GM, New Math, and You (US & Canada Taxpayers)

[ArthurPE]

US DRASTICALLY OVERPAYS GM $49.5 billion to finance it's bankruptcy TO BUY 60.8% equity of the company
Canada DRASTICALLY OVERPAYS GM $8.1 billion to finance it's bankruptcy TO BUY 11.7% equity in the company

FIXED
but that doesn't suit your agenda, now does it?

again you are misrepresenting the facts, which do not correlate with your (mis(mis)understanding...it is not I with the agenda, you made the false, hyperbolic, post...what did you expect? only like minded folks to respond? everyone else to allow your distorted 1/2 'truths' to stand without clarification or rebuttal? I think you've forgotten, this is America, whose citizens have a moral obligation to defend the government from lies and attacks from within...'enemies both foreign and domestic'

actually, they didn't over pay...any company vaulation is revenue based:
rev 150-200 annual
investment to date 13 bil, 7 spent
a great deal in anyone's book
comparing it to defense spending or the Iraq war, it's a positve bargin with tangible benefits...it was cheap to boot, without it the impact on the economy would have cost much more than the 7 bil spent so far...

summary

my understanding of your position:
1 big blunder by the government
2 you know better than the people who came up with this solution
3 the gov will lose 30+ bil when all is said and done
4 it's an affront to our American values, 'way' and the capitalist system
5 the $$$ was a 'gift', it was 'given' to them...

my take:
1 only time will tell, much more $$$ has been wasted for far less benefit (defense, war, airlines, etc.)
2 I'll defer to the dozens experienced & educated in these matters who put the deal together, and those who made the decison to implement it...
3 may lose a few bil, may make a few (or more), most likely zero sum
4 it's business as usual, it's good for the Country, but these are opinions, not facts
5 stock was bought at reduced value, they got control of GM for pennies on the dollar, if anything, as they should have, the gov struck a hard bargin and paid less than it was worth...GM was desperate and had no other options...

FY 2011 defense 860 bil (including Vets benefits), at only 10% waste (low for sure) that's >10 times what GM has cost to date, and that assumes GM does not pay for itself...saving GM cost 7 bil to date, allowing it to fold, by some estimates, would have cost 50-100 times as much in the long run...

if you pull out SS/medicaid, debt service interest, income security/UI (non-discretionary spending, ie, mandated by law or obligation)
the total budget is 1650 bil, defense alone is >50%...
7 bil vs 1650 bil...we need to pick our fights better and slaughter the 'sacred cows'

 

[Rickster71]

if you get something in return, it's not 'giving', it's a transaction...
people are buying and trading GM stock daily, so it's worth something...

again, they did not give it to them, they bought stock shares...
HUGE difference

those figures only detail outlays/expenditures, it does NOT factor profit, dividends or sale of the stock...
which will at least recoup the $$$, and most likely make a profit...
and that is for all the companies including suppliers...
again, misleading

...on April 21, 2010, GM CEO Ed Whitacre Jr. announced that the company had paid back the entire amount of the U.S. and Canadian government loans, with interest, a total of $8.1 billion. The government still has $2.1 billion invested in preferred shares that pay dividends, plus a 61% share of common equity valued at about $45 billion to the U.S.

In a national TV advertisement which appeared in the U.S. in April 2010, chairman and CEO Ed Whitacre talks about the company repaying loans from government in full, with interest, five years ahead of the original schedule. There are congressmen call that a "lie to the American people". At issue is the money for the loan repayment came from other bailout funds housed in an escrow account belonging to the company, that smacks of deception to critics.

as the report states, when all is said and done the gov will have ~47 bil invested, and will hold 61% of equity (45 bil) and 2.1 bil of prefered stock...they will have 'given' them nothing, not a cent...

