Govt may turn GM's biggest shareholder

SOUTHFIELD: General Motors Corp, operating with $15.4 billion in US aid, would be at least half owned by the US government under the automaker���s plan to slash its debt and cut dealer ranks more than 40%.

The proposal, if accepted by the Obama administration, would give the Treasury at least half of the 60 billion shares in a reorganized GM, the automaker said. The US would join European and Chinese governments in holding stakes in local automakers.

���Political economics are now part of the economy in the US,��� said Sean McAlinden, a labor analyst and economist at the Center for Automotive Research in Ann Arbor, Michigan. ���They are going to control more of GM than the government of Lower Saxony owns of Volkswagen or France owns in Renault.���

The US may end up as the biggest shareholder in the nation���s largest automaker by converting $10 billion of its loans into equity. The government gets preferential treatment over other GM creditors because its loans are secured by assets while the $27.5 billion in bond debt is unsecured.

Chief Executive Officer Fritz Henderson, installed by the Obama administration after his predecessor was asked to resign, needs the debt reduction and savings so GM can restructure outside of court and not be forced into bankruptcy in 34 days.

The government has held veto power over GM expenditures of more than $100 million since a December rescue.