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Old 06-01-2009, 11:50 AM   #26
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Originally Posted by time_traveller View Post
Sounds like a great investment for the US government, it's right up there with the war on terror.
you kidding me? the war on terror was a success, gas prices are finally bearable. fuck the bandwagon, our future kids, the blood shed for oil, morals and ethics, i want cheaper gas now! if it wasnt for that stupid war that cost americans so much, we'd be paying upwards of $1.75/L right now
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Old 06-01-2009, 10:13 PM   #27
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GM faces high stakes, high costs and high hopes

General Motors Corp. was bailed out Monday with $40-billion (U.S.) in loans from the U.S., Canadian and Ontario governments as part of a massive, two-stage, government-dictated restructuring designed to transform Detroit auto makers into environmental leaders.

The end of the first stage was GM's Chapter 11 bankruptcy protection filing Monday, which puts the company on solid financial footing.

It came just hours after a court-approved buyout of Chrysler LLC that will give it a new lease on life as part of a global empire with deep pockets.

The second stage in a U.S. policy that is reshaping Detroit is a plan to turn the three auto makers into lean, green companies offering more fuel-efficient vehicles.

Such a radical shift from gas-guzzling but profit-spinning pickups and sport utility vehicles to smaller, more fuel-efficient cars would usually take 10 years, but U.S. President Barack Obama has ordered it compressed, said industry analyst William Pochiluk, president of AutomotiveCompass LLC.

“It's a huge risk. It's a gamble,” Mr. Pochiluk said Monday.
Mr. Obama said the U.S. government has no interest in running GM, but he added several times in an address at the White House that GM must produce fuel-efficient vehicles.

“I'm confident that the steps I'm announcing today will mark the end of an old GM and the beginning of a new GM, a new GM that can produce the high-quality, safe and fuel-efficient cars of tomorrow, that can lead America toward an energy-independent future and that is once more a symbol of America's success,” Mr. Obama said.

He is using auto makers “to reshape the way Americans drive and the way they interact with the environment,” said Dimitry Anastakis, a history professor at Trent University in Peterborough, Ont., and author of a book on the 1965 Canada-U.S. Auto Pact.

U.S., Canadian and Ontario taxpayers will own 72.5 per cent of the new GM that will emerge from bankruptcy protection having shed tens of thousands of U.S. employees, once-prominent brands such as Saturn and Hummer, and billions of dollars in crushing debt.

The federal and Ontario governments are receiving 12 per cent of the common shares in the new GM in return for $10.6-billion (Canadian) in financial assistance. The governments also receive about $1.3-billion in debt and some preferred shares in the new company.
But Prime Minister Stephen Harper held out almost no hope Monday that the bulk of the money will be repaid.

“Clearly, taxpayers will get some money back when the day comes that we begin to sell our equity share, but to be frank, we are not counting on that,” Mr. Harper told reporters. “We are not factoring that into our budgetary plans.”

Nonetheless, the $10.6-billion was the price of admission if Canada wanted to retain GM plants in the Ontario cities of Oshawa and St. Catharines and thousands of jobs at auto parts makers, he said.

What motivated the governments to participate in the bailout was the spectre of GM closing up shop in Ontario and shifting all of its production to the United States, Ontario Premier Dalton McGuinty added.

“We looked at the other side,” Mr. McGuinty told reporters. “If you think this side's dark, take a look at the other side to understand the full economic consequences of that.”

As part of the Chapter 11 filing, GM will be split into two companies. One will hold assets and brands that GM wants to jettison, such as Saturn, Hummer, Saab, Pontiac and likely most of the 14 additional plants that GM announced yesterday will be shut or idled. The Wall Street Journal reported that GM will announce the tentative sale of the Hummer brand today.

The new GM will consist of four divisions, Chevrolet, Buick, Cadillac and GMC, as well as the assets of General Motors of Canada Ltd. that are not slated for closing.

The point is to reduce costs drastically to make GM competitive and able to generate profit before interest and taxes when U.S. vehicle sales are as low as 10 million annually, GM chief executive officer Fritz Henderson said at a news conference in New York.

In the past two years, with U.S. vehicle sales considerably higher than that – 13.2 million last year and 16.1 million in 2007 – GM lost a staggering $70-billion.

“The new GM will have a significantly stronger and healthier balance sheet, which will allow us to better support our brands and products through investment, increase our investment in new technology and be able to weather difficult times,” Mr. Henderson told reporters.

In return for the financial help, GM promised the federal and Ontario governments that its Canadian operations would retain 16 per cent of GM's North American vehicle production until 2016.

The company will be required to make a $4-billion (Canadian) up-front payment to address a shortfall of about $7-billion in its pension plans. In addition, GM will inject $200-million annually into the pension plans over the next five years, making them fully solvent.

The auto maker has also agreed to invest $2.2-billion at its Canadian operations over the next seven years. That includes production of a new, fuel-efficient, front-wheel-drive transmission in St. Catharines.

The deal does not, however, include a commitment on how many employees GM will retain in Canada.

Industry Minister Tony Clement conceded the equity investment is more risky than a secured loan.

Under the deal, GM will have an initial public offering in 2010. Canadian governments must divest 35 per cent of their stock within three years, 65 per cent within six years, and the rest within eight years – regardless of the share price and potential for taxpayers' losses. Officials said that there is a certain flexibility around the timing of the share sale, but those minimums must be met regardless of the state of the economy at the time.

Federal officials could not say at what level GM shares would need to be trading for the governments to break even on the investment. In fact, they said governments had not done such an analysis.
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