only time will tell

but this is one of those topics that people jump on...
damn government!!!! socialists are stealin' our liberty!!!
<div style="float: left; margin-right: 10px;"><embed src="http://media.entertonement.com/embed/OpenEntPlayer.swf" id="1_c22be364_5593_11df_b410_0019b9b841a0" name="1_c22be364_5593_11df_b410_0019b9b841a0" flashvars="auto_play=false&clip_pid=kmjzclhjmd&e=&id=1_c22be364_5593_11df_b410_0019b9b841a0&skin_pid=wfxswdnlkf" width="300" height="30" type="application/x-shockwave-flash" pluginspage="http://www.macromedia.com/go/getflashplayer" allowscriptaccess="always" wmode="transparent"></embed><div id="1_c22be364_5593_11df_b410_0019b9b841a0_anchor" style="font-size: 8px; color: black; text-decoration: none; display: block; text-align: center;">They took our jobs!! sound bite</div><img alt="They took our jobs!! sound bite" border="0" height="0" src="http://www.entertonement.com/widgets/img/clip/kmjzclhjmd/1/1_c22be364_5593_11df_b410_0019b9b841a0/blank.gif" style="visibility: hidden; width: 0px; height: 0px; margin:0; padding:0; float:right" width="0" /></div>
yet >900 bil in Iraq, many, many dead, 10,000+ US crippled & maimed, both physically & mentally...
long term costs: healthcare, debt, pensions, etc., as high as 2 trillion...
and it is no different, some say worse, than it was 7 years ago...

compared to this, GM is a stellar investment...

ArthurePE , my friend, this won't be the first time I've told you that you make some great points.

Allow me to add a bit here.
You've mentioned in several posts "if" "possible" profit associated with GM deal.
There's the rub, it's not a good deal, it's not a good stock. GM wouldn't need a bailout if it was a good investment.

GM has ridiculous and expensive pension obligations, even worse in regards to it's labor costs, they add around $3K to the price of a car because of it.
GM is also in bed with our government (as all industry is)
GM and other auto makers have to meet EPA requirements that are unrealistic, even though the automobile isn't a significant source of pollution anymore.

American corporations go along with the "Good Cop - Bad Cop" game that they're engaged in with the government, they have always been in bed together, and the middle class pays the bill.

 

[ArthurPE]

that's right, 'if'...too early to see how this will play out...
imo, it will pay for itself, and then some, but in the event of a loss, it will be small (by government stds, lol)

but this was not done to invest, this was done to minimize damage to the economy and prevent job loss...much of the reason any gov $$$ is spent...total gov employment is ~ 20% of the workforce (fed/state/local)...

at least there is hope of divesting ourselves of this burden...
we're stuck with the rest...lol

pensions: good point, if GM folded, who owns those obligations?
the feds? how much? I'm betting >>>> 7 bil spent so far...

as far as mpg standards...easily met...smaller engine in a smaller car...
many companies are already within 10% of the 2016 std...
make an SUV 10% lighter (smaller) with an engine with 50% displacement/power and yeild mpg +30%, maybe more...
but instead of going 120, it will only go 80, and instead of accel to 60 in 8 sec, it may take 12...no big deal...

ArthurePE , my friend, this won't be the first time I've told you that you make some great points.

Allow me to add a bit here.
You've mentioned in several posts "if" "possible" profit associated with GM deal.
There's the rub, it's not a good deal, it's not a good stock. GM wouldn't need a bailout if it was a good investment.

GM has ridiculous and expensive pension obligations, even worse in regards to it's labor costs, they add around $3K to the price of a car because of it.
GM is also in bed with our government (as all industry is)
GM and other auto makers have to meet EPA requirements that are unrealistic, even though the automobile isn't a significant source of pollution anymore.

American corporations go along with the "Good Cop - Bad Cop" game that they're engaged in with the government, they have always been in bed together, and the middle class pays the bill.

 

[JerryLove]

This is no different than the housing market, how many home owners bought homes they couldn't afford and have since been bailed out by government assistance and re-fis? The home owner got one loan, higher rate then couldn't afford it and now has a lower rate and tax incentives to help them.

