Fall of a titan – US carmaker General Motors goes bust
Published: 02 June, 2009, 06:43
TAGS: Manufacturing, USA, Big deal, Economy
The U.S. car manufacturer General Motors has declared itself bankrupt. President Barack Obama said the federal government will act as a reluctant shareholder when it takes a 60 percent stake in the new GM.
The U.S. president pledged up to $30 billion of additional federal assistance, with GM’s shares tumbling to their lowest price in the company's 100 year history.
The bankruptcy of America’s auto-making giant brings an end to an era. What was once unimaginable is now a reality. One of the largest pillars of the U.S. economy has collapsed in the global financial crisis.
One of Manhattan’s skyscrapers, the General Motors building, was once an icon of American pride and success. And it was there that GM made its bankruptcy official on Monday.
Fritz Henderson, the CEO of the company, said it was “a defining moment in the history of the General Motors corporation.”
The corporation was set up over a century ago. It survived the Great Depression and major wars. But not the credit crunch of 2008. People say this is more shocking than anything else and can’t believe this large company is gone.
GM’s bankruptcy means it’s had to put a begging hand in front of the Obama administration. The result – the U.S. government will now hold a 60 percent stake in the company. This means General Motors will now essentially be owned by the Government.
Barack Obama insists his administration will only be involved in major decisions.
“In short, our goal is to get GM off its feet, take a hands-off approach and get out quickly,” the U.S. president said.
Financial analyst Jim Bonfils says exactly how this will be done is unclear.
“It’s very easy to come in and ‘save’ the company, and be the White Knight, but how are we going to pull out of this ownership? As far as I know, the U.S. government wasn’t founded to be a car-maker, ” Bonfils said.
About 15 years ago, the U.S. would lecture Russia about the merits of market-regulated capitalism. Today the American government is buying the former jewels of its crippled economy.
Moreover, another 30 billion dollars of tax-payers’ money will be invested into the fallen giant.
“Management is going to have to give one of the cars sitting on the lots to every family in the U.S. that’s bailed them out,” Jim Bonfils says.
For now, the question is whether the U.S government can steer this auto-making giant back on the right track or whether the wheels have come off for good.
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The General Motors building is in Detroit, not Manhatten.