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Cost Of GM Rescue Likely To Rise

MELISSA BLOCK, Host:

This is ALL THINGS CONSIDERED from NPR News. I'm Melissa Block.

ROBERT SIEGEL, Host:

Today, a landmark in the relationship between government and business: the federal government assumed a 60 percent stake in one of the biggest U.S. companies ever to file for bankruptcy.

BARACK OBAMA: It's not just any company we're talking about, it's GM. It's a company that's not only been a source of income, but a source of pride for generations of autoworkers and generations of Americans.

BLOCK: President Obama spoke today of a new GM that can produce the high quality, safe and fuel-efficient cars of tomorrow and that is once more a symbol of America's success. The president also said he has no interest in, as he put it, running GM.

OBAMA: The federal government will refrain from exercising its rights as a shareholder in all but the most fundamental corporate decisions.

SIEGEL: NPR's Frank Langfitt reports.

FRANK LANGFITT: President Obama said he didn't want to do this; spending a fortune in taxpayer money to finance General Motors in bankruptcy is really unpopular. And for the new president, it's a political and financial risk. But the alternative of letting GM and Chrysler fail, Mr. Obama argued, was much worse.

OBAMA: In the midst of a deep recession and financial crisis, the collapse of these companies would have been devastating for countless Americans and done enormous damage to our economy.

LANGFITT: But GM CEO Fritz Henderson described it as a new beginning.

FRITZ HENDERSON: The GM that many of you knew, the GM that, in fact, had let too many of you down, is history.

LANGFITT: Henderson promised a leaner company devoted to its customers. And he said General Motors would not betray them again.

HENDERSON: We look forward to the chance to win your business and earn back your trust. Give us another chance.

LANGFITT: Some have doubted the government's ability to push a big industrial company through court, but President Obama cited the recent remarkable experience of Chrysler. The company went bankrupt a month ago; a new Chrysler is expected to leave court in a few days.

OBAMA: Keep in mind, many experts said that a quick surgical bankruptcy was impossible. They were wrong.

LANGFITT: Ed Altman is a professor of finance at New York University's Stern School of Business.

ED ALTMAN: I think this is a big gamble on the part of the government, on the part of GM itself, that the bankruptcy will work. And frankly, I'm quite skeptical given the fact that the rest of the competition is not going to sit back and say, oh, we have to now give them some market share because they are an American icon. It doesn't work that way, unfortunately.

LANGFITT: And after taxpayers have sunk all that money into General Motors, Altman wonders...

ALTMAN: If it doesn't go well, the question then is what do you do? Do you let them then liquidate or do you keep putting money, you know, good money after bad?

LANGFITT: Rebecca Lindland follows the car business for the firm IHS Global Insight. After GM gets rid of all those huge debts, she thinks the company could eventually make a profit and survive.

REBECCA LINDLAND: I think that we're reasonably optimistic that GM won't find itself in this position again.

LANGFITT: Frank Langfitt, NPR News, Washington. Transcript provided by NPR, Copyright NPR.

NPR transcripts are created on a rush deadline by an NPR contractor. This text may not be in its final form and may be updated or revised in the future. Accuracy and availability may vary. The authoritative record of NPR’s programming is the audio record.

Frank Langfitt is NPR's London correspondent. He covers the UK and Ireland, as well as stories elsewhere in Europe.