I don't believe any homeowners have gotten any government dollars towards existing homes. I don't believe there have been any tax incentives to existing home-owners. (the tax incentives have been toward new purchases). The re-fi's have certainly not given moeny to home-owners. The worst case is that the re-fi has paid off a bank and put the debt in Fanny Mae's hands, and the debtor has then defaulted. In that case, the actual beneficiary is the bank (who no longer has a loss).

The problem is people are not responsible and greedy (by people i'm not point my finger at you, I am generalizing). When the average person is in debt thats more because of the decisions they have made (no one forced them to buy that new car, house, clothes, shoes, etc.) rather than a bank, auto maker, or any business. They certainly didnt help by making it easier on them to do so, but no one forced them to do it.

Except that the mortguage broker, who lied about the house's value made money, as did the builder who built the house that was not needed, and the bank that gave the morguage that never should have been approved (and have no doubt there are more than just greedy buyers; many were actively decieved).

Its more frustrating to me to watch individuals get bailed out after bad decisions and be better off for it, when I make sacrifices and sound judgement and get nothing for it. At least with the major businesses by bailing them out they are helping a large group of people (who may or may not be responsible).

Bailing out a million individuals is not helping a large group of people? A million people not going into bankruptsy doesn't help an even larger group?

 

[JerryLove]

GM has ridiculous and expensive pension obligations, even worse in regards to it's labor costs, they add around $3K to the price of a car because of it.

It relates to my "evils of the stock market" rant. The GM management that decided to offer unsustanable benifits rather than reasonable raises back in the 80s did so because they got rich over the stock value that year, and would be unaffected by the state of the company 20 years later.

 

[Rickster71]

that's right, 'if'...too early to see how this will play out...
imo, it will pay for itself, and then some, but in the event of a loss, it will be small (by government stds, lol)

but this was not done to invest, this was done to minimize damage to the economy and prevent job loss....

That's just my point Arthur,
I'm just an average guy that's been investing for 30 years, and I recognize GM as bad, (investment or otherwise) why didn't the pros in our government see the same thing?
I can tell you why....all are in bed with one part of industry or the other. It was said Bush was in bed with (fill in the blank) and Obama is in bed with other entities, namely Unions. (some of my best friends are union) Much of the stimulus monies was directly targeted toward unions. It should've been spread out to all the taxpayers, or not given at all.

as far as mpg standards...easily met...smaller engine in a smaller car...
many companies are already within 10% of the 2016 std...
make an SUV 10% lighter (smaller) with an engine with 50% displacement/power and yeild mpg +30%, maybe more...
but instead of going 120, it will only go 80, and instead of accel to 60 in 8 sec, it may take 12

Be careful of confusing the two, EPA standards are - Pollution requirements. MPG requirements fall under - CAFE standards.
Some risk arises when these feather light, smaller cars have to share the road with large 18 wheelers that deliver all of our goods.

Arthur as always it's a pleasure talking to you. Unfortunately I have to run.
Regards.

 

[bhodge]

I don't believe any homeowners have gotten any government dollars towards existing homes. I don't believe there have been any tax incentives to existing home-owners. (the tax incentives have been toward new purchases). The re-fi's have certainly not given moeny to home-owners. The worst case is that the re-fi has paid off a bank and put the debt in Fanny Mae's hands, and the debtor has then defaulted. In that case, the actual beneficiary is the bank (who no longer has a loss).

The re-fis are essentially giving them money. Its significantly reducing the price of the mortgage thus leaving them with more money at months end. This saved not only the people who technically couldn't afford the monthly rate when first purchased as well as those whose ARMs were about to kick in or already had. Plus in addition, while the new home buyer tax incentive (which will make people consider buying when they shouldn't because they think they get free money) was extended to people who weren't first time home buyers so that the debt was shift around and they were able to get out of their current home into a new one with (hopefully) a lower interest rate and mortgage.

Except that the mortguage broker, who lied about the house's value made money, as did the builder who built the house that was not needed, and the bank that gave the morguage that never should have been approved (and have no doubt there are more than just greedy buyers; many were actively decieved).

