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  • 02 Jun 09
    mattkramer
    Matt Kramer

    Obama makes his big move on GM
    Automaker to seek protection today; President to lay out turnaround scenario

    By David E. Sanger and Jeff Zeleny, New York Times | June 1, 2009

    WASHINGTON - President Obama will send General Motors into bankruptcy protection today, making a risky economic and political bet that by nationalizing for a period of years the onetime icon of American capitalism, he can save at least a diminished automaker that is competitive.

    The bankruptcy case, to be filed in New York, marks a significant turning point for an industry that was once at the heart of the US economy. It is the culmination of a remarkable four months of confrontation between Washington and Detroit that is expected to result in a dramatic downsizing of the company. It also places the government in uncharted territory, as a business owner.

    Reflecting the government's extraordinary intervention in industry, aides say, Obama plans to tell the nation that he believes GM can be brought back from the brink of insolvency, even if the company looks almost nothing like the titan of old.

    He will spell out a strategy in which the shrunken GM can make money even if new car sales remain at a sluggish 10 million a year in the United States and even if GM, once the giant of the industry, holds only a 13 percent share of sales.

    But to get there, American taxpayers will invest $30 billion more in the company, atop the $20 billion already spent to keep it solvent.

    The company will also have to shed 21,000 union workers and close 12 to 20 factories, steps that most analysts thought could never be pushed through by a Democratic president allied with organized labor.

    Forty percent of the company's 6,000 dealers will close; the workers' union will be forced to finance half of its $20 billion healthcare fund with stock of uncertain value in the restructured GM; and bondholders, including many retirees, will be forced to take stock worth 10 cents for every dollar they lent the company.

    The company's last steps toward bankruptcy took place

    economics cars

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