Der Kommisar

If anyone still thinks that the Obama administration has any intention of rescuing companies and returning them to profitable, capitalist enterprises please stop drinking the Kool-Aid. It was bad enough that the government is using its influence on TARP-receiving banks to forward its agenda, now the administration is going to restructure the automakers, GM and Chrysler, to provide jobs to the UAW. The UAW's money to help buy the presidency was well spent as the administration is going out of its way to ensure that either the UAW or itself own majorities of both GM and Chrysler, ignoring the rights of creditors and, in the case of GM, a plan to make taxpayers whole.

Yesterday, Chrysler filed for Chapter XI protection after some of its creditors (nearly everyone which was not a TARP bank), declined to accept the governments plan which would have left them as minority equity owners in a company run by and for the benefit if the UAW. What is more outrageous is that President Obama heavily criticized (ripped) Chrysler's who were well within their rights to demand a larger portion of ownership in Chrysler.

GM is an even more outrageous situation. GM creditors are owed $27 billion. The government is owed $15.4 billion. Given this, it would be foolish, not to mention unfair, for GM creditors (who in a bankruptcy court have a senior claim and majority on owning GM) to accept the government's plan which would give GM creditors a 10% equity ownership in a company in which the UAW and the government would collectively own nearly 90%. That would be just plain foolish.

GM bondholders have offered a counter proposal. GM creditors want control over 58% of GM and give the UAW ownership in 40% (the remaining 2% would go to other outside investors). GM creditors also said that GM would be able to pay the government (taxpayer) loans back in full. The Obama administration declined the offer.

Many analysts and market pundits are of the opinion that creditors are trying for more cents in the dollar for compensation. What is really happening here is that GM creditors do not want to be owners in a company which will be run as a non-profit organization. Come on, how profitable can GM be with the government and the UAW running it as a workers collective? How appropriate for May Day. Not only would I not invest in GM, I would not do so with the money of my worst enemy.

This socialistic power grab could be beneficial to GMAC bondholders. The government has selected GMAC as the financier of choice for both GM and Chrysler. Being a TARP bank means that GMAC will make good on its debts, as long as GM and Chrysler are building vehicles and Obama or his ilk are in power. Welcome to the People's Republic of America. If the government and / or the UAW end up as majority owners in GM and Ford, I will not purchase a vehicle from either company as long as the situation persists. I encourage my readers to do the same.