Car blog (3) – Motors Liquidation Company, the GM story continues
When in August 2009 GM went bankrupt, the name of the old GM was changed into Motors Liquidation Company. The new company, with the US Government as majority shareholder, was named again GM, which jokingly was referred to as Government Motors first. November 18, General Motors returned to the New York Stock Exchange for the second time in their existence. It was to everyone’s surprise the biggest introduction of a company ever…worldwide…US$ 23.1 bln.
Some more facts on this:
- the US Government took over GM for around US$ 50 bln and became 61% shareholder
- the net debt of the new GM was reduced from US$ 46 bln to a mere US$8 bln by the official bankruptcy
- after the Stock Exchange introduction the US Government is now holds about 26% of the new GM shares
- the overall net profit level of the combined automotive industry worldwide is still around 1% of it’s sales and therefore still one of the lowest of all global industry sectors (see FD300 for more details)
The analysts frowned looking at the high price investors were willing to pay for the new GM shares. But it’s full circle now and everybody seems happy:
- the US government bought a company who would go bankrupt within help; they got rid of most of the debts, closed 12 factories and laid off 34,000 people
- the new GM now looks bright and shining again and investors seem to love it…
If you sit back and look what happened, it’s quite strange. I keep wondering if this is the way our new global economy really works…? If it suits the government, it can decide to help a mismanaged global enterprise to stay alive to save jobs and it’s status as automotive leader without any penalty from the World Trade Organization or simiral global institutions.
Fair competition? Survival of the fittest? Elimination of overcapacity in the market? I think not..
Just plain good old protectionism…and the Wall Streets boys all love it….their bonus is secured for 2010.
Gerard Ekhart / November