The Obama administration appears to be in the final stages of engineering a takeover of bankrupt General Motors that would turn the company over to a combination of worker leaders and government officials.
Under the plan being developed by GM's current chief executive, Fritz Henderson, the United Auto Workers would end up owning 39 percent of the restructured GM, with the UAW agreeing to take common stock instead of cash to pay off half the $20.4 billion that GM owes the UAW workers fund to pay pension and health benefits to retired GM workers, according to the Wall Street Journal.
The plan also calls for the U.S. Treasury to give GM an additional $11.6 billion in bailout loans, on top of the $15.4 billion the government has already given.
In return, the Treasury expects to pick up at least half the ownership of GM, as payment for half the outstanding bailout funds that will total $27 billion by the time the deal is done.
So, when the deal is completed, GM will be 89 percent owned by the government and the union.
The clear losers are the current holders of GM stock and the creditors of GM.
Henderson has threatened to file for bankruptcy unless GM's creditors agree to settled for 10 percent of the company.
This would leave the current GM stockholders with less than 1 percent of GM common stock.
The Wall Street Journal commented that the government owning 50 percent of GM or more "would turn GM into a sort of Government Motors, making the federal government the company's de facto boss and bank lender."
Ironically, the Obama administration's heavy-handed insistence on transforming GM into a European-style automaker owned by government and workers may have increased the likelihood GM will be forced into a late-May Chapter 11 bankruptcy filing.
An ad hoc committee of GM bondholders called the proposal "neither reasonable nor adequate," characterizing the offer as a "blatant disregard of fairness for the bondholders who have funded this company."
The GM bondholders asserted the proposal being floated by the Obama administration and the current GM management "amounts to using taxpayer money to show political favoritism of one creditor over another."
Is it going to be 'Government Motors'?
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