Politically, the split [into "Good GM" and "Bad GM"] makes sense—but only if the US government takes an equity position in the “new” GM. See? We didn’t throw billions of dollars worth of your hard-earned money down a rathole. We used it to help GM rise Phoenix-like from the ashes. It’s an investment. Uncle Sam gets to make a new cake and eat it too because GM’s current U.S. Treasury loans (call it $22.8 billion) are secured, backed by all of GM’s assets, including the assets owned by its subsidiaries.

The Fed’s claim on GM is junior only to the existing, secured, revolving credit facility (a pittance at about $5 billion). I repeat: GM’s federal loans are senior to all GM’s creditors, including the retiree trust claims (around $27 billion), GM bondholders ($29 billion) and the trade payables owed to suppliers ($22 billion).

Moving forward, leaving all of those “stakeholders” behind, “good” GM is looking for another $22 billion from the Treasury to fund its future operations. Oh, and an additional $6.6 billion to develop energy efficient vehicles and $6 billion from foreign governments. If Santa leaves all these presents under GM’s Christmas tree, all of this new money would ALSO be senior to existing unsecured creditors, ahead of payments to bondholders, the retiree trust and creditors.

Again, in exchange for their largesse, US (and foreign) taxpayers get a stake in the new, relatively unencumbered “Good” GM. The Treasury Department converts all of its current and upcoming senior secured debt into junior preferred stock. Ladies and gentlemen, I present to you, American Leyland.