Richard Shelby: U.S. "On The Road To Socialism"
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WASHINGTON — Sen. Richard Shelby said Friday the government should have allowed the marketplace to decide General Motors' fate and that the huge federal stake in the company puts Washington on "the road to socialism."
Shelby, ranking Republican on the Banking Committee, argued that the financially beleaguered GM could have saved "lots of money" if it had chosen six months ago to file a Chapter 11 bankruptcy petition.
"What I worry about" is Washington's large interest in the company, the senator said in a nationally broadcast network interview. "It's basically going to be a government-owned, government-run company ... a company that has been sadly run into the ground."
Shelby represents Alabama, a state with a significant presence of non-U.S. automakers, including Honda, Mercedes and Hyundai.
Facing a restructuring deadline, GM is in the process of brokering a last-minute deal with bondholders and the United Auto Makers, and then is expected to file Monday what would be one of the largest bankruptcies ever.
Said Shelby: "I'm sure they haven't cut enough and there are not enough concessions there."
The Treasury has loaned GM $19.4 billion and would provide $30 billion in additional financing to keep the new GM operating under bankruptcy protection. The government would get 72.5 percent of the new company's stock under the plan.
"I think this is a sad day," said Shelby. "This was a great company ... But they're where they are ... they were mismanaged for a long time. Look at the wealth they've lost, look at the prestige they've lost. It's just not a good day."
Asked on CBS's "The Early Show" whether he expected taxpayers would ever be reimbursed for the money Treasury has sunk in GM, Shelby replied, "That's a great question. I think it's a daunting task for the people running this company."
"We should have let the market forces work it out," he said. "That's the way we've always done it ... What we've done ... it's the road toward socialism, government intervention in the market in a big way. What's the end game here and can the American people afford it. I think the answer is obviously not."
A stronger picture of the nature of the company's restructuring emerged Thursday after a bloc of General Motors Corp.'s biggest bondholders agreed to a Treasury sweetened deal to wipe out $27 billion of the automaker's unsecured debt in exchange for company stock.
GM's union employees are due to finish voting Friday on whether to ratify a modified contract that would cut some of their benefits but slash the automaker's labor costs. And the company's board of directors will begin two days of meetings to decide what the automaker will do when its government restructuring deadline arrives Monday.
A senior Obama administration official estimated that GM would be under bankruptcy protection for 60 to 90 days, longer than the expected reorganization of Chrysler LLC, because GM is bigger and more complex. The official spoke on condition of anonymity because of the sensitivity of the negotiations.
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05/29/09 09:27 AM ET Associated Press