Surprisingly few bloggers of the bloggers I read are writing about GM’s emergence from bankruptcy in a mere 40 days through a rather unorthodox process. The background:
AP:
General Motors completed an unusually quick exit from bankruptcy protection on Friday with ambitions of making money and building cars people are eager to buy. Once the world’s largest and most powerful automaker, new GM is now leaner, cleansed of massive debt and burdensome contracts that would have sunk it without federal loans.
After a six-week trip through bankruptcy, the “new” General Motors was born Friday owned by the government and free of tens of billions in debt and shed of unaffordable brands, dealerships and plants.
The sale of the valuable assets of the old company to the new GM was completed Friday morning.
[…]
The new company retains the Chevrolet, Cadillac, GMC and Buick brands, along with most of its overseas operations.
GM also keeps about 3,600 of its 6,000 U.S. dealerships and most of its plants. But 14 U.S. plants will be closed, and the company will eliminate about 20,000 of its 88,000 U.S. employees by the end of the year as it continues to cut costs.
While the new company goes forward outside of bankruptcy, much of its debt and many of the assets it shed in the process remain in bankruptcy. It will take about two to three years for an entity known as Motors Liquidation Co. (GMGMQ) to liquidate under court supervision.
NYT:
“It’s just beginning. It’s nowhere near over,” said Keith Crain, the publisher and editorial director of Automotive News, an industry trade publication. Speaking on WJR-AM in Detroit, Mr. Crain said, “They’re going to need hard work, a lot of smarts, and they’re going to need good luck.”
G.M.’s goal, said the chief executive, Fritz Henderson, is to design, build and sell the best vehicles in the world, something that the company had forgotten.
“We deeply appreciate the support we’ve received during this historic transformation and will work hard to repay the trust and the money that so many have invested in G.M.,” Mr. Henderson said hours after the company closed the sale of its good assets to a new, government-backed carmaker.
While Friday marked the first day of the new G.M., many unanswered questions remain, including the government’s role at the company. The federal government will hold nearly 61 percent of the new company — now called the General Motors Company — with the Canadian government, a health care trust for the United Automobile Workers union and bondholders owning the balance. By the end of the year, the government will have poured $50 billion of taxpayer money into the automaker.
[…]Senior administration officials have promised that they will not micromanage the company, despite being the majority owner and having already picked new directors, including G.M.’s new chairman, Edward E. Whitacre Jr.
The administration hopes to take the new G.M. public again next year.
CNN’s report that the bad assets will continue to go through something akin to the traditional bankruptcy process is encouraging news that I hadn’t seen elsewhere. The idea that a massive corporation could simply sell its “good” assets to itself while leaving its debt entirely behind struck me as outrageous. It remains to be seen what its creditors get; they’re certainly entitled to something.
Rolfe Winter makes the most obvious point:
Remember when everyone was saying that if GM filed for bankruptcy the world would end? It didn’t. Yeah they got lots of government help, but they were still able to divest billions of old liabilities. So why don’t we remove the bailout facilities benefiting banks and busted homeowners and force them through the bankruptcy process?
Especially if it’s the new, pain-free bankruptcy that doesn’t ruin your credit for seven years.
Jim Manzi, Kevin Drum, and Matt Yglesias are upset with the notion that the government might intervene to keep the automakers from unilaterally closing 2000 dealerships. But, considering that the government actually owns GM and is backstopping Chrysler to the tune of billions of dollars, I’m not sure why they shouldn’t intervene. Especially given that the process by which these franchises were closed was, to say the least, opaque.
