In GM Bankruptcy Plan, Government Will Select New Board Of Directors

Let’s say the U.S. has poured billions of dollars into a failing company. How strongly should it try to protect that money once the company files for bankruptcy? The Washington Post is reporting that the plan for GM—which may go belly up as early as Monday—is for federal officials to select 5 or 6 of the company’s new board members, and have a say over which 6 of the existing board will remain. The UAW gets to choose another, and Canada might possibly be given one slot to fill. The rest of us will probably just get t-shirts or a souvenir mug.

While President Obama has said he has no interest in running GM or Chrysler, into which the government has poured more than $20 billion combined, he has said officials have an interest in protecting the taxpayers’ investment. Nevertheless, federal officials are preparing to be deeply involved in the companies well after they emerge from their respective bankruptcies.

“I don’t think that we should micromanage,” Obama has said. “But I think that like any investor, the American taxpayer has a right to scrutinize what’s being proposed and make sure that their money is not just being thrown down the drain.”

“U.S. Involvement in GM Won’t End With Bankruptcy” [Washington Post]
(Photo: jm3)

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  1. jayphat says:

    2 quotes that enrage me and make me laugh.
    “I don’t think that we should micromanage,”
    Really? You mean laying out every detail of what this company can and can’t do for the last 7 months isn’t micromanaging?

    “But I think that like any investor, the American taxpayer has a right to scrutinize what’s being proposed and make sure that their money is not just being thrown down the drain.”

    Really? You’re telling me that we are gonna get ALL the money back, money we told you not to spend in the first place? Fat chance.

    How about the government get out of everyones damn business. Stop telling people what cars to make, what color their roofs need to be, making us buy a permit to do just about anything to our private property, and get back to doing what it is outlined in the constitution, i.e., YOU’RE JOB!

    • chuckv says:

      @jayphat: +1

      • ekzachtly says:

        @chuckv: WHY DID YOU NEED TO FINISH THAT RANT WITH “YOU’RE JOB”? That is not even the way that people actually misuse the homophones your/you’re! You can’t build a whole argument like that and then blow it on something so silly at the end.

    • katieoh says:

      @jayphat: oh, man, it’s totally my favorite thing in the world when people post a poorly-constructed rant and then end with a huge grammatical error.

      also, america didn’t tell anyone not to do anything. sadly, our country does not allow for the common man to make direct decisions. our elected officials do that. so, yeah, we did give it an okay. when we elected them.

    • varro says:

      @jayphat: Get a brain morans!

      Corporate boards tend to be bastions of backscratching….let’s see if the Commerce Dept. can put some new blood into GM…

      • quagmire0 says:

        @varro: That’s an insult to morans everywhere. :D

        @jayphat: Poor ending, but you’re right on. The government needs to back off. Americans will buy what they want to buy, not what the government wants them to buy. America was founded because the King of England was making us do things that we didn’t want to do and making us pay for things we didn’t want to pay for. Now, all the sudden, our own government is doing the same. I agree with you. The government’s sole purpose is to provide safety and keep order. When it begins to go outside those lines, it always seems to make things worse – and that goes for both parties.

    • pecan 3.14159265 says:

      @jayphat: my eyes…try go right to the error. Can’t. Look. Away.

      But aside from that +1 on that as well.

  2. Michael Belisle says:

    Sounds fair to me. Based on GM’s market capitalization, it would have been cheaper for the US to just buy the company outright instead of loaning it billions of dollars of pissing money. So it’s only modestly fair that the US gets to pick a director or six.

    • chuckv says:

      @Michael Belisle:
      Doesn’t the fact that nobody was willing to buy GM for what the US government has given GM indicate that it was a misuse of resources to prop up GM?

      • XTC46 says:

        @chuckv: I agree. The value of something is only as much as someone is will to pay for it, GM was not worth 20Bil.

        • H3ion says:

          @xtc46 – thinksmarter on twitter: Maybe not on the basis of a liquidation value, but when you consider the psychological impact of what was once America’s #1 corporation being sold for parts, or all the supply chain jobs that would have been lost, I give the government some credit for viewing this as more than just a dollars and cents issue.

          • jayphat says:

            @H3ion: The rule of law is free from emotion. You cannot write laws with the psychological impact in mind. Otherwise, nice guys would win every court case and the jackass would lose, even if the jackass was right. Besides, who the hell gave the goverment the authority to buy a private company anyway? I can’t find that in the constitution.

            • H3ion says:

              @jayphat: In a perfect world, you’re right; the law is free of emotion. I don’t know anyone who lives in that world. Besides, this is not a legal matter but a political and economic one. As far as the Constitution is concerned, the Commerce Clause is probably sufficient authority if anyone wanted to mount a legal challenge. Heck, that clause is broad enough (based on judicial interpretation) to cover almost anything. Is it right? Maybe not if you believe in strict construction. But that’s what it is.

