No doubt some commentators on Fox News and other US media giants will claim that this is socialism. Quite the opposite, it is the rescue of capitalism on the backs of taxpayers and workers. Workers get a share in almost bankrupt auto makers and also the taxpayers get to invest in them as well! While it is true that investors such as bondholders and shareholders have also lost instead of following the free market ideology of letting the companies fail the govt. and workers rush in to bail the companies out. If and when the companies turn profitable the government and probably the unions too will sell their equity. Profit is for private capital not the public or workers the latter share only the risks!
Washington, auto union set to take control of GM, Chrysler
In Washington: Government to buy 50% of GM, UAW seeks 55% of Chrysler GREG KEENAN AND SHAWN MCCARTHY
With a report from AP
April 28, 2009
In a historic reshaping of American capitalism, the U.S. government and the auto workers union are on the verge of controlling both General Motors Corp. and Chrysler LLC.
The latest proposal offered up by GM - now subsisting on loans provided by Washington - would see the U.S. government hold 50 per cent of the company if it accepts a debt-for-equity swap. The United Auto Workers union would hold another 39 per cent of GM, if it agrees to allow a new health-care trust fund to be financed with GM shares.
Ottawa is watching the GM deal closely and is also looking at taking an equity stake.
In a separate deal, the auto workers union would eventually own 55 per cent of a restructured Chrysler under an agreement reached by the union and the auto maker, according to a summary of the arrangement. The revised Chrysler-UAW contract says that Italian automaker Fiat Group SpA eventually will own 35 per cent of a restructured Chrysler, with the remaining 10 per cent stake divided between the U.S. government and secured lenders, mostly banks and hedge funds.
The landmark Chrysler deal was forged at the demands of the Obama administration, which required that equity fund at least half of Chrysler's $10.6-billion obligation to a union-run retiree health care trust. The deal will slash retiree benefits in the U.S., and hand control of the company over to the union, though perhaps only in the interim. Chrysler stock eventually will be traded publicly again, as there are mechanisms for the UAW to sell shares to fund the trust, the summary said.
Chrysler workers will vote to ratify the deal, a process the union hopes will be done by Wednesday, one day before Chrysler's government-imposed deadline to restructure.
The GM deal eliminates another one of its storied brands, vaporizes another 22,000 manufacturing jobs in Canada and the United States, and wipes out almost half its dealer network in both countries by the end of next year. The company's top executive cast it as a plan to remake the company in one fell swoop.
"We need to take this as an opportunity to restructure, and restructure General Motors once," Fritz Henderson, GM's chief executive officer, said yesterday as he outlined the demise of Pontiac and a bond exchange that offers reluctant debt holders shares in GM for their $27-billion (U.S.) in debt.
The plan needs to be approved by government and bondholders, who are likely to be unhappy about receiving just 225 shares of GM in return for every $1,000 worth of bonds.
A senior Canadian official said Ottawa is also looking at taking an ownership stake in GM, which yesterday promised to slash its Canadian production and cut work force by an additional 1,000 jobs. The plan would accelerate job losses in Canada, shrinking to about 5,500 employees by 2014 from more than 20,000 just 15 months ago.
"There's a menu of options we're looking at," the federal official said. "We know the United States is looking at that [equity-for-debt] option quite seriously and we have to see whether that might work for us."
Asked whether Ottawa would take an ownership stake in GM, Industry Minister Tony Clement said: "We've got another 30 days to go [before the GM deadline]. There's a lot of proposals on the table. We have not made any conclusions at this point."
The GM announcement kicked off what is likely to be the most significant week in the history of the Detroit auto makers with the guiding hand of the U.S. Treasury Department on the steering wheel.
GM officials indicated yesterday, for example, that the Treasury Department said it would not support the GM plan if debt holders ended up owning more than 10 per cent of the company after the debt-for-equity swap.
The Canadian and U.S. governments have intervened because a failure by GM would wipe out hundreds of thousands of jobs across the continent. "It would trigger a catastrophe in the economy, if that were to happen," noted David Cole, chairman of the Center for Automotive Research, an industry think tank in Ann Arbor, Mich.
"I have a hard time putting my finger on another [such critical time] unless it was 1941 when the industry just stopped making cars and made guns and planes," added Gerald Myers, a former chairman of American Motors Corp. and now a professor at the University of Michigan.
Some of the restructuring pain is being imposed by governments, which are seeking to ensure that the companies they bail out with long-term loans can survive. "It will take severe restructuring, there's no doubt about it and the job losses are terrible," Mr. Clement said outside the House of Commons. GM will slash its Canadian dealer network in half, to between 395 and 425 outlets by 2010 from 705 outlets now. That's a deeper and faster cut in its retail operations than was in a plan unveiled in February that called for a reduction to between 450 and 500 dealers by 2014.
GM Canada is negotiating with Ottawa to secure a $3-billion bridge loan to carry it until the end of May, and the company said the two sides are "close" to agreement. It is also looking for $7.5-billion in long-term loans from Ottawa and the province of Ontario to keep it alive until North American car sales pick up.
General Motors of Canada spokesman Stew Low said the company remains committed to Canada and that its plan here is largely unchanged, save for the elimination of a planned third shift in Oshawa next year to build the Impala. The company now has to begin negotiations with the Canadian Auto Workers union in an effort to extract the same concessions that the union provided to Chrysler in a deal ratified on the weekend.
GM said it expects to reduce its unionized work force to 4,400 by 2014, mostly through already announced closings at its truck plant in Oshawa next month and Windsor transmission plant in the summer of 2010.
"The landscape is going to shrink dramatically and it's going to have a negative impact right across our communities," said Chris Buckley, president of CAW Local 222 in Oshawa.
The loss of auto jobs is already devastating communities in Southern Ontario that rely on the assemblers and their parts suppliers for high-paying manufacturing jobs. Parts suppliers are warning of a cascading effect as the manufacturers cut back and parts makers face bankruptcy.
GM's survival plan includes slimming down to just four brands, compared with the eight it now offers. The lineup will consist of Chevrolet, Buick, Cadillac and GMC. The auto maker's Saturn, Saab and Hummer brands will be gone by the end of the year.
The plan calls for GM to break even financially in the worst vehicle markets such as that being experienced during the current U.S. downturn and to generate lots of profit when the market returns to healthier levels next decade.