Political  Calculations

In mid-2008, General Motors was a failing company. Unable to unload their product line of gas guzzlers, the wrong cars and trucks to be trying to sell at a time of record high gasoline prices, the company's high union-driven high labor costs were combined with the extremely high pension and health care costs it had awarded its unions in better times, the company was quickly heading for bankruptcy and quite possibly for liquidation.

In that environment, GM decided to bet big on a new mass market production car, one that could deliver 50 miles per gallon - more than double the mileage of the average vehicles of its product line - and it would bring it to market in 2010, making a technological leap in the process: the Chevrolet Volt.

From Failure to Federal Entity

And then, General Motors, as it was, failed. In December 2008, the company's management and its unions sought and received a special bridge financing from the federal government which would provide a cushion of time during which the company would attempt to restructure itself before becoming insolvent.

Chevrolet Volt Recharging - Source: General Services Administration

In January 2009, Barack Obama was sworn into office and changed the direction of the company's restructuring efforts, forcing out the company's CEO as he increased the federal government's role in managing the company as it prepared to enter bankruptcy. Ultimately, the U.S. government would become the largest stakeholder in the company that acquired GM's name, trademarks and assets in the company's bankruptcy. For all practical purposes, GM became an entity of the U.S. federal government.

Political Calculations

Political Calculations is a site that develops, applies and presents both established and cutting edge theory to the topics of investing, business and economics.

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