You're kidding yourself if you think the reason the housing market collapsed was because everyone lied about the value of the house. The value of property is strictly the amount someone is willing to pay for it as it is for anything. The only people who lied were the home buyers to themselves thinking they could afford it. The banks didn't help the situation by allowing them to do so but no one was holding a gun to their head. Once the vast majority could no longer pay their mortgage and the property defaulted to the banks the value went down because the banks don't want property they want money. Since the banks don't want the property they need to get rid of it fast and in doing so reduce the price. WHen there are a ton of houses at reduced price on the market no one is going to buy Joe Homeowners house at his asking price when they can get one across the street at a discount and thus the value of the house dropped.

Bailing out a million individuals is not helping a large group of people? A million people not going into bankruptsy doesn't help an even larger group?

Yes, it helps. But it helps those who made the bad decisions. My point being that all these gov efforts are bailing out bad decisions by greedy and irresponsible people and the reason why there is more outcry on the GM deal than the housing deal is because its perceived as saving a company rather than an individual; however the individuals are being saved that was the whole point of the GM deal. Business go out of business all the time and the gov does nothing, the reason they did here just like in the banks, airlines, and other industries is because they are vital to the stability of the economy.

The gov allowed this problem by not policing creditors and when a major economic industry fails it has a domino affect. However its was the greedy of people that created it (both the individual who bought of more than he could chew and the person who allowed him to do it).

 

[JerryLove]

I can tell you why....all are in bed with one part of industry or the other. It was said Bush was in bed with (fill in the blank) and Obama is in bed with other entities, namely Unions. (some of my best friends are union) Much of the stimulus monies was directly targeted toward unions. It should've been spread out to all the taxpayers, or not given at all.

I agree that the conflict of interest problem between those who are supposed to govern in the best interest of the people, and their beholden status to special interests (such as big business) is a big part of the problem.

Some risk arises when these feather light, smaller cars have to share the road with large 18 wheelers that deliver all of our goods.

Here I cannot agree with you.

A loaded semi is 40 tons. A large F150 is 2.5 tons. A corolla's curb weight is 1.5 tons. I don't see that being 6% of the weight of what you hit, and being 4% of the weight of what you hit is a big difference.

Further: a look at safety in barrier-impact tests has even small cars doing better than SUVs and trucks (like a bookshelf-vs-floorstander: rigidity is easier to maintain in a smaller structure). In real-world experience (where everyone hits everyone else), the highest safety is with large sedans (showing a possible weight-safety advantage: but one offset by other factors in trucks and SUVs).

Further: I suspect that the percentage of accidents involving semis is relatively small. In this case: reducing the weight of the largest cars and trucks would make collisions less lop-sided.

To put it another way: if everyone has big or small cars, the danger is similar (not identical, but similar). Only the mix causes problems.

My house has one of each.

 

[ArthurPE]

That's just my point Arthur,
I'm just an average guy that's been investing for 30 years, and I recognize GM as bad, (investment or otherwise) why didn't the pros in our government see the same thing?
I can tell you why....all are in bed with one part of industry or the other. It was said Bush was in bed with (fill in the blank) and Obama is in bed with other entities, namely Unions. (some of my best friends are union) Much of the stimulus monies was directly targeted toward unions. It should've been spread out to all the taxpayers, or not given at all.

Be careful of confusing the two, EPA standards are - Pollution requirements. MPG requirements fall under - CAFE standards.
Some risk arises when these feather light, smaller cars have to share the road with large 18 wheelers that deliver all of our goods.

