General Motors (aka Government Motors) claims that it paid back the 49.5 billion dollar loan. Wrong. GM paid part of loan with government money.
Taxpayer money to pay taxpayer loan. Think about that for awhile. Does your head hurt yet?

http://www.forbes.com/2010/04/23/gen...mia_print.html

Originally Posted by Donna2

General Motors (aka Government Motors) claims that it paid back the 49.5 billion dollar loan. Wrong. GM paid part of loan with government money.
Taxpayer money to pay taxpayer loan. Think about that for awhile. Does your head hurt yet?

http://www.forbes.com/2010/04/23/gen...mia_print.html

Good catch, Donna.

While I was a supporter of the GM bailout--I didn't like all the details, but I believed that GM needed to be saved--the recent ads by the GM chairman kind of surprised me. Not enough to go back and do the research--you did that--but surprised me nonetheless.

I have now done the research. And I agree with the Forbes writer. There is almost no way that I can see that the U.S. taxpayer will come close to breaking even on our investment in GM. To give you an example of how profitable they would have to become to justify a share price to produce a market capitalization (share price times number of shares outstanding) of $60 billion, here are the companies that are currently at roughly that value...Amazon, 3M, Home Depot. They're the 40th thru 42nd most valuable companies in the U.S. More examples, companies that are less valuable include names like Boeing, Kraft, Ford, Target, Eli Lilly, Time Warner, and on down the list of those worth less than $60 billion.

It proves one thing...never believe a car salesman!

Originally Posted by Villages Kahuna

Good catch, Donna.

While I was a supporter of the GM bailout--I didn't like all the details, but I believed that GM needed to be saved--the recent ads by the GM chairman kind of surprised me. Not enough to go back and do the research--you did that--but surprised me nonetheless.

I have now done the research. And I agree with the Forbes writer. There is almost no way that I can see that the U.S. taxpayer will come close to breaking even on our investment in GM. To give you an example of how profitable they would have to become to justify a share price to produce a market capitalization (share price times number of shares outstanding) of $60 billion, here are the companies that are currently at roughly that value...Amazon, 3M, Home Depot. They're the 40th thru 42nd most valuable companies in the U.S. More examples, companies that are less valuable include names like Boeing, Kraft, Ford, Target, Eli Lilly, Time Warner, and on down the list of those worth less than $60 billion.

It proves one thing...never believe a car salesman!

Thanks K.

It is simply amazing how the figure "billion" has lost it's meaning. Many big companies have bitten the dust through the years. GM should have been one of them. In my humble opinion, of course.

Originally Posted by Villages Kahuna

Good catch, Donna.

While I was a supporter of the GM bailout--I didn't like all the details, but I believed that GM needed to be saved--the recent ads by the GM chairman kind of surprised me. Not enough to go back and do the research--you did that--but surprised me nonetheless.

I have now done the research. And I agree with the Forbes writer. There is almost no way that I can see that the U.S. taxpayer will come close to breaking even on our investment in GM. To give you an example of how profitable they would have to become to justify a share price to produce a market capitalization (share price times number of shares outstanding) of $60 billion, here are the companies that are currently at roughly that value...Amazon, 3M, Home Depot. They're the 40th thru 42nd most valuable companies in the U.S. More examples, companies that are less valuable include names like Boeing, Kraft, Ford, Target, Eli Lilly, Time Warner, and on down the list of those worth less than $60 billion.

It proves one thing...never believe a car salesman!

VK:
I must agree with you on this one.
I can't believe they are on the air bragging how they paid all their money back
It started as a whisper but it is getting awful load now. GM wants us to pay the 13.5 billion into their retirement fund. There is no justice

Originally Posted by JUREK

...GM wants us to pay the 13.5 billion into their retirement fund....

Whoops! What'd I miss? Give me a link. One of the things I didn't like about the GM bailout was how well the UAW was treated at the expense of the secured lenders. I understood the bankruptcy settlement to be "it" as far as the union pension fund was concerned. If there's something I misunderstood about even more being gifted to the UAW, I'm really going to be PO'd.

VK: I heard the guests talking about the GM and Chrysler pension problems on both Larry Kidlow and on Fox news. Also read it on line.
Here is one link. http://www.sodahead.com/united-state...w/blog-306953/

has very good reasons to be POd. Had GM gone into bankruptcy, the creditors would have assumed ownership, the company would be able to renegotiate all of its union contracts and get wage scales comparable to non-union automakers, amounts owed to suppliers would be radically adjusted, property leases and dealer contracts would be cancelled, etc.