  3. Jeff_McAwes0me says:

    This makes sense. Since the other firms that the government has been involved in have fared sooo well. See: Mac, Freddie; Mae, Fannie.

  4. Esquire99 says:

    Of course the Govt. will get to pick most of the directors; it will be the majority shareholder when this is all said and done.

  5. Shoelace says:

    How about a national vote to select most of the directors since it’s taxpayer money that’s being dumped into GM?

    • albokay says:

      @Shoelace: yeah cause America is known to choose people based on who can do a job best rather than choosing based on race, nationality, religion/religious views and political party affiliation.

    • Esquire99 says:

      @Shoelace:
      You voted when you voted for your congressional representatives. There are too many voices for the “people” to get involved in these kinds of decisions. Companies have Boards of Directors for the same reason.

  6. NorthJersey says:

    How about door number three – chapter 7 liquidation. Any firm that has mismanaged their affairs so terribly, and for this long, should be left to reap what they’ve sown. Let the free market decide GM’s fate, not the government.

    Given this Chavez-esque defacto seizure by the federal government I would rather eat my own spleen than own another GM or Chrylser product henceforth.

  7. Russ Johnson says:

    What is ridiculous is the unions seems to get to play a big part in running the company. These are the same unions whose terrible agreements help weaken the company on the open market. GM and Chrysler should go into bankruptcy so that they can either restructure or die. Either way it’s not the governments job to save unions and car companies. Government artificially holding back the inevitable results in wasted taxpayer money.

  8. junkmail says:

    @katieoh: Naw, flawed logic. If we elect an individual to public office, then that same individual goes completely skitzo and burns down an orphanage, I think it’s safe to say that implied consent doesn’t really apply. Yeah?

    BTW, epic error aside, +1 on the rant.

    • metsarethe... says:

      @junkmail: Plus one on the post as well. I think we understood the point regardless of the error at the end.

    • secret_curse says:

      @junkmail: Actually, her logic is sound. Our nation is a democratic republic, not a democracy. We elect leaders and it is their job to make decisions on our behalf. In a true democracy, the people would vote on every issue.

      Your logic is flawed, because simply being elected to office does not make a person above the law. So yes, if an elected official were to start burning down orphanages, they would go to jail for arson. However, it is completely within a politician’s rights to change their platform in the middle of their term and do whatever they want politically. It is also the right of the people to vote that person out during the next election. That’s how republics work.

  9. dave_coder says:

    The Government should not have the power to toss around taxpayer money like this. This just screams governmental overtaxing and overspending.

    It is not their job to save failing corporations. The corporations should die to allow for stronger companies to rise from the ashes.

    • ducs says:

      @dave_coder: Assuming that none of the commenters here are legislators, our sole recourse is the power to vote people in and out of office.

      If you disagree with the way your legislator is behaving, I suggest writing to them. In this case, you may get good results by writing to your representatives in the House of Representatives and the Senate.

  10. Blueskylaw says:

    I have an open order to buy 10,000 shares of GM for 1 cent. That is the most I am willing to pay for the slight chance that shareholders will not be completely wiped out.

    As an interesting aside, court officials are creating plans for a separate computer server devoted just for G.M.’s filings.

    • michaelgibbons says:

      @Blueskylaw: I’d give it a 1:10,000 shot that common shareholders are paid.

      So say it goes up to $1.50…that’s +14900%…$14,900

      Are the odds in your favor? It’s close depending your guess on where its ppshare goes.

  11. Trai_Dep says:

    Hey, their prior management had quite a long time to drive themselves into this mess. Sweep their execs out and get new blood. If they don’t like it, next go-around, try not to drive your business 10′ under the ground.
    “Accountability” is a bad word when applied to execs, I guess.

    And guys, controlling who’s on their board isn’t micromanaging. Take a decent business class if you don’t understand this.

    • Shivved says:

      @Trai_Dep: Accountability would be allowing GM to go into bankruptcy and emerge on the other side as a better company, unburdened by some of the obligations they currently have. In this scenario, they continue to lose money on every car they make and the taxpayers get to foot even more of the bill

      • Trai_Dep says:

        @Shivved: Nah, accountability is dumping any of the execs that looked at Saturn as a threat instead of a beacon leading into the 21st Century. It’s a shame those Saturn guys are long past forced out – smartest thing to do is give THEM the keys, and watch them from afar, with a supportive board.

