Auto Bailouts Redux

Meantime, Toyota can't seem to get out of its own way.

Meanwhile, Ford was able to achieve record profits without government bailouts...

Separately, the U.S. government, which still owns about one-third of GM shares as a result of the taxpayer-funded bailout, said it expects to quickly exit its position in the company, according to the Detroit News,

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Seeing as how the share price is within pennys of the IPO, I'm not sure how the tax-payer has come out on top?

I can think of a little over 80,000 taxpayers that had some pretty clear and immediate benefits...

And if GM is paying us back, I think that's a pretty sweet deal.

Conveniently forgotten, the fact that Bush pumped 13.4 billion from TARP into GM and Chrysler to keep them afloat and started the ball rolling on the restructuring, concessions, etc. *shrugs* I still believe it was the wrong thing to do, and I am dismayed that the treasury sold shares at a loss making the chances of every penny being paid back less likely. Selling low off the bat means that the remaining shares have to sell high (around $51) for all of us to be repaid.

Torrance said:

Selling low off the bat means that the remaining shares have to sell high (around $51) for all of us to be repaid.

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Thats a fair distance from the most recent close of $33.25.

The economy is booming though right?

What? I must've missed my proxy card in the mail. I vote for riding the green wave and hoping for a jolt from the sale of Volt, and the return of $92 per share!! If the Big O fails to let the rubber meet the road and once again throws something under the bus, I will be pissed.

rugcat said:

Conveniently forgotten mostly by those incensed over the Obama socialist takeover of the car industry. The fact that both Bush and Obama, who agreed on almost nothing, both realized the importance of saving GM, is significant. Bipartisanship at its best.

We may get all the money back, we may not. Also conveniently forgotten is that this was not designed to make money. It was designed to save GM and 80,000 jobs. Conservatives insisted it would fail, GM would fold anyway, the jobs would be lost, and the taxpayer would have wasted billions.

But that's not what happened. It was money well spent, whether the entire cost is recouped or not. Do you think the economy would be in better shape if GM had been allowed to go belly up?

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No, it was money spent on CEOs who went to Washington in private jets and decided it was their turn at the trough. After all, all those Wall Streeters got taxpayer money. All it takes is being a bigshot, right?? And I should probably mention that those "eighty thousand jobs" saved pale in comparison to the millions of jobs lost, homes lost and futures lost because those millions DIDN'T get a bailout, but still had to pay their prior year taxes. If you think that saving GM was some kind of altruistic/economic stroke of brilliance, I can assure you, it wasn't. It was a screw job leveled against decent Americans that were forced to suck it up. . . .

So, an update of sorts:

http://www.forbes.com/sites/louiswoodhill/2012/08/15/general-motors-is-headed-for-bankruptcy-again/

Right now, the federal government owns 500,000,000 shares of GM, or about 26% of the company. It would need to get about $53.00/share for these to break even on the bailout, but the stock closed at only $20.21/share on Tuesday. This left the government holding $10.1 billion worth of stock, and sitting on an unrealized loss of $16.4 billion.

Right now, the government’s GM stock is worth about 39% less than it was on November 17, 2010, when the company went public at $33.00/share. However, during the intervening time, the Dow Jones Industrial Average has risen by almost 20%, so GM shares have lost 49% of their value relative to the Dow.

[snip]

In the 1960s, GM averaged a 48.3% share of the U.S. car and truck market. For the first 7 months of 2012, their market share was 18.0%, down from 20.0% for the same period in 2011. With a loss of market share comes a loss of relative cost-competitiveness. There is only so much market share that GM can lose before it would no longer have the resources to attempt to recover.

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According to the article, GM's D-class sedan for 2013 is a stone-cold loser; market share is likely to keep going down.

GM stock v. the DOW: https://www.google.com/finance?chdn...mpto=INDEXDJX:.DJI&cmptdms=0&q=NYSE:GM&ntsp=0

Bird of Prey said:

No, it was money spent on CEOs who went to Washington in private jets and decided it was their turn at the trough. After all, all those Wall Streeters got taxpayer money. All it takes is being a bigshot, right?? And I should probably mention that those "eighty thousand jobs" saved pale in comparison to the millions of jobs lost, homes lost and futures lost because those millions DIDN'T get a bailout, but still had to pay their prior year taxes. If you think that saving GM was some kind of altruistic/economic stroke of brilliance, I can assure you, it wasn't. It was a screw job leveled against decent Americans that were forced to suck it up. . . .

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So what exactly do you propose? Let GM go under because we can't help everyone, so we help no one? Is it the camp of the "if I can't get it, no one should" platform? Because that's what it sounds like.

I'll say this. I don't work in the auto industry, but I'm glad we saved it. And as much as I think wall street is broken (because they're wild and unregulated), saving the engine or our economy was important.

In almost every industry, there are subsidies and tax breaks and all other sorts of goodies that they have that others might not have...be it farmers, churches, oil, academia...etc.. What's your day job and I bet I can find some.

rugcat said:

When Obama bailed out GM, investing taxpayer money, GOP Senators and other conservatives were outraged.

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The not unexpected thing is that the anti-obama line on the event was completely wrong, but that in no way suggests to any anti-obama-ist that there might be something amiss in their analytic propensities.

