The Los Angeles Times, New York Times, Washington Post, and the Wall Street Journalcontinue to lead with the nationalization of General Motors. When the automaker filed for Chapter 11 protection yesterday morning, it "became the second-largest industrial bankruptcy in history," notes the WSJ. President Obama marked the moment "by barely mentioning it," points out the NYT, instead choosing to focus on how filing for bankruptcy will give GM another shot at survival. Some Republican lawmakers were quick to criticize the Obama administration's decision to infuse more than $50 billion in taxpayer money into the automaker and called it another example of the deepening involvement of the government in the private sector. Others were skeptical that so much money was given "to a company lacking an answer to its most profound problem: how to get more car buyers to choose its cars and trucks," notes the LAT. Some members of Obama's party, particularly from industrial swing states, criticized the restructuring plan that will lead to more job losses.
USA Today goes big with GM's bankruptcy filing but devotes its lead spot to the Air France jet carrying 228 people that vanished as it was making its way from Rio de Janeiro to Paris. Investigators began searching a vast swatch of the Atlantic Ocean for any signs of the Airbus 330-200, but there's little hope that anything will be found that could shed light on what happened to the plane as it traveled through a lighting storm off the Brazilian coast. Assuming all the people aboard were killed, it would be the deadliest airline disaster since November 2001. Pilots flying another plane said they saw what looked like fire in the ocean along the route early yesterday.
In addressing GM's bankruptcy, Obama was careful to note that filing for Chapter 11 would hardly mark the end of problems for people who depend on the automaker for their livelihood. "I will not pretend that the bad times are over," he said. "Difficult days are ahead." Indeed, shortly after it entered bankruptcy, GM announced the closing of 14 more American factories and cut up to 21,000 more jobs. By 2011, GM aims to shrink its U.S. work force to 38,000, which is less than one-tenth of what the company had in 1985. GM will also shut down around 2,000 dealerships.
As expected, Obama emphasized that the government won't be involved in day-to-day decisions, and the White House made clear that it had no say on which plants to close. Steven Rattner, the head of the administration's autos task force, summarized the government's limited involvement: "No plant decisions. No job decisions. No colors-of-car decisions." Still, many analysts say the government might find it impossible not to get involved in product decisions to further environmental goals, or even just give it favorable treatment when making purchasing decisions. Ford expressed concern that the amount of aid given to GM could change the playing field.
On the same day as GM filed for Chapter 11 protection, a New York bankruptcy judge approved the sale of most of Chrysler's assets to Fiat. The timing was great for the White House. "Keep in mind, many experts said that a quick, surgical bankruptcy was impossible. They were wrong," Obama said yesterday.
While the key players emphasized that this is an opportunity for GM to remake itself—"Why would a CFO be smiling when he's filing for his company to go bankrupt?" GM's Chief Financial Officer Ray Young asked—it's really "a risky play for the economy," declares USAT. The idea is that the effects of GM's bankruptcy filing will mostly be felt in the auto industry, but if things go awry, "the fallout could drag the economy into a deeper recession."
The LAT's Michael Hiltzik declares that there's only a "microscopic chance that taxpayers will turn a profit" with the investment in GM. "[I]f you were a conventional stock market maven, you would probably take one look at this deal and run like hell." Still, that doesn't mean the move is a bad idea since the government has to take into account the "incalculable economic cost" that would be involved in an overall GM collapse.
In a news analysis inside, the NYT makes clear that deciding when to sell off the government's stake in GM will be one of the toughest decisions Obama will face. As soon as the company comes out of bankruptcy proceedings many lawmakers are bound to urge the government to get out of the auto industry. But the truth is that the faster the sale, the less likely it is that the government will be able to recover the billions of dollars it has put in the company.
The government isn't alone in having to get used to playing a new role in GM. In a piece inside, the NYT takes a look at how the United Automobile Workers will have to adjust to its new role as not only a labor representative but also an owner of 17.5 percent of GM and 55 percent of Chrysler. Some analysts think this shift will improve the relations between workers and management as the union will have to focus on profitability since it will directly impact the retirees' health plan. Others are skeptical and say that it's unlikely the union will be able to look beyond its traditional role.
The Air France flight traveling to Paris made its last radio contact about three hours after it took off. A short while later, the plane entered a severe thunderstorm and sent out several automated maintenance messages to Air France headquarters signaling that several of its electrical components had failed and that it had lost cabin pressure. There were no distress calls from the pilots. What exactly happened remains a mystery that may never be solved, particularly considering that the lack of distress calls from the pilots signals that it must have been a quick succession of events. Initial theories lay out the possibility that lightning may have brought down the plane, but experts say it's highly unlikely that could have brought down a plane.
The WSJ details that the automatic alert sent out by the Air France plane "is puzzling for several reasons." Electrical failures can cause problems, but rarely do they result in disasters, mainly because modern planes are equipped with backups. The alerts also suggest there wasn't a sudden loss of electrical power, meaning the pilots could have sent out a distress signal. Experts are focusing in on an electronic system that had caused two recent harrowing incidents in the same Airbus model. As the NYT details, the systems sent two Qantas flights "into sudden dives" due to faulty information that it fed the plane's computers. One expert tells the NYTthat if the Air France flight suffered the same problem, and at the same time the storm winds were pushing the plane downward, "that would be hard to recover from."
The NYT reports that Iranian officials around the world may celebrate the Fourth of July among representatives of the American government. The State Department has told its consulates and embassies around the world that "they may invite representatives from the government of Iran" to their Independence Day celebrations. The paper explains that these annual parties "typically feature hot dogs, red-white-and-blue bunting and some perfunctory remarks about the founding fathers."
The WP off-leads a look at how the economy is still in the dumps. Despite the optimistic words that are being uttered by government officials, "the evidence of improvement still exists only in the form of glimmers." There's no question that the economy is stabilizing a bit, and, of course, financial markets have been rising, but even the economic indicators that purport to tell good news "come with caveats that make them less than impressive." The general view is that the economy will stop contracting in the second half of the year, but even then recovery will come slowly and unemployment will keep rising. "We're not improving yet," David Wyss, chief economist at Standard & Poor's, succinctly explained. "But we're not getting worse quite as fast."