GM Auto Bailout Loss Nearing $35,000,000,000

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**Frazzled**

http://news.investors.com/article/616849/201207030826/gm-bailout-taxpayer-loss-rises-as-shares-fall.htm

Government Motors: As GM shares near record low, taxpayer loss on bailout rises to $35 billion
To quote Lando Calrissian, this deal's getting worse all the time.

General Motors(GM) shares fell to a fresh 2012 closing low of 19.57 on Monday. The stock hit 19 in mid-December, the lowest since the auto giant came public at $33 in November 2010 following its June 2009 bankruptcy.

Normally you might say, tough luck investors. But this is Government Motors. The Treasury still owns 26.5% of GM, or 500 million shares. Taxpayers are still out $26.4 billion in direct aid. Shares would have to hit $53 for the government to break even.

Those shares were worth about $9.8 billion as of Monday. That would leave taxpayers with a loss of $16.6 billion.

But that's not the full tally. Obama let GM keep $45 billion in past losses to offset future profits. Those are usually wiped out or slashed, along with debts, in bankruptcy. But the administration essentially gifted $45 billion in write-offs (book value $18 billion) to GM. So when GM earned a $7.6 billion profit in 2011 (more on that below), it paid no taxes.

Include that $18 billion gift, and taxpayers' true loss climbs to nearly $35 billion.

Of course, there's no chance that the Obama administration will sell off its GM stake before Election Day. That would force Obama to recognize actual losses, which would remind voters that the bailout was a massive transfer from taxpayers to unions.

Union workers did make sacrifices in bankruptcy, but not nearly enough. GM only narrowed the labor cost gap vs. what Japanese automakers pay their workers. Given that Toyota(TM) still enjoys a price premium over similar GM vehicles, the U.S. auto giant needs a labor cost advantage, not near-parity. And Toyota has relatively high costs. Volkswagen(VLKAY) pays workers at its new Tennessee plant only about half what GM does.

The Volt hybrid was supposed to provide a green veneer to GM's entire lineup, like the Prius has done for Toyota. Instead, the Volt has been a p.r. disaster following fires and anemic sales that led to a temporary production halt earlier this year.

GM's market share and profits got an artificial boost in 2011 as Japan's earthquake and Thailand's massive floods wrecked havoc with supply chains for Toyota and other Japanese automakers. But with Toyota back on track and VW and Hyundai aggressively expanding in America, GM is rapidly losing share in 2012.

Overall U.S. auto sales were strong to start the year, but that momentum has faded along with slowing economic growth and hiring. Falling gas prices also may reduce the incentive to replace aging cars and trucks with higher-mileage vehicles. Automakers release U.S. June vehicle sales on Tuesday.

**Jihadin**

In time...one will be able to saddle the horse in under 45 sec's

**Palindrome**

Oh look, todays Obama hate thread.

**MeanGreenStompa**

Frazzled posts another Obama bash.

In other news...

**Aerethan**

My favorite part of the whole bail out was that part where the US population voted on whether or not to spend 800+ billion dollars on companies that didn't know how to stay solvent. Oh wait...

**MeanGreenStompa**

Aerethan wrote:My favorite part of the whole bail out was that part where the US population voted on whether or not to spend 800+ billion dollars on companies that didn't know how to stay solvent. Oh wait...

Was that before or after they voted on wars in Iraq and Afghanistan that have costed $1,350,000,000,000.00 so far?

**Jihadin**

Was that before or after they voted on wars in Iraq and Afghanistan that have costed $1,350,000,000,000.00 so far?

Wasn't the people that voted for both those wars. It was the elected (by the people) that voted green for both wars

**Aerethan**

MeanGreenStompa wrote:
Aerethan wrote:My favorite part of the whole bail out was that part where the US population voted on whether or not to spend 800+ billion dollars on companies that didn't know how to stay solvent. Oh wait...

Was that before or after they voted on wars in Iraq and Afghanistan that have costed $1,350,000,000,000.00 so far?

I agree to a point. I think that most of the US population would have voted in favor of nuking whoever they FELT was responsible for 9/11. That doesn't mean we'd have been in the right, but that is what would have likely happened.

I think the more important part is that we can't vote on when to end such "wars". It's our money, we should have discretionary rights over it.

Personally, I'm a fiscal conservative. I favor anything that means spending less money on things that are often pointless. 28,000 troops in South Korea? sure, there is a decent threat just north of them. More than 100 troops in the 3rd world trying to dictate how a nation is run and trying to snuff out "insurgents" from the general populace? No thanks, waste of money.

But, let's assume that "national defense" falls under the complete discretion of the government. What part of bailing out private corporations is national defense? I'm pretty sure that all those GM employees would rather have had their houses paid off than their crappy jobs.

