WASHINGTON — In a defining moment for U.S. capitalism, President Barack Obama ushered General Motors Corp. into bankruptcy protection Monday and put the government behind the wheel of the company that once symbolized the nation’s economic muscle.
The fallen giant, the largest U.S. industrial company ever to enter bankruptcy, is shedding about 21,000 jobs and 2,600 dealers.
Sparing few communities, the retrenchment amounts to one-third of GM’s U.S. workforce and 40 percent of its dealerships.
“We are acting as reluctant shareholders because that is the only way to help GM succeed,” Obama said of the temporary nationalization of the 100-year-old company.
Obama lauded what he called a “viable, achievable plan that will give this iconic American company a chance to rise again” as GM followed Chrysler LLC into bankruptcy court. Of Detroit’s “Big Three” automakers, only Ford Motor Corp. has avoided bankruptcy restructuring and has not taken federal bailout money.
The prepackaged GM bankruptcy deal — crafted by the administration, the company, the United Auto Workers union and a group of bondholders — would give the U.S. government a 60 percent controlling stake in what was once the world’s largest automaker.
An additional 12.5 percent would be under Canadian government ownership.
“What I have no interest in doing is running GM,” Obama said.
His only goal, he said, is to get GM back on its feet and then “to get out quickly.” Yet, the U.S. could end up holding the shares for some time.
Neither Obama nor his spokesman offered an indication of how long the government’s involvement with GM would last.
Obama said he recognizes that even the temporary nationalization of GM “may give some Americans pause.” But he called it preferable to letting the company fail outright — or giving it more and more bailout loans, money it has gone through rapidly.
The administration will provide GM with an additional $30 billion in aid to help it restructure in addition to the $20 billion the automaker had already borrowed from the Treasury. GM will also get $9.5 billion from Canada.
If all goes according to plan, on top of the 60 percent U.S. stake and Canada’s 12.5 percent, the UAW would get a 17.5 percent stake and bondholders would end up with the remaining 10 percent.
Existing stockholders would be wiped out.
It is one of the largest peacetime nationalizations. The government has taken shares in railways, steel mills, coal mines and foreclosed homes — but most of these came at times of war.
The government did take over failed savings and loans in the 1980s and, more recently, mortgage giants Fannie Mae and Freddie Mac.
