The 10 Car Pile-Up Obama Created At General Motors

Many Americans already know Obama tossed: 25 billion dollars: in taxpayer money down a rathole to bail out GM and Chevrolet. That was a bad idea. If the choice had actually been between letting both companies go out of business and losing 25 billion dollars of taxpayer money, we’d have been better off letting both companies get mothballed. Your hard earned tax dollars were not given to the government in order to fund corporate welfare on an epic scale.

However, here’s the dirty little secret: Neither GM nor Chevrolet would have gone out of business. In fact, over the long haul, both companies would have been better off if they’d gone into traditional bankruptcy because they could have shed the union contracts that have made – and are still making – both corporations uncompetitive. Instead, we’re still dealing with the fall-out from Obama’s decision to put helping his union cronies ahead of doing the right thing.

The: result hasn’t been pretty.

A backroom deal hatched by General Motors during the auto bailout to fulfill the Obama administration’s demand for a quick bankruptcy could be reversed, draining the automaker of nearly all of its cash on hand and leaving it in worse shape than it was when it collapsed in 2009.

As GM teetered on the edge of bankruptcy in June 2009, it cut a $367 million “lock-up agreement” with several major creditors in order to prevent its Canadian subsidiary from going under. The move spared the subsidiary from fulfilling the $1 billion debt it owed the creditors–major hedge funds–ensuring that GM would not have to face bankruptcy courts in two nations, which could have delayed the company’s recovery.

The trustee for (old GM) creditors shortchanged by the government-driven bankruptcy are now suing the hedge funds in a move that could undo the bailout.

…Judge Robert Gerber, who approved the sale with little hesitation, could now reverse the entire auto bailout–and overturn one of President Barack Obama’s signature achievements.

“When I approved the sale agreement and entered the sale approval order I mistakenly thought that I was merely saving GM, the supply chain, and about a million jobs. It never once occurred to me, and nobody bothered to disclose, that amongst all of the assigned contracts was this lock-up agreement, if indeed it was assigned at all,” Gerber said in July.

Industry experts say GM should be very concerned with the judge’s reaction to the deal.

“The judge has made it very clear that he is greatly dissatisfied with the process,” one analyst said. “He’s basically implying that GM hid it from him and that reopening the sale is a possibility.”

…If the court decides to reopen the bailout, new GM could cease to exist, according to the bankruptcy expert. Its stock would be removed from all stock exchanges and the company would have to repay the $27 billion it owes the federal government–a major problem considering the company has just over $30 billion in cash.

“GM has plenty of cash, but that $30 billion doesn’t include their liabilities … Treasury would have to turn around and give the money right back,” a market observer said. “They’re burning through money right now. If they had to stop and repay Treasury, they’d cease to operate.”

…“The government did a sloppy job with the bailout,” the bankruptcy expert said. “We have a fully functioning bankruptcy process based on centuries of common law, standard ways of doing things.”

“The federal government didn’t want pension plans to bear any costs associated with traditional bankruptcies … and now you’re faced with this.”

…“You never want to free-fall into bankruptcy,” an industry insider said. “They went into bankruptcy in 2009 with a plan on getting out. If they were to enter it today, they couldn’t negotiate with creditors because everyone would be filing legal action against them.”

…GM’s stock has fallen nearly 40 percent since its record-setting IPO in 2010 after dismal European sales. In addition to owing U.S. taxpayers $27 billion, its lending arm, ResCap, a subsidiary of GM, has filed for bankruptcy after making risky gambles on the housing market.

GM still has labor costs that are way too high, which is causing it to compensate by making mediocre cars, which is keeping it from being profitable. Meanwhile, since Obama broke the law to help the unions at a cost of billions to investors to GM, there’s a reluctance to loan the company money because of fear it may happen again. Meanwhile, these legal troubles are still hanging over the company’s head. GM is not a “success story” by any stretch of the imagination. It’s a classic case of a well connected company getting special favors from a powerful politician while the taxpayers have been asked to pick up the tab. If you want to talk about 1%ers, corporate fat cats, and capitalism on the way up coupled with socialism on the way down, then you couldn’t find a much better example of that than GM.

Leave a Comment

Share this!

Enjoy reading? Share it with your friends!

Send this to a friend