GM in Chapter 11; Plants to Close, Government to Spend Billions

GM-red-ink450.jpgThe Smart Asset celebrates the GM bankruptcy: "We will own about 70 percent of an enfeebled GM, and we're still going to be bailing it out." It is hard to believe that General Motors was once literally a pillar of the American economy: according to a fascinating story in Automotive News, in its glory days "GM was the nation's biggest taxpayer, accounting for about 4 percent of all corporate-profit taxes collected." And GM flexed its muscle in the market, which caused the government to contemplate breaking up the company in the 1950s and 1960s on anti-trust grounds. But GM was at its zenith too big to fight, and now, at its nadir, is too big to fail: the government will assume a majority share in the company and devote billions in public money to reorganize it. Whether a profitable car company will come out the other end is anybody's guess. In the meantime the now-bust GM will cease operation in at least a dozen plants, which will not be good news for the people who work in them, and GM says it owes creditors $172 billion, on which said creditors will now receive pennies on the dollar, so the first effects of the bankruptcy on America's economy we can safely characterized as Very Negative. Image via The Smart Asset.

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