MICHELE NORRIS, host:
From NPR News, this is ALL THINGS CONSIDERED. I'm Michele Norris.
ROBERT SIEGEL, host:
And I'm Robert Siegel.
It has been another momentous day for General Motors. To reduce its mountain of debt, GM is offering the U.S. government and the United Auto Workers near total ownership of the company. GM also said it needs another $11 billion in taxpayer help and that it will shut down its fabled Pontiac division by next year.
NPR's Frank Langfitt catches us up on the day's events.
FRANK LANGFITT: To keep operating, GM wants to reduce its debt by at least $44 billion. The company's proposed solution is dramatic. In exchange for giving up many of their claims, the union and the government would take an almost 90 percent stake in the company. To put it in clearer terms, consider: the U.S. Treasury Department could end up owning about half of an iconic, industrial firm.
GM's CEO Fritz Henderson said the deal is critical to revitalizing GM.
Mr. FRITZ HENDERSON (Chief Executive Officer, General Motors): Our objective here is to create a strategy where we can win, not simply survive. And so, it's basically dealing with the environment that we have, the reality of our situation, doing it once and doing it now.
LANGFITT: The reality of the situation is stark. GM owes far more money than it can pay back. That includes $20 billion in health care benefits to union retirees and more than $15 billion in taxpayer loans. If the union and government trade much of that debt for a stake in GM, Henderson acknowledged they would have a lot of influence.
Mr. HENDERSON: The shareholder, whether it's the UAW or the government, they're going to want to have a board of directors oversee the company; they're going to want to have a management team aggressively execute the plan. But the Treasury has not demonstrated any interest in actually running the company. They want to make sure the company is run well for the benefit of all the parties, including the taxpayers.
Mr. BRIAN JOHNSON (Financial Analyst, Barclays Capital): If it goes through, GM is effectively a nationalized union-controlled organization.
LANGFITT: That's Brian Johnson. He's a financial analyst who covers the auto industry for Barclays Capital. Johnson says the proposal has serious implications for Washington, Detroit and capitalism.
Mr. JOHNSON: It seems like we're entering a new era of government industrial cooperation, shall we say.
LANGFITT: Johnson said whether that cooperation works depends on what role the government plays. If the Treasury Department is a passive investor and lets car executives run the company, Johnson says GM could succeed.
Mr. JOHNSON: But the question is, will the political process in Washington let it be passive?
LANGFITT: GM's proposal to trade debt for stock is not a done deal. Officially, the government is noncommittal. In a statement today, the administration said it had, quote, "made no final decision on how it will treat its loans." GM bondholders, who stand to lose a huge sum in this deal, may reject it, and that would send the company into bankruptcy.
More certain at this moment is the fate of Pontiac. The famous muscle car brand will soon be history.
Fritz Henderson, the GM CEO, said deciding to kill Pontiac wasn't easy.
Mr. HENDERSON: A tough decision, one of many, but a very tough decision for many of us because this is a brand that has a considerable heritage within our company. It's an intensely personal decision in many ways, but one that needed to be taken in light of the circumstances.
LANGFITT: Pontiac was once a successful brand, known for high horsepower vehicles. The Pontiac Trans Am co-starred in the 1970's Burt Reynolds' movie "Smokey and the Bandit." But tastes change, consumers moved toward more fuel efficient cars and Pontiac eventually became just like any other auto division.
David Westcott marketed Pontiacs in their heyday.
Mr. DAVID WESTCOTT (Owner, Westcott Automotive Group): They were sporty and flashy. And with the Firebirds, you had the big - and the Trans Am, you had the big scoops on the front and the big hawk decal.
LANGFITT: Westcott now sells Pontiacs in North Carolina, and he admits sales aren't what they used to be.
Mr. WESTCOTT: It had dwindled over the past few years.
LANGFITT: Now, Pontiac joins the increasing number of brands GM plans to get rid of. They include Hummer, Saturn and Saab. The survivors: Chevrolet, Cadillac, Buick and GMC, the company's truck division.
Frank Langfitt, NPR News, Washington.
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