Safeguard our investment

Safeguard our investment

Miami Herald: Congratulations, Mr. and Mrs. Taxpayer. You are now the principal owners of General Motors, a company that was once the mightiest private enterprise in the world and a symbol of American industrial strength. The bad news is that the company has lost so much money over the last few years that even its name and history could not save it from bankruptcy.

The good news? There isn’t any, except that the company isn’t going out of business, but rather reorganizing under Chapter 11 of the Bankruptcy Code. This will allow it to get out from under $27 billion in debt held by investors and allow it to transfer to the United Auto Workers the burden of paying for hundreds of thousands of retirees.

Will this turn the company around? Perhaps, someday. For the moment it’s going to mean public investment — your money — to the tune of at least $50 billion. And there is no guarantee of a return of that investment.

Is that the worst of it? No. One of the first actions of the “new” GM will be to close 14 plants, perhaps more, and lay off 21,000 union workers. The company also plans to eliminate 1,100 dealers and wants them to close within 18 months. Get used to seeing empty lots and showrooms where long-established, family-owned dealerships have long been landmarks.

So why wasn’t the company just allowed to go under? Timing had something to do with it, as President Obama said in noting that such an action would have had enormous consequences beyond the auto industry amid a deep recession and financial crisis.

Also, it’s a fair bet that the international financial community would have been shocked to see the government stand idly by while GM collapsed.

Now what? Create a company that can stand on its own and make a profit. This requires a new mindset from Detroit, and Washington’s playing the role of regulator, lender and shareholder at the same time won’t be easy, especially when U.S.-owned GM is competing against privately owned Ford.

The best way to avoid the inherent conflict of interest is for the government to nurse GM back to health as soon as it can and then get out of the car business.