If this sounds radical, consider K-Mart. K-Mart went into chapter 11 in 2002. It did not stop doing business,but it did close a number of unprofitable stores - no longer being obligated for the lease on these stores. In two years K-Mart went on to acquire Sears and formed Sears Holdings, an entity that owns both chains. The combined companies are reporting record earnings despite the recession. How much did this cost the taxpayer? Nothing, zero, nada!

This same scenario could have played out at GM. The company would not have shuttered its plants, GM cars and trucks would continue to be made and the creditors would have assumed ownership.

Instead, the government stepped and and through loans for stock emerged as the owner of GM. The company was not allowed to go through bankruptcy and the primary lenders got very little. The UAW contracts were left intact, making a competitive position in the marketplace impossible or at least very difficult in the long run. The taxpayer is out many tens of billions and the chance of being repaid? Nothing, zero, nada!

In which instance did the creditors, the company US international financial strength and the taxpayers come out ahead? The answer is obvious. The question is do we want our government to own major companies at the expense of the taxpayer or do we want the free market to work?

Originally Posted by BBQMan

...Had GM gone into bankruptcy, the creditors would have assumed ownership, the company would be able to renegotiate all of its union contracts and get wage scales comparable to non-union automakers, amounts owed to suppliers would be radically adjusted, property leases and dealer contracts would be cancelled, etc.
...

Not to create revisionist history, but GM did declare bankruptcy and their Plan of Reorganization was quickly approved by the bankruptcy judge and they came out, freed from a huge amount of their obligations.

What you describe is how bankruptcy is supposed to work. If you recall, it didn't in the case of GM. All the key creditors met together, in small groups, with the company and finally with representatives of the Treasury Department. Remember that committee that was formed with several bankruptcy experts to try to negotiate a plan? They got absolutely nowhere.

After several months of negotiations, there was no progress on a Plan of Reorganization. The secured lenders would only go so far, as would the union. It was a giant game of "chicken" during which time GM slipped damgerously close to insolvency. Had they declared bankruptcy then, it's a virtual certainty that they wouldn't exist today. The creditors simply were not going to give in from their "last and best" positions.

That's when the government stepped in and basically strong-armed the deal that got done. I don't like a lot of the details--the secured lenders got hosed, the UAW got a giant gift, and the taxpayes got screwed. But I have to say that one can disagree with many of the elements of the plan, but without government intervention, the bankruptcy process simply was not going to work. For saving GM, I must give the government credit, even though I strongly dislike many of the elements of the bankruptcy re-organization that was finally negotiated.

Originally Posted by JUREK

VK: I heard the guests talking about the GM and Chrysler pension problems on both Larry Kidlow and on Fox news. Also read it on line.
Here is one link. http://www.sodahead.com/united-state...w/blog-306953/

Well, I didn't learn anything really new, and yet I did. The deal that was part of the bankruptcy plan of reorganization reduced GM's obligation to fund the UAW pension plan quite substantially and permanently. At the time, I thought "what's going to happen when the pension fund, now completely under the control and ownership of the UAW, runs dry and can't meet it's obligations to retirees?"

I thought to myself that there would be no way that a political decision would be made to go back and dump more money into the now totally UAW-controlled pension fund to satisfy the UAW. I still (would like to) believe that. I can't imagine any member of Congress standing up in the open and proposing that we give more money to the UAW retirees, who even in retirement make more money and have better healthcare benefits than the vast majority of Americans who are working!

The flip side of the failure of the pension fund is, yes the PBGC would have to step in and pay the pension and benefit obligations to GM retirees. But by law, the pensions and benefits that PBGC can pay are only a little more than half the retirement pay and benefits that GM retirees get now. So if the government--us--have to pick up the tab for the GM retirees, that would be bad thing. But if the overpaid UAW retirees retirement pay and benefits would be reduced to a far more reasonable level, more like what most Americans have to live on, in my opinion that would be a good thing!

What I learned was how close we might be to confronting this problem.

For those who are into fiction and haven't seen this fairy tale yet.

[ame]http://www.youtube.com/watch?v=SSNPFVLIWjI&feature=player_embedded[/ame]