GM Collapses Into Government's Arms
General Motors Corp. GM -0.75% became the second-largest industrial bankruptcy in history Monday as it filed its landmark case, with President Barack Obama predicting the humbled corporate titan will emerge from Chapter 11 "a stronger and more competitive" company within months.
GM's bankruptcy caps a frenetic few months in which the Obama administration scrambled to salvage GM as well as Chrysler LLC, the country's first- and third-largest car makers, at a cost to taxpayers of more than $62 billion.
GM officials portrayed the bankruptcy -- No. 2 in asset size among industrial concerns to WorldCom's filing in 2002 -- as an unprecedented opportunity to reverse decades of decline. GM said it would close 17 factories and parts centers and lop off 20,000 more jobs by the end of 2011 in Michigan, Indiana, Ohio, Tennessee and other states.
The government-orchestrated shrinkage will cost taxpayers $30 billion, on top of $20 billion in U.S. funds already put into the company. In exchange, the U.S. will own 60% of the new GM. In all, the rescue of the car industry could cost taxpayers close to $100 billion.
I've read from other sources (blogs) that GM has been propping up its sales by offering financing to buyers w/ "subprime" credit scores. If true, the company is headed for headed for yet another cliff.