GM Opens Newest Showroom at the White House

GM's bankruptcy plan has been accepted and the old GM, now known as Motors Liquidation Co., can complete all pending sales of assets. Deals to sell Hummer, Saab and Saturn have been made.

Why is Motors Liquidation unloading these three lines? If there's no market for gas-chugging Hummers, what organization would want to own the Hummer operations and attempt to sell these vehicles, which, if a reader believes the noise, is equivalent to marketing unfiltered Camel cigarettes to school kids?

On the other hand, why would Motors Liquidation sell the Saturn division, which builds cars that travel more than 30 miles per gallon? Aren't vehicles like those the sort of vehicles right-thinking Americans are expected to drive?

Saab? It seems to fall somewhere in the middle. Quirky designs, Decent gas mileage. Niche market. Okay. The growth potential of Saab is probably close to zero. But Saturn? Seems like Saturn is on the right road. Hummer? Currently out of favor. But that will change when the price of oil shows signs of remaining low.

However, the most troubling part of this transaction is the position of the government -- us. The taxpayers are stuck with 61% of the company. That's more than a mere controlling interest. That's total dominance.

What can we expect from government ownership? The Obama version? The new GM will build cars like those from the Saturn division. Smaller high-mileage vehicles. It will build the Chevy Volt, an electric vehicle with a $40,000 price tag. It's designed to sit in showrooms forever. A few Hollywood liberals will buy them and praise them while virtually all other car buyers choose vehicles that travel a couple of hundred miles after each refueling. Refuelings that take less than five minutes.

How will the government react to poor sales of its products? Will it offer special financing to those who buy vehicles from its 61%-owned subsidiary? Will it offer other incentives to crowd out competitors lacking government muscle?

If the new GM fails to sell enough vehicles to pay its bills, what will the government do with its 61% stake? Sell it to the public? Or make it into the next Amtrak?

Here's my view: Expect the government to turn the White House lawn into a car lot. Expect Government Motors to pay buyers for bringing in old cars -- towing them, pushing them, or bringing them to the White House in parts -- then leaving in new cars bought with 100% borrowed money. Those borrowed funds offered with a negative interest rate. In other words, the balance of the loan will decline even though the buyer NEVER makes a monthly payment. That oughta give Government Motors the edge it will need.

Bankruptcy judge OKs GM sale plan

Judge approves General Motors plan to sell assets, automaker could emerge from bankruptcy soon

Monday July 6, 2009, 7:16 am

NEW YORK (AP) -- A bankruptcy judge has ruled that General Motors Corp. can sell the bulk of its assets to a new company, potentially clearing the way for the automaker to quickly emerge from bankruptcy protection.

U.S. Judge Robert Gerber said in his 95-page ruling late Sunday that the sale was in the best interests of both GM and its creditors, whom he said would otherwise get nothing.

GM's government-backed plan for a quick exit from Chapter 11 hinges on the sale, which will allow the automaker to leave behind many of its costs and liabilities. The Treasury Department has vowed to cut off funding to GM if the sale doesn't go through by July 10.

The Detroit car maker's Chapter 11 filing on June 1 was the fourth-largest in U.S. history.

GM will leave bankruptcy court with significantly reduced debt and labor costs, as well as fewer dealerships and brands. But it's still operating in an environment where fewer American are buying cars. At the current pace, automakers will sell around 9.7 million vehicles this year. That's a reduction from sales of more than 16 million vehicles as recently as 2007.

In June, the automaker captured 20.3 percent of the U.S. market. GM has estimated that it can maintain a market share between 15 and 17 percent, reflecting its plan to sell off three brands and end its Pontiac line.

GM has several new cars coming to market next year, including the Chevrolet Volt, a plug-in hybrid electric car. The Volt might be a promising vehicle, but with an expected $40,000 price tag it might only be a niche player, said James E. Schrager, clinical professor of entrepreneurship and strategy at the University of Chicago Graduate School of Business.

Upcoming small-car models such as the Chevy Cruze and Spark may fare well, but will face heavy competition from foreign automakers already in that segment of the market and from Ford Motor Co.'s new Fiesta, which the company has already started advertising.

The company has received $50 billion in taxpayer funds. In exchange for those funds, the government will own about 61 percent of the "new GM."

The Obama administration has said it does not plan to interfere with the day-to-day running of the company, though government has been involved in the selection of the new company's 13-member board of directors and change of control transactions.

The United Auto Workers union, which gets a 17.5 percent stake through its health care trust for retirees, has selected Stephen Girsky, a former GM adviser and Morgan Stanley analyst, to serve on the board.

The Canadian government, which will control an 11.7 percent share, also will pick one member.

Assets that GM does not sell to the new company will become part of the separate "old GM," which the company said Monday will be known as Motors Liquidation Co., and will be sold to the highest bidder under court supervision.

Other assets to be filed under the old GM include brands like Hummer, Saturn and Saab, for which GM has lined up buyers. They also include all current GM common stock, which -- despite its active trading on over-the-counter markets -- will soon be worthless.

The old GM will remain an entity until all of the facilities are sold off, a process that could take months or years to complete.