Is GM Squeezing Tennessee For Cash?

General Motors is now officially in bankruptcy a moved brought on thanks to tens of billions of dollars lent to it by the federal government of the preceding six months. In order to secure GM's future, the Obama administration orchestrated the company's bankruptcy filing, a move which is intended to help the automaker shed unwanted brands, dealerships and factories as well as terminate thousands of employees.

Government Intervention, Despite Saying That There Would Be None

The federal government is insisting that GM will run its own affairs from this point forward, but analysts know that this statement simply is not true. Recently, Rep. Barney Frank of Massachusetts intervened when GM included a Norton, Mass distribution center on its list of facilities slated for closure, calling up GM CEO Fritz Henderson who agreed to reverse that decision.

Now, GM is playing hardball with several states, including Tennessee, asking the Volunteer State to contribute at least $200 million to keep the former Saturn factory in Spring Hill open. That factory will likely become the home of GM's small car venture, a project transferred to the US when lawmakers objected to the car being imported from China as initially planned.

Putting The Financial Pressure On Tennessee

GM's squeeze on Tennessee comes as the automaker looks at reversing the closure of one of three plants to build its small car, a vehicle likely to be based on the Chevy Beat concept platform. The two other facilities are in Wisconsin and Michigan states who likely don't have the deep pockets to fund the operation.

Tennessee, however, doesn't plan to provide the funding requested by GM, indicating that the current economic climate and lack of runny day funds would preclude that from happening. In addition, with GM being in the precarious financial state that it is, should the automaker eventually fail it could mean that Tennessee would lose its entire investment.

No Interest In Running GM?

The Obama administration has insisted that it has “no interest” in running General Motors, but that doesn't mean that members of Congress won't have their say. Nor does that mean that government backed managers, such as CEO Fritz Henderson, wouldn't consider carrying out the political wishes of federal leaders.

With just a few months in which to restructure, expect that GM will be taking additional controversial steps to ensure its success, perhaps leaning on local officials to provide funding to keep existing plants open. But, that step would leave a lot of folks facing a dilemma – risk losing thousands of local jobs and millions of dollars in property taxes while raising taxes on everyone else to provide the required funding.