President Obama: We Are ‘Reluctant Shareholders’ of GM

Jun 1, 2009 12:55pm

“We are acting as reluctant shareholders,” President Obama said today, announcing the federal government’s unprecedented 60 percent stake in General Motors, a company that will ultimately receive almost $50 billion from the U.S. taxpayer. “That is the only way to help G.M. succeed.”

Attempting to reassure Americans skeptical of this step, the president said, “What we are not doing — what I have no interest in doing — is running G.M.”

General Motors “will be run by a private board of directors and management team,” he said. “They, and not the government, will call the shots and make the decisions about how to turn this company around.  The federal government will refrain from exercising its rights as a shareholder in all but the most fundamental corporate decisions.”

A senior administration official said “the government will not interfere with or exert control over day-to-day company operations and very much will ensure that no government employees will serve on board or be employed by the company it makes investments in. As a shareholder, the government will limit what it votes on to core governance issues, particularly the selection of the company’s board of directors; major corporate events or transactions.”

President Obama began his remarks by noting that a bankruptcy judge had approved the sale of Chrysler’s assets. “A new, stronger Chrysler is poised to complete its alliance with Fiat,” the president said, adding that “what the completion of this alliance means is that tens of thousands of jobs that would have been lost if Chrysler had liquidated will now be saved.”

The plan for General Motors is different, the president said, because it is a larger and more complex company,

Amidst news of the shuttering of 14 factories, 2,600 dealerships, and layoffs of 21,000 GM workers, the president seized upon a friendlier number: “If all goes according to plan,” he said, “the share of G.M. cars sold in the United States that are made here will actually grow for the first time in three decades.”

But that said, the bankruptcy and restructuring would all “come at a cost,” he acknowledged.

Speaking directly to GM workers, he stated, “I know you’ve already seen more than your fair share of hard times. We saw 400,000 jobs lost in the auto industry in the year before this restructuring even began. I will not pretend the hard times are over. Difficult days lie ahead. More jobs will be lost. More plants will close.  More dealerships will shut their doors and so will many parts suppliers. But I want you to know that what you’re doing is making a sacrifice for the next generation…”

He described the restructuring plan as tough but fair, requiring the “United Auto Workers to make further cuts in compensation and retiree health care benefits, painful sacrifices on top of all that they’ve already done” as well as GM “shareholders to give up the remaining value of their shares.”

The plan for the new GM will “require a substantial amount of money that only a government can provide,” Mr. Obama said, thus the “government will be making a significant additional investment of about $30 billion in G.M., an investment that will entitle American taxpayers to ownership of about 60 percent of the new G.M.”

“I recognize that this may give some Americans pause,” he said. “Understand, we’re making these investments not because I want to spend the American people’s tax dollars, but because I want to protect them. Instead of taking so much stock in G.M., we could have simply offered the company more loans. But for years, G.M. has been buried under an unsustainable mountain of debt. And piling an irresponsibly large debt on top of the new G.M. would mean simply repeating the mistakes of the past.”

He said this would mean the “beginning of a new G.M., a new G.M. that can produce the high quality, safe and fuel-efficient cars of tomorrow, that can lead American toward an energy-independent future, and that is once more a symbol of America’s success.” This future G.M. will be different from the one of yore, he said, but he said he’s “absolutely confident that if well managed, a new G.M. will emerge that can provide a new generation of Americans with the chance to live out their dreams, that can out-compete automakers around the world, and that can once again be an integral part of America’s economic future.”

– jpt

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