        • secret_curse says:

          @Trai_Dep: No way. A car brand based on customer service would never work. I mean, Saturn built reliable, safe, and fuel efficient cars for reasonable prices. You didn’t even need to haggle at the dealership. People would never want that… (As an aside, I wish GM would’ve kept Saturn but let some design engineers from the Corvette department make a good looking Saturn)

  12. Lordstrom says:

    Can we now admit that we are, indeed, a socialist country? What else is needed to fit that definition?

    • I Love New Jersey says:

      @Lordstrom: Well we have the propaganda machines, lies and governmental incompetence already. Just need for the people to start noticing.

      • secret_curse says:

        @I Love New Jersey: Propaganda machines, lies, and governmental incompetence are hallmarks of Communism, socialism, and capitolism. In fact, they are common in all forms of government. Socialism is not a form of government. It is an economic system where the government owns and regulates all of the largest industries for a nation, but a private citizen is still allowed to own a small business. True capitolism is a system where the government doesn’t own or regulate anything at all. We’ve been somewhere between the two for a very, very long time. The government hasn’t owned much of our industry, but it has regulated most industries. We’re getting closer to socialism with the bailouts, especially converting the preferred stock we bought in the banks into common stock (which I think was a pretty sneaky move). But no, we can’t call the US a socialist nation until the government completely owns most of the largest industries in the country.

        Or, you could say we’re socialists, but you’d be completely wrong. Either way, really…

    • varro says:

      @Lordstrom: Single-payer health care would be a good start.

      You conservatives keep using that word. I do not think it means what you think it means.

    • Michael Belisle says:

      @Lordstrom: Socilists would probably be offended by the insinuation that America is now a socialist country.

      But hey, if we were a “fascist” country under Bush, I’ll let you guys call us a “socialist” country under Obama. (And no, you can’t have it both ways and make the argument that Obama is a fascist and a socialist. I won’t allow it.)

  13. I Love New Jersey says:

    “But I think that like any investor, the American taxpayer has a right to scrutinize what’s being proposed and make sure that their money is not just being thrown down the drain,” says the corrupt Chicago politician responsible for trillions of debt for pork spending.

  14. smokinfoo says:

    If we own why can’t we elect the Board Members?

  15. MooseOfReason says:

    What the hell is this? What happened to letting failing companies go through the bankruptcy process?

    Thomas Jefferson did warn us. “The natural progress of things is for liberty to yield and government to gain ground.”

    Yes, people do have economic liberty, which the government is trampling on.

  16. Eric Toth says:

    Blah blah blah! All you chicken littles and your “Sky is falling” nonsense. Liberty isn’t failing, communism isn’t taking over, so have someone change your diapers. Look at what the capitalists did to the financial system and to the auto industry before you start to whine. Your religion of free market economics has failed.

    • anajay says:

      @Eric Toth: Your knowledge of economics is staggering. I hear Tim Geithner is hiring!

    • thrillwill says:

      @Eric Toth: You’re absolutely right! I just glanced out the window and it suddenly looks like the Balkans outside. No Wait… now it looks like DR Congo.

      Damn capitalists!

    • MooseOfReason says:

      @Eric Toth: What did we do to the financial system?

      It is the keynesian idea that the Federal Reserve can inflate the money supply and lower the interest rate without causing bubbles in the economy is what got us into this mess.

      Do me a favor? Read this article from August, 2003, talking about our fractional reserve banking system and the Fed-induced housing bubble. AND THEN come back and explain how “free market economics” has failed.
      [mises.org]

      Also, this clip from the Daily Show where Stewart interviews former Fed chair Greenspan, and Greenspan rightly tells Jon that we don’t have a free market so long as we have the Federal Reserve:
      [www.thedailyshow.com]

      Have anyone from your philosophy who warned about the pending crisis? I’d appreciate if you had some links for me too. ;)

  17. Featherstonehaugh says:

    Who in their right mind would buy a GM car now? What is the govt gonna do, force us to drive them?

    GM should be liquidated to pay off creditors. Case closed.

    • Michael Belisle says:

      @Featherstonehaugh: You do know that liquidation is not the only form of bankruptcy, right?

    • bigmil87 says:

      @Featherstonehaugh: Just because the company may be entering bankruptcy doesn’t mean their product is any bit poorer. In fact I would love to buy a GM because they are going at cheaper rates to get more sales. I only buy GM, never have and never will buy another brand unless they are stop being made. Some people have brand loyalty.

  18. Snarkysnake says:

    According to Yahoo , The yahoo’s on GM’s current board oversaw the loss of $56.84 a share…In just the last 12 months of business. Since 2000 , the company has destroyed more wealth that they created in the previous 95 years of existence. How could a group appointed by anyone else do any worse ?

    • FooSchnickens - Full of SCAR says:

      @Snarkysnake: If those were people who were decided upon by company insiders, imagine what could happen with people appointed from outside. I imagine it could be a LOT worse, but time will tell.

