The "New" GM

Yesterday's news was filled with hoopla about General Motors emerging from bankruptcy protection in a new company. This "new" company is 60.8% owned by the U.S. government and will have a puppet board of directors that takes its marching orders from the Oval Office. The press played the positive spin to the hilt. They didn't talk much about the "old" General Motors" that was left in the dust. I guess that is left up to me.

The first group of people are stockholders of the original company. These folks include just about anyone that has had a 401-k or retirement plan that road the stock to the dirt. Hopefully most fund managers had since enough to dump that dog of a stock years ago. Also in this group was individual investors that thought you couldn't go wrong investing in GM. Whether these people paid $50 per share or $1 per share that money is gone, never to be recouped. There was never any consideration to give them an interest in the new company.

The second group is the debt holders. These are banks and financial institutions that made good faith loans to General Motors. Also are institutions and individuals that did the same thing in the form of bonds. Unless they took the bone the government offered them they also lost everything.

The final, almost forgotten, group is the U.S. taxpayer. We loaned GM $50 billion and there is no guarantee that we will ever see any of it again. This is because we kept propping up the old company instead of letting it fail like it ultimately did. The ironic thing is that we, the U.S. government, are not in any better shape than the old GM and had no business loaning them anything. The only advantages we have is we haven't been abandoned by our creditors (yet) and we have no problem mortgaging our children and grandchildren's future! Otherwise we are just as insolvent as they were.

The only hope we have of getting back any of our money is if GM can produce a car that people will buy. It's folly to watch the earnings reports of the new company because they will most likely make money out of the blocks. However, it will be important to watch year two, three and four, if they last that long. Watch for more trips to the White House for more money. Watch the streets for new GM cars on the street. I believe many people are unhappy with this sad chapter and will not buy one of their cars. And as long as our economy keeps flopping around like a fish out of water you won't see people making large purchases like cars unless they have to.

I'm not popping any champagne open right now.