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June 1st, 2009

Historic Day: GM Files for Bankruptcy

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There’s no avoiding the historic news of the day: GM, once the world’s leader in auto sales, filed for Chapter 11 bankruptcy in a Manhattan court this morning. We’ve already begun to see the signs of GM’s transformation into a much slimmer, more environmentally-focused operation.

With nearly $50 billion in taxpayer support, the White House has made a political decision that the cost of letting GM fail would far outweigh the price to save it. Thanks to their momentous financial commitment, the U.S. government now controls 60% of the automaker. Canada’s $9.5 billion pledge has given our neighbors to the north a 12.5% stake.

While the White House says it won’t involve itself in the day-to-day operations of the company, their “guiding” hand could influence the pending selection of GM’s new leadership board, much in the same way it forced out previous company head Rick Wagoner. The company will have to abide by the Treasury’s executive compensation limits, but beyond that, the extent of the Washington’s influence is unknown.

Some experts say the government’s largest influence over the proceedings will be felt through speed. Bankruptcy can be a long and arduous process for large corporations. GM’s filing marks the largest in our country’s history, just after their counterpart Chrysler, who some say may emerge from bankruptcy as early as this week.

What does today’s news mean to consumers?

If you own or plan to buy a GM vehicle, there’s no real cause for concern in the short term. Despite some dealership closings, no other immediate changes should be felt this year.

Will GM emerge from bankruptcy a better company? Cast your vote here.

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About the HSH Blog

HSH.com's daily blog focuses on the latest developments in the mortgage and housing markets. Our mission is to relate how changes in mortgage rates and housing policy, as well as the latest financial news, impacts consumers, homebuyers and industry insiders alike. Our 30-plus years of experience in the mortgage industry gives us an edge as we break down the latest changes in an ever-changing market.

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Tim Manni

Tim Manni is the Managing Editor of HSH.com and the author of their daily blog, which concentrates on the latest developments in the mortgage and housing markets.

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