardize the automakers' chances for survival, put politics and special interests above sound business strategy, and disrupt our nation's trading relationships across the world."
You don't say. Again, that's the whole point here. Using GM's bankruptcy as a means of gaining greater control for the government and its allies...picking the winners and losers.
And some of the creditors appear to be getting ready to fight back...
Similar complaints arose from Chrysler's creditors, mainly banks and hedge funds, but Obama dismissed some of the lenders as mere "speculators," and their legal claims have failed to gain traction in court.
GM's creditors, however, consist of thousands of investors, individuals as well as institutions. One group of individual investors, calling themselves the Main Street Bondholders, have already organized to protest their treatment. And their claims have been echoed by some in Congress.
"The proposal seems to favor the rights and claims of the UAW, a political ally of the current administration and a powerful lobbying force in Washington, over the rights and claims of the company's diverse group of bondholders," according to a letter from 20 House members, led by Rep. Jeb Hensarling (R-Tex.), to Treasury Secretary Timothy F. Geithner. "Contractual rights of investors are being trampled by the government under the rationale of 'extraordinary circumstances.' "
Contracts, shmontracts! We're bringing "change" here!
In the end, the high profile nature of the GM bankruptcy, the government's sure-to-be mismanagement of the company's affairs, and the lawsuits by investors (including state government and teacher retirement funds) might just serve as an object lesson about the insanity of this type of big-government control over private enterprise. Maybe.
TAKE ACTION: Click here and let your members of Congress know you're sick of the spending.  Let them know you oppose government bailouts and takeovers of private business!