As everyone knows (or think they know), General Motors Corporation was bailed out by the U.S. Government in the middle of 2009. Technically, however, GM did not get a bailout. Instead, it was sold, under Chapter 11 bankruptcy rules, to a conglomerate headed by the U.S. Treasury. This is why it came to be known as "Government Motors." The conglomerate included the Canada Development Investment Corporation, the Government of Ontario, old GM bondholders and the U.S. and Canadian Auto Worker unions (UAW and CAW). In other words, the original owners were either frozen out or reduced to minority status. At the end of last year, the Treasury sold its stake in the company at a loss estimated at $10 billion.
Through all these changes, the company never regenerated its entrepreneurial DNA. Instead, it remains Government (Genetically) Modified. The Treasury had no choice but to sell its stake, since there was no prospect of ever recouping its losses.
Having lost its top position in the automobile and truck market, GM seeks Government aided competition by other means. (The attack on Toyota, its chief market rival, is a case in point.)
GM is but one company in the international market. Sadly, as the U.S. continues to slip from its position of market domination in manufactures, other companies will undoubtedly follow its model.
Stock ownership is a risky business, these days, even riskier than in times past. Not only must a careful investor know the fundamentals of a company, the investor must also keep an eye on government intervention and international litigation. Not to mention sabotage1 .
- 1Some years ago, I lost money on investment in an Internet company, an ISP. The ISP's customers were attacked via spam, and it was unable to react fast enough to protect them. As they lost customers and market share, their stock plummetted.