The ‘Old GM’ is being reborn into the ‘New GM’, and it’s looking quite different. Some interesting details from the link:
“The plan is for the federal government to take a 60 percent ownership stake in the new GM. The Canadian government would take 12.5 percent, with the United Auto Workers getting a 17.5 percent share and unsecured bondholders receiving 10 percent. Existing GM shareholders are expected to be wiped out.”
Talk about controlling the means of production… (Would Marx be proud?).
A couple of points:
First, why did the government decide to bail out GM in the first place if they knew (and it appears as if it was inevitable, at least according to intrade) that they would end up in bankruptcy court. In essence the original 20 billion was lost in the ‘Old GM’ inefficient waste.
Secondly, the talk is that the government does not want to control the company. Thus the talking points are that they want to get ASAP. I am skeptical of the Government relinquishing control of anything let alone something that gets so much press.
Ultimately this brings to mind a quote by Ronald Reagan:
"The nine most terrifying words in the English language are: 'I'm from the government and I'm here to help.'"
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If the government knew that this company was going bankrupt why did they step in to save them? It seems as if giant corporations are extended special favors by the government. If a private business was to declare bankruptcy, it would simply shut down and fail. I don't feel as if the government would help out a small business so why are they rescuing corporations? That seems to me to be undermining the purpose of capitalism. In a competitive economy no business should be provided this type of advantage, particularly by the government.
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ReplyDeleteIn response to Jennifer's comment I think that it should be pointed out that the bailout isn't there just to help the "bigwigs" and the corporation but also all of the "little people" who work for the company that are also getting laid off. The auto industry had provided jobs for thousands of people and according to the Philadelphia Metro, "It still employs 92,000 people and has 500,000 retirees." These people are also all affected by layoffs and problems within these companies as well. However, to play devils advocate it must also be pointed out that according to the Metro, it took $30 billion in taxpayer money to keep GM running. So again, this is wasted money that the average American has put towards the company. It seems like we are in an unfortunate lose/lose situation.
ReplyDeleteI must agree with Kayla on the lose/ lose situation. Enough of the taxpayers money has been wasted on trying to keep a company afloat, this was how the government steped in to try and save GM. The government is aware of the great influence that GM has on the american encomy because of the number of employees it employs but there comes a time when the governemnt must step back and realize that there is not saving some things and I think that is what they are doing now. And we should not expect GM to disappear all together.
ReplyDeleteshannon dunn
What is interests me is the major shareholder of the business is the american government. The government claims that they will not interfere with GM's business activities, but as this story unfolds it will be interesting to see if they hold true to their word.
ReplyDeleteWell if the auto industry wasn't enough for the new "US holdings company," Obama is now focusing on healthcare reform. He wants to start a government health insurance company now!?
I'm going to ask professor Diemer to put feature this article for the next blog post. To be honest it is truly frightning to hear the plans for health care. I have extensive knowledge on this industry and from what I can tell the government has an under developed health care reform plan, that would hurt private insurance companies and cause unintended consequences. These consequences would not only effect price, but the quality of care as well. Is your health important to you?
If the article is posted I will write more of my thoughts. I do agree that health care is a problem and needs to be addressed, but created a national insurance program that runs like a business with new legislation to support it? WHAT!?
We need to focus more on preventive care and financing techniques that allow health care consumers to act like more traditional consumers wieghing the cost and benefit of health care rather than consuming it becuase insurance pays.
Here is the article if anyone is interested.
http://news.yahoo.com/s/ap/us_health_overhaul
Sorry for the bad grammar/spelling it's late.
ReplyDeleteHere is an article that goes into the hands off approach that our government is taking in regard to GM.
http://news.yahoo.com/s/ap/20090601/ap_on_go_pr_wh/us_automakers_obama_analysis
Interesting Quote - But, Obama stressed: "The federal government will refrain from exercising its rights as a shareholder in all but the most fundamental corporate decisions."
What constitutes a fundamental corporate decisions? I guess we will find out.
Scott Riegel