While President Obama and General Motors CEO Fritz Henderson are both expected to hold press conferences today, officially GM has already filed for Chapter 11 Bankruptcy Protection.
Once the world's largest automaker and a symbol of the success of free market economics, GM is now a symbol of failure. In the 1950s it employed over 500,000 people and produced more than half of all the vehicles sold in the United States. Now it also holds the dubious title of the world's third-largest bankruptcy - and the largest bankruptcy for a manufacturing company.
General Motors, backed by yet another government loan from the U.S. Treasury is expected to get the same fast-tracked bankruptcy proceedings as the smaller U.S. automaker Chrysler - which filed for Chapter 11 just one month ago and which already appears to be emerging. Just yesterday a judge approved the sale of Chrysler's assets to a group comprised of Fiat, the U.S. government and the UAW. The Chrysler Chapter 11 proceedings were seen by many as a practice for the much larger General Motors corporation.
As a part of the Chapter 11 filing GM will receive $30 billion from the Obama administration, giving it a 60 percent stake in the once-great automaker. The Canadian government will take a 12 percent stake by providing an additonal $9.5 billion, while the UAW gets a 17.5 percent share and bondholders get 10 percent.
The Chapter 11 proceedings are expected to take anywhere from 60 to 90 days but the future of General Motors is anything but certain. In the short term the automaker will most likely push ahead, but the big question mark is if it can become financially viable and build cars that people want to buy - something which is further complicated by the government's involvement.
While the Obama Administration was reluctant to get involved it almost had no choice as without government help both General Motors and Chrysler were doomed to failure - at a time when the U.S. economy already has enough troubles. But now that the government is involved it doesn't appear to be willing to part with its economic engine. Even when GM and Chrysler emerge from bankruptcy, the government's Autos Task Force will continue to be involved in the future of both companies.
With a 60 percent stake in General Motors and a political agenda, will the Obama Administration work with GM and Chrysler to ensure both companies build cars people want - or build cars it wants people to want?
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