No instead, the anti-obama line shifts to: it was Bush's idea and/or it didn't really work, and/or people flew in jets and/or still the money was somehow (not sure how) wasted.

People are predisposed to see what they're going to see, but it's blatantly obvious that at least some good came of this bailout, regardless of the pocket-lining that is pre-built into Capitalism at the upper levels. So even if you're against the bailout, you have to admit to it being at least a partial success. Not admitting this is just being plain silly.

Debeucci said:

So what exactly do you propose? Let GM go under because we can't help everyone, so we help no one? Is it the camp of the "if I can't get it, no one should" platform? Because that's what it sounds like.

I'll say this. I don't work in the auto industry, but I'm glad we saved it. And as much as I think wall street is broken (because they're wild and unregulated), saving the engine or our economy was important.

In almost every industry, there are subsidies and tax breaks and all other sorts of goodies that they have that others might not have...be it farmers, churches, oil, academia...etc.. What's your day job and I bet I can find some.

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According to the article Rob posted, GM is far from being "saved". At best GM is still on life support, and trending down.

sulong said:

According to the article Rob posted, GM is far from being "saved". At best GM is still on life support, and trending down.

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From Forbes, i.e. conservative outlook. Like I say, we're all predisposed.

Death Wizard said:

From Forbes, i.e. conservative outlook. Like I say, we're all predisposed.

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Well, that can be said about any issue, including those trumpeted by the current admin.

But the numbers are what they are: GM stock prices suck. Since the new IPO, they've tumbled. The unrealized losses for the government are increasing, not decreasing. And a loss of market share in a less-than-vibrant economy is a serious problem when it comes to profitability, long and short term.

That's not a success story and it can't be spun as one.



And just from the stock held by the government, there was a loss of $16 billion (so far) to "save" 80,000 jobs. That comes in at $200,000 per job. And we all know upper management is taking a larger share of the pie. Seems to me that cutting all of these people a check for $250,000, breaking up GM, and selling it off to mitigate these costs would have been a far more effective choice.

Yeah, but IS that government's job? To keep businesses afloat so that people can have jobs? I don't think so. I know GM was big, but the whole too big to fail idea gives me pause, every time. And if you think government did the right thing when they stepped in and "saved 80k jobs," should they do it for 50k jobs? 30k? 10k?

I think not, and I blame both of our CEOs, I mean presidents, equally, for GM and Goldman Sachs et al.

I also think it's likely GM will fall, unless FedGov keeps propping it up.

Make it a crown (or in this case, a capital?) corporation. Scare the bejeebers out of every single American. It's the only sensible plan.

Death Wizard said:

From Forbes, i.e. conservative outlook. Like I say, we're all predisposed.

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robeiae said:

Well, that can be said about any issue, including those trumpeted by the current admin.

But the numbers are what they are: GM stock prices suck. Since the new IPO, they've tumbled. The unrealized losses for the government are increasing, not decreasing. And a loss of market share in a less-than-vibrant economy is a serious problem when it comes to profitability, long and short term.

That's not a success story and it can't be spun as one.

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Agree with Rob. Whether bailouts are a good idea in general is something it's fair and expected for people to differ on. But whether a particular company is doing well is not quite as subjective, especially in the case of GM.

There are two questions here. Robeiae's post clearly shows that the GM Buyout was a terrible investment for the taxpayers and probably will never break even by the sale of stock alone. The loss works out to about $205,000 per job if the full $16.4B is realized.

But to be fair, those 80,000 taxpayers who get to keep their jobs and their subsequent economic activity has to be factored in. It would be nice if this could be calculated, but I couldn't find any statistics on it.


That brings us the second question...how much should the federal government spend to save 1 job? Would each of those 80,000 workers be responsible for $205,000 in tax revenues (or a reduction in other govt expenditures, such as housing, food stamps, etc)?

As much as I hate to admit it, I believe the answer is no. If the feds can reduce the loss by holding on to the stock for a while, then the buyout would make more economic sense.

I think a better choice would have been to arrange a loan so that Ford and Chrysler could pick over the bones of GM after it dies, allow the workers normal unemployment benefits until the recession is over and provide a one-time grant for the cities affected so they can help rebuild. AND have all federal government agencies buy "Chevy" Volts, manufactured by whichever car maker ends up with it.

There's more to the bailout than "saving 80,000" jobs. You have to consider how much it would destroy the entire market. Look at how Lehman's affected the entire everything. The market is sensitive. Hell, just the republicans irresponsibly talking about not raising the debt ceiling caused havoc.

robeiae said:

Well, that can be said about any issue, including those trumpeted by the current admin.

But the numbers are what they are: GM stock prices suck. Since the new IPO, they've tumbled. The unrealized losses for the government are increasing, not decreasing. And a loss of market share in a less-than-vibrant economy is a serious problem when it comes to profitability, long and short term.

That's not a success story and it can't be spun as one.



And just from the stock held by the government, there was a loss of $16 billion (so far) to "save" 80,000 jobs. That comes in at $200,000 per job. And we all know upper management is taking a larger share of the pie. Seems to me that cutting all of these people a check for $250,000, breaking up GM, and selling it off to mitigate these costs would have been a far more effective choice.

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(my bold) This is worst-case scenario, presented by the conservative side of the equation. Stocks rise and fall. Could be the reverse might end up being true.

And money is only part of this issue, as you know.