Washington If the government takes a majority stake in General Motors, will it end up taking the wheel, too?
Under a restructuring plan put forth this week by GM, the ailing automaker would give majority ownership to the federal government to stave off bankruptcy. That handoff would amount to an extraordinary partial nationalization of the maker of Buicks, Cadillacs and Chevys that has been an independent company since 1908.
The Obama administration has said it isn’t interested in running an auto company, but with that big of a stake, some analysts say the government would probably be tempted to push its own policies on such issues as alternative fuel vehicles and unions. And that could affect the types of cars that roll off GM’s assembly lines.
“The fear here is that a company owned by the government would move toward the do-good results, not the bottom line,” said Gerald Meyers, a University of Michigan business professor and former CEO of American Motors Corp.
GM’s proposal would give the government more than 50 percent of the automaker’s stock in exchange for forgiving $10 billion in government loans. The United Auto Workers union would end up with a 39 percent stake.
The plan is far from a sure thing. Holders of GM’s $27 billion in unsecured debt have dismissed it as unfair because they would lose most of their investment. And the White House repeated this week that it doesn’t want to own GM or any other auto company.
But through its broad efforts to rescue the auto industry, the White House is already deeply involved in the operations of GM and Chrysler. It has sunk nearly $25 billion into the two companies and their financial arms, and is ready to give them even more if their restructuring plans are deemed workable. The Obama administration has already flexed its muscle by forcing out Rick Wagoner as GM’s CEO.
GM said Monday that it would still retain day-to-day control of the company. But at the direction of the Treasury Department, GM will replace several members of its board of directors at its annual meeting in August. In most corporations, the board sets long-term policies and goals. If the handover plan goes through, at least one of those seats will probably be held by a government representative who would look out for the taxpayers’ interests.
“The U.S. government as a major shareholder would probably ensure that the board is doing their role,” GM chief financial officer Ray Young said in an interview this week.