GM and the Government: The Wheeling and Dealing

In 2007, when gas prices began to top out around $4 a gallon, GM, who had come to rely on the SUV and truck sales for its bread and butter, was surprised to find that the American public stopped buying big gas-guzzling vehicles and began to purchase smaller fuel efficient cars from foreign auto-makers. By October of 2007, GM stock had plummeted 31% and GM was asking for a piece of the first government bailout.

By November, GM was in front of Congress asking for the money. When Congress denied the loan, then-President Bush, gave GM, and the rest of the Big Three, a portion of the already approved financial bailout funds. But GM needed more money and to secure more loans from the government, began a restructuring plan to present to the federal government that included cutting jobs, closing plants, reducing the number of brands it produces, and billions in additional government funds that was presented to the government in February of 2008. One year later, Rick Wagoner met with the Obama auto task force and requested release of the funds it had asked for from the previous administration to stave off bankruptcy.

Once the Obama administration was involved, thing began to change for better and for worse. The task force approved GM’s plan, but pressured the top management of GM, Rick Wagoner and the Board of Directors into resignation, and replaced them. Wagoner was replaced by a long time GM employee who had worked his way up from a sales manager at his father’s dealership in Detroit. Frederick Henderson was a good choice to head up the New GM. Bond holders were pressured to convert 2/3’s of the 27 billion owed to them into stock in the General Motors, LLC, the “New GM.” Additionally, the UAW agreed to take a stock share in place of 50% of their contract guaranteed health care benefits for retirees. It was this agreement with the UAW that had many people here in the Miami Valley livid. Where was the stock share for other unions to whom GM owed benefits? What about the non-retirees, men on lay-off from GM plants, that were promised guaranteed income-streams and health benefits for certain time periods? What would happen to a non-UAW union worker who was not yet eligible for retirement from GM but would eventually get pension and benefits from GM? There were no guarantees for anyone who was not a UAW member. GM and the Obama administration are still silent on these issues today.