Nationalizing GM won't help GM

The usually Liberal Left-leaning Denver Post strikes a blow for capitalism on their Editorial Page 04/30/2009. I was SHOCKED! They make a very concise and reasoned argument for the government NOT getting into the auto business. It’s a short read and I highly recommend it: Nationalizing GM won't help GM — or the nation.

Some pertinent points from the editorial (most of it, actually):

…“GM's new idea would grant the federal government 50 percent ownership in the company. The United Auto Workers would own 39 percent. That hardly gives traditional investors 10 percent, which means minimal say in the boardroom.

We hope the Obama administration rejects this new proposal, which would effectively nationalize the country's largest automaker. If the president doesn't, it would bring his business acumen into question. Unfortunately, the team of officials Obama has working with the company appear to like this new notion.

A more likely outcome is that bondholders, who are being asked to sell their debt for a tiny amount of unsecured stock, will reject the offer. We hope they do so.

Yes, that will lead to Chapter 11 bankruptcy, but we've long argued that those protections are sufficient and the limit of what government should extend.”

…“How could Washington continue to set regulations for such things as higher fuel-efficiency standards and lower emissions requirements if those obligations conflict with selling its cars? How could taxpayers ever expect government, which would run GM, to stop bailing it out with taxpayer loans? And what about the other automakers in this country? Could they still compete?

How could executives make savvy business decisions if the UAW, which for decades has helped saddle the company with lavish pay and benefits packages grossly out of step with foreign competitors, calls the shots?

One of the key justifications for the government's extending $15 billion in loans was to protect jobs. This plan isn't even doing that. Some 21,000 jobs would be shed and several plants shuttered. GM dealerships would shrink by 42 percent.

Those cuts are most likely sadly needed to give the company a shot at regaining a competitive edge.

But the cuts are also an acknowledgment that competitors, which also employ American workers, control more of the market than ever before.

It's long past time to stop giving GM an unfair advantage propped up with huge taxpayer support, and it's unwise to saddle GM with government control. This kind of "innovation" ought to get the bankruptcy protection it deserves.”

Additional articles on the issue, much of it repetitive (IF you’re inclined toward tooo much information):

GM's New Road Map: Partial Nationalization

Nationalize General Motors? UAW and U.S. government could own 89 percent of company under GM's plan:
“GM said it would speed up six factory closings announced in February and close three additional facilities in 2010. Henderson expects to identify the plants in May and said they will include assembly, engine, transmission and parts-stamping factories.

GM will also cut 21,000 hourly jobs in the U.S. by 2010 -- 7,000 more than what the company outlined just two months ago.

With the factory cuts, GM will be a mere fraction of its old self. At the end of 1991, the company had 304,000 hourly workers in the U.S.; by the end of 2010, it would have 40,000.

Also, General Motors Canada said it plans to slash its hourly work force from 10,300 to 4,400 by 2014. Young said the reduction follows previously announced plant closures.

In addition, GM plans to cut additional U.S. salaried jobs beyond the 3,400 cuts completed last week, and it plans to reduce dealerships 42 percent by 2010.”

Government May “Nationalize” GM by Swapping Debt for Equity

New York Times:
‘Surgical’ Bankruptcy Possible for G.M

Money Morning:
U.S. Treasury to GM: Prepare for Bankruptcy