      While all of these moves logically makes sense (in so much that the gov’t “owns” a controlling interest in GM) I don’t like how much they’re getting involved here. Sure, help get them back on their feet, but quit pumping billions of dollars worth of cash and manpower into them whilst possibly ignoring other issues where the funding and time would be better spent.

  19. squidbrain says:

    It wasn’t capitalism that screwed the banking system, it was government pressure and policies to force banks to give home loans to “everyone”. This was started by Carter and strengthen by Clinton and then Bush.

    Car companies are screwed by the Unions. That’s obvious.

    • Snarkysnake says:

      @squidbrain:

      “government pressure and policies to force banks to give home loans to “everyone”.

      Please name one bank anywhere, anytime that gave even one loan to anyone because of this “pressure” you claim. Just one. Banks don’t loan money because politicians want them to . If they did ,it would be 2006 all over again now because they are shoveling money at banks like there is no tomorrow.No, banks loan money because they want to be paid back more money in the form of interest.

      You have been programmed to write this drivel by the people that really do your thinking for you – Sean ,Rush et al… Because thinking is harder than being a zombie. One more time, I will repeat : If the stupid lending had started under Carter , then the loans would have begin blowing up under Reagan , Bush(41) and Clinton. Since we have not had a 30 year mortgage meltdown , this theory is full o’ SHIT.

      Sweet Jesus , use your head.

  20. Brad Brown says:

    I understand. In death, a member of Project Meltdown has a name. Their name is United States Motors.

  21. giggitygoo says:

    I don’t think we’ve even begun to have seen the worst of this yet. The “Big 3″ have countless problems to deal with already in trying to get back to being profitable – just imagine how much more difficult it will be with the new administration’s new fuel standards? Fleet wide average MPGs will have to be 35.5 by 2016. Cars for 2016 will need to be designed years ahead of time, meaning that car makers will somehow have to build these cars in just 2-3 years. Toyota/Honda will probably have enough trouble with this, but at least they’re on firm financial footing. In addition, the US makers are just starting to catch up to the Japanese in reliability – now they’re all going to have to make drastic design changes in just a few years while coming out of bankruptcy and dealing with government micromanaging all at the same time. How can this end well?

  22. White Speed Receiver says:

    I thought it took a team effort of two completely inept groups to ruin a company. The unions and management at GM did a spectacular job of running the company into the ground. For anyone to just blame one or the other is shortsighted at best and just plain wrong at worst. But adding a 3rd completely inept group in the government probably isn’t going to solve anything. In fact, for those of us with gallows humor, it may make everything much more entertaining.

  23. vladthepaler says:

    This is the part where the US Government wishes it were a mismanaged corporation instead of a mismanaged government, so it could ask the government to bail it out of its obviously irresponsible, ill-advised investment.

    In Obama’s defense, it’s less immoral to throw money away than it is to wage war with it, so he’s still better than his predecessor…

  24. Null.Aleph says:

    Wow. I’m amazed any of you let the gov’t run/ruin itself.

  25. Anonymous says:

    The GMC truck division should not continue as a part of GM. GM and the US government have one chance to get the reinvention of the new GM right and avoid continued government and taxpayer support.

    Domestic and import full-size truck and SUV sales are declining with fuel economy concerns, so manufacturing two of the same brand is not a profitable long-term business model. Chevrolet and GMC trucks and SUVs are essentially the same vehicles. Chevrolet models cost less, have equal or better quality and fuel economy, and outsell GMC models more than three to one. Toyota and other imports don’t manufacture two of the same full-size vehicles under different brand names; it does not make sense, economically, for GM to continue producing both GMC and Chevrolet.

    Advocates who hope to keep GMC as the auto industry changes to more fuel-efficient models want to continue a business strategy that will ultimately be as unprofitable as the now defunct brands of Hummer, Pontiac, Oldsmobile, Saturn, and Saab.

    Follow the import business model, eliminate GMC now, and save the costs associated with the extra GMC manufacturing processes and distribution channels, which will not be part of a long-term solution. The new GM will be more profitable going forward without GMC if Chevrolet produces and sells all of GM’s full-size trucks and SUVs.

    GM won’t need government and taxpayer support again if GMC is eliminated now.

  26. Anonymous says:

    Kudos to Ford Motor Co., not just for better products. but for being smarter and more visionary. And how will we repay them for their vision and expertise? We will put them in direct competition with the government. What chance do you suppose Ford will have in bidding vehicles for government entities, a huge part of the industry? What will the “new” GM’s incentive be to run from under the wing of Uncle Sam? Unlimited funds, no pressure from stock holders, mandates favorable to the “new” owners. Who in their right mind would want to leave?