Summary
The government is making last minute attempts to find an agreement to prevent GM bankruptcy. $20 billion dollars has been poured into GM, and another $30 billion is being considered, along with a sale of assets to a new GM, and government ownership of as much as 70% of the company. Bondholders have rejected the agreement to receive 10%. Warnings are being given from those with experience about the new Marxist America.
Analysis
I don't want to say too much as events are taking shape this weekend, so it is difficult to predict exactly what will transpire over the next few days.
There is an old saying that as goes the motors goes the nation. Unfortunately for the nation GM is on the edge of Chapter 11. Bondholders have rejected a plan to receive 10% in a sale of assets to a new GM, shareholders would only receive 1%. Deals have already been cut in Germany and Canada for suppliers to save some lines such as Opel, and there is talk that perhaps Chevy and Cadillac will survive.
It would be rash for me to speak of what may happen, as this will play out in the next few days. The government is expected to nationalize as much as 70% of GM. It has already poured $20 billion of taxpayer money into GM, and is considering another $30 billion. GM has been known for its bureaucratic management practices.
Unions have made it clear to their members that their leverage is limited, after receiving an offer for 17.5% of the company, with the health care plan to receive 39%, to the irritation of bondholders.
Government interference is the problem, not the cure. GM is not an "essential" industry or company. If GM were to disappear, there would emerge another company, leaner, not so engrossed in its own bureaucracy and privilege, less likely to bestow upon itself million dollar salaries and benefit packages, not to mention $20 billion plus bailouts with taxpayer money to cover their own failures. Government is of course the only organization dim enough to support such an organization. GM should be left to go bankrupt, to weed out the problem which is those who made the bad corporate decisions, and the system they created. Already GM is trying to reduce their overpriced gas guzzlers, and there has been talk of a new line of "smaller" cars. A bit late don't you think? Not exactly the spirit of competition.
If GM fails, new companies, that are properly managed, would emerge to take the place of GM. The nation, its workers, and the taxpayers would be better off with the new companies that do not need government funding to survive. Not a new government managed GM headache.
From Russia Pravda is warning its readers of the new Marxist America. "The American decent into Marxism is happening with breath taking speed, against the back drop of a passive, hapless sheeple, excuse me dear reader, I meant people."..." The initial testing grounds was conducted upon our Holy Russia and a bloody test it was. But we Russians would not just roll over and give up our freedoms and our souls, no matter how much money Wall Street poured into the fists of the Marxists."..." "The final collapse has come with the election of Barack Obama. His speed in the past three months has been truly impressive. His spending and money printing has been a record setting, not just in America's short history but in the world. If this keeps up for more then another year, and there is no sign that it will not, America at best will resemble the Wiemar Republic and at worst Zimbabwe."..." "Then came Barack Obama's command that GM's (General Motor) president step down from leadership of his company. That is correct, dear reader, in the land of "pure" free markets, the American president now has the power, the self given power, to fire CEOs and we can assume other employees of private companies, at will. Come hither, go dither, the centurion commands his minions."
I think Pravda has told the picture from hard earned experience. Russians know the cost of giving their freedom to government bureaucrats and dictators. When you remove the corporations incentive to manage itself, and give control to government, you remove all incentive to invest in the business.
The nations currency is the stock of that nation. The nations brand logo is on its currency. When you devalue the currency, as is being done spending billions of taxpayer dollars to prop up failed companies, rather than encourage the incentive to develop successful ones, you devalue more than the currency, you devalue the incentive of the people, you devalue freedom.
