GM just got a new owner -- the U.S. government

Today General Motors becomes the second of the Big Three domestic automakers to succumb to the recession and be placed in bankruptcy by the U.S. Treasury Department.  From once employing over 1 million people, between its employees and direct suppliers, GM has fallen, now becoming the largest industrial bankruptcy in the history of the United States.

The bankruptcy, filed at 8 a.m. this morning, was carefully crafted by the Obama administration's top officials and the U.S. Treasury Department.  The bankruptcy also marks the start of the largest nationalization of a corporate entity in U.S. history.  The government plans to invest an additional $30B USD in GM, bringing its total investment thus far to $50B USD.  In return, it will receive a 60 percent controlling ownership stake in the company when it exits bankruptcy protection.

Canada is also deeply tied to the company will also enjoy a part in the nationalization, taking on a 12 percent stake.  Unions get 17.5 percent and the bondholders are handed 10 percent and the right to buy greatly discounted GM stock.

The Obama administration calls the solution "permanent" and insists that this will be the final bailout for GM.  Meanwhile, it faces critics -- mostly shareholders and bondholders -- who believe it is giving favorable concessions to unions.  These groups are expected to get less out of the deal, and are banding together to voice their discontent.  A group calling themselves the Main Street Bondholders have formed and plan to voice their anger in court.

Rep. Jeb Hensarling (R-Tex.) supports the group, writing to Treasury Secretary Timothy F. Geitner, "The proposal seems to favor the rights and claims of the UAW, a political ally of the current administration and a powerful lobbying force in Washington, over the rights and claims of the company's diverse group of bondholders.  Contractual rights of investors are being trampled by the government under the rationale of 'extraordinary circumstances.'"

Under the new plan, the U.A.W. would exchange its $20B USD in pension and retirement obligations for the 17.5 percent stake and for $9B USD in notes and preferred stock.  Bondholders, which hold $27B USD in GM debt, only get a 10 percent stake and the right to later purchase discounted stock.  It should be noted though, that the Bush administration similarly supported larger cuts by bondholders, and smaller ones from the unions.  The cuts for both parties actually exceed those proposed by the Bush administration, which suggested a 50 percent reduction cut to the union trust, and a 66 percent cut for bondholders.

However, the complaints will likely fall on deaf ears -- similar complaints during Chrysler's bankruptcy process, albeit fewer and less organized, failed to gain traction in court.

During the bankruptcy GM plans to sell or liquidate its Pontiac and Hummer brands.  It will also sell and/or spin off several foreign brands -- Saab, Vauxhall, and Opel.  The Obama administration remains confident of the company's recovery, stating, "For the better part of a century, The General Motors Corporation has been one of the most recognizable and largest businesses in the world.  (Today) will rank as another historic day for the company -- the end of an old General Motors, and the beginning of a new one."

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