Arthur as always it's a pleasure talking to you. Unfortunately I have to run.
Regards.

as I said, this was not made for investment purposes (unless the stability of our economy in the long run is considered an investment), they did not do this willingly, they felt they had to, were compelled to act...in order to prevent greater losses/dmages...

nope, mpg, not emissions...
if you have a 5000 lb suv, not uncommon, and reduce it to 4500, you aren't really making it 'less safe', a MB C class is lighter, yet 'safer'...

a BMW 740d series diesel:
37 mpg (combined) now (that meets the 2016 stds) it gets 28 city/45 highway!
it weighs 4300 lbs...and is as safe as a bank vault, lol
it's got a 183 cu inch engine (most suv's twice that), tops out at a ltd 155 mph, and does 0-60 in 6.1 sec

this proves, you can have your cake and eat it too...
if GM/Ford/etc. had been working towards this model for the last 10 years, cost could be minimzed...an suv barge costs $50k

a 316d costs less, maybe 30k...and is a very safe vehicle:
combined 57 mpg/city 47/hw 64!
wt 3300 lbs
0-60 10.5 sec
top speed ltd 123
122 cu inches

 

[Chu Gai]

Arthur, I understand what you're saying and I think I've got a handle on where Stereodude is coming from too. In the official press release, GM stated,

General Motors Company Chairman and CEO Ed Whitacre today announced that GM has made its final payment of $5.8 billion to the U.S. Treasury and Export Development Canada, paying back its government loans in full, ahead of schedule.
The announcement came at a ceremony here to highlight an investment of $257 million at GM’s Fairfax, Kansas, and Detroit Hamtramck assembly centers. The investment will prepare Fairfax to build the next generation of Chevrolet’s award-winning Malibu, and make Detroit Hamtramck a second source for Malibu, ensuring that Chevrolet can meet market demand for this popular mid-size sedan.
“GM is able to repay the taxpayers in full, with interest, ahead of schedule, because more customers are buying vehicles like the Chevrolet Malibu and Buick LaCrosse we build here in Fairfax,” said Whitacre. “We are now building some of the best cars, trucks, and crossovers we have ever built, and customers are taking note. Our dealers are increasing their sales, we are investing in our plants, and we are restoring and creating jobs.”
The U.S., Canadian, and Ontario governments, as part of the launch of the new GM, provided loans of $8.4 billion and took equity stakes in the new company. Today’s payment of $5.8 billion ($4.7 billion to the U.S. Treasury and $C1.1 billion to Export Development Canada) completes the payback of these loans.
“GM’s ability to pay back the loans ahead of schedule is a sign that our plan is working, and that we are on the right track. It is also an important first step toward allowing our stockholders to reduce their equity investments in GM,” said Whitacre. “We still have much hard work ahead of us, but we are making progress toward our vision of designing, building, and selling the world’s best vehicles.
“We appreciate the support the taxpayers have given GM, and our great new products are tangible results of that support.”

Now, while I haven't done a survey, a casual read of the quotes, might very well suggest to the reader that GM has repaid the gov't in full and has done so because of increased sales. That might even be more true when one hears the commercials that basically paraphrase the announcement with people thinking GM had a little trouble, got a loan from the gov't, paid it back with the profits it's now making.

Technically, it may be a loan and technically it may be considered to be repaid. Some though may consider this nothing more than a debt for equity thing and some creative shuffling of monies and words. The NY Times, which by no stretch of the imagination can be considered a paper with a strong anti-Obama position wrote the following: http://www.nytimes.com/2010/05/02/business/02gret.html?ref=business

Maybe things will turn around someday. Maybe the IPO that GM will eventually float will serve to repay the entire Fedral committment and then some. Maybe.

 

[highfigh]

I don't believe any homeowners have gotten any government dollars towards existing homes. I don't believe there have been any tax incentives to existing home-owners. (the tax incentives have been toward new purchases). The re-fi's have certainly not given moeny to home-owners. The worst case is that the re-fi has paid off a bank and put the debt in Fanny Mae's hands, and the debtor has then defaulted. In that case, the actual beneficiary is the bank (who no longer has a loss).

Except that the mortguage broker, who lied about the house's value made money, as did the builder who built the house that was not needed, and the bank that gave the morguage that never should have been approved (and have no doubt there are more than just greedy buyers; many were actively decieved).

Bailing out a million individuals is not helping a large group of people? A million people not going into bankruptsy doesn't help an even larger group?

First-time home buyers get an $8500 tax credit and now, people who are buying a home that's not their first get a $6000 credit.