The 'New' GM: Private Investors Set To Make A Killing As More Workers Are Laid Off

The “new” General Motors exited bankruptcy court on Friday. With the help of the courts, and under the direction of the Obama administration, the company has shed nearly $130 billion in liabilities and created the framework for a vast increase in the exploitation of its workers.

The speed of the bankruptcy proceedings is remarkable. GM passed through the entire process is less than six weeks. One analyst called it “unprecedented, unbelievable, breathtaking.”

Bankruptcy court Judge Robert Gerber brushed aside a series of objections from retirees who will see their health care eliminated, along with asbestos and accident victims and other unsecured creditors. With the potentially profitable assets sold to the new GM, these obligations, along with a number of unwanted brands, will languish in bankruptcy court as part of the “old” GM.

The whole process was a travesty of legality and due process, demonstrating that when Wall Street wants something done, every institution of the American state snaps into line. The bankruptcy courts are supposedly a mechanism for mediating the different claims of various “stakeholders.” In the event, the court served as a rubber stamp for decisions that had already been made. The wealthy investors and banks will recover 100 per cent of their investments in GM debt, while workers and other claimants will end up with nothing.

The new GM is born out of a process of social devastation. The company will shed 27,000 more jobs in the US, bringing its total US workforce to 64,000. Thirty years ago the company employed over 618,000 in the US. At the beginning of last year, it employed 110,000.

An additional 14 plants will be closed, along with some 2,000 dealerships. GM is also shutting plants in Canada, bringing the total workforce there to 7,000, down from 20,000 in 2005.

The “new” company emerges from the rubble of closed factories and dealerships and the impoverishment of working class communities that depended on auto employment to fund schools, hospitals and other basic services, as well as the blighted lives of hundreds of thousands of workers and retirees.

As part of a deal negotiated with the United Auto Workers, workers who retain their jobs will have their wages frozen. A no-strike pledge through 2015 agreed by the UAW will facilitate further job, wage and benefit cuts, without the inconvenience of a contract vote. The company aims to replace all older workers with new-hires making $14 an hour.

In an indication of things to come, CEO Fritz Henderson declared Friday that he would employ the “intensity, decisiveness and speed” of the bankruptcy process and transfer it “to the day-to-day operations of the new company.”

UAW retirees, who have already seen their dental and optical benefits eliminated, will face sharp cuts in health care, enforced by the UAW. The UAW-run health care trust—the Voluntary Employee Beneficiary Association (VEBA)—will own 17.5 per cent of the new GM. Its assets will be insufficient to cover benefits owed to UAW retirees, but the UAW executives hope to grow rich from the 17.5 per cent of stock in the new company they will control.

More than 50,000 retirees who are members of the International Union of Electrical Workers and other non-UAW organizations face the immediate elimination of their health care, as they are not covered by the VEBA.

The downsizing of GM—along with Chrysler, which exited bankruptcy last month—will ripple throughout the auto parts industry and other industries, producing a wave of bankruptcies, plant closures, layoffs and wage cuts.

The restructuring of General Motors and Chrysler is the direct outcome of the policy of the Obama administration, the tool of the most powerful sections of the financial elite. The government conditioned loans to the automaker on securing this result, making explicit its demands for massive concessions from auto workers. Everything has been tailored to the interests of Wall Street, which was determined to transform the former auto giants into much smaller, but highly profitable, enterprises.

The US government will now own 60 per cent of GM, but the administration has repeatedly made clear that it has no intention of playing any role in the day-to-day management of the company.

This will be left to Henderson and the new chairman, Edward Whitacre, former CEO of AT&T, who was handpicked by the Obama administration’s auto task force. The Wall Street Journal quoted Karl Rove, former advisor to George W. Bush, calling Whitacre “very tough”—i.e., very dedicated to the interests of Wall Street.

The administration has said it hopes to quickly sell off its shares to private investors, who are set to make a killing.

The bankruptcy of General Motors, once the pinnacle of American manufacturing, is a stunning expression of the protracted and precipitous decline of American capitalism. The economic crisis that has overcome world capitalism is rooted in the decay of American capitalism. But the crisis precipitated by the money-mad speculation and fraud of the US financial elite has only increased its domination over the political system and every other official institution in the country.

The banks, utilizing the services of the Obama administration, are exploiting the crisis of their own making to plunder the national treasury and carry through a further dismantling of unprofitable industries, in order to divert even greater resources to the enrichment of the American financial aristocracy.

At the heart of this process is an assault on the living standards of the working class without historical precedent.

Joe Kishore