The whole bailout thing was the biggest mismanagement of money since my grandma gave me $200 for my 10th birthday. Sure, give all that money to banks, who then STILL foreclose on houses, and now have houses that they claim to take losses on, and can't sell.

How it should have happened? Create a government branch that you bring your total real estate debts to, provided you didn't try to buy some million dollar home when you make minimum wage. So anyone who bought a house in good faith that they would be able to afford it. Then vet out people who refinanced just so they could buy that beach house or vacation in Europe for 3 months.
So people who honestly got screwed by the whole economic fallout. Then, take that bailout money, and pay off the house loans for Joe Schmoe.

What happens? Joe Schmoe gets to keep his house, perhaps with certain restrictions on selling it since the government paid it off. Also, the stupid bank that allowed Joe to buy a house he couldn't afford get's all their money back with X interest, and guess what? They don't have to try and sell that house again at a loss.

Bank wins, Joe Schmoe wins, government actually does something for it's people for a change, and then the tax payers pay back the money that they basically loaned themselves to pay off their houses.

Why didn't we do this? Because we had no say in it whatsoever. Fewer than 500 people decided that they were going to spend money that the rest of the country would have to pay off in a way that did jack gak for the people paying it back.

**Jihadin**

Solyndra as an example and it seems another bailout company filing bankruptcy

**sirlynchmob**

but that was Romney's plan, he gets the credit for the auto bailout.

http://www.forbes.com/sites/michelinemaynard/2012/05/08/mitt-romney-takes-credit-for-the-auto-bailout-say-what/

My own view, by the way, was that the auto companies needed to go through bankruptcy before government help.
So I’ll take a lot of credit for the fact that this industry’s come back.

So there you have it, blame Romney!

But I love how we're talking about this chump change, when will the banks pay back the money they got?

**Ouze**

Palindrome wrote:Oh look, todays Obama hate thread.

Just another 4 and a half years of these left.

**Kilkrazy**

Why should an investor sell before Election Day?

Surely the sensible course of action would be to hold the shares until they are above water.

Unless the whole company is headed for the lavatory, of course.

**sirlynchmob**

Kilkrazy wrote:Why should an investor sell before Election Day?

Surely the sensible course of action would be to hold the shares until they are above water.

Unless the whole company is headed for the lavatory, of course.

Its a good idea in my book. Would you really want someone being elected holding on to large shares of Halliburton or any company? By holding onto the shares, anything you do that affects that company will be seen as abusing your powers as president.

**notprop**

All that money and they could come up with something as good as an Astin Martin, still I like this.

This is a GM right?

**sarpedons-right-hand**

Can't really compare Aston Martin to GM. Aston got into so much trouble that Ford (an American company) had to buy them out.....

**notprop**

Yeah but they looked good while going out of business.......

**sarpedons-right-hand**

Edit: Ford then couldn't cope with the financial pressure of owning one of England's finest luxury car brands and promptly sold, at a loss, the rights to a company called ProDrive.

Automatically Appended Next Post:
And yes, buying a DBS in Frost White is top of my lottery winnings list!

**sebster**

Judging a company by share price movement, when money is pouring out of the market due to macroeconomic factors is what stupid people do. Then when he tried to argue that the Federal Government could get full value for past losses when bankruptcy was declared, I mean come on. That's not even what stupid people do... you can't understand what those things mean and still be so stupid to think government would get full value for them.

I doubt the author is actually that stupid, I think it's much more likely that he's just trying to find anything he can to inflate the cost of government's bailout of GM. This is because Romney's team have identified Obama acting to save GM makes him popular with certain key demographics, and Romney's opposition to the same makes him unpopular. So they're attacking a strength, which is exactly what you'd expect politicians to do.

Why Fraz continues to believe this stuff and post here is something of a mystery, though.

Meanwhile, GM has posted profits the last two years, and has continued to employee around 200,000 people, and pay about 80 billion a year in salaries. So there's about 20 billion in income tax government never would have seen, in each of those years, which swallows up the 35 billion right away. Then you look at GM as part of an overall economy, and see they represent about 140 billion in economic activity - factor in a conservative estimate for the multiplier and it's about 300 billion. So that'd be 300 billion in lost economic activity, and about 75 billion in lost income taxes every year, if GM had been allowed to disappear.

Now, there's a fair case to be made that the moral hazard means companies need to be made to face the consequences of their own actions - that GM should have been punished for the two decades in which management lacked the will to turn the company around. But from a pure dollars and cents argument it's been absolute win for government.

**Frazzled**

Kilkrazy wrote:Why should an investor sell before Election Day?

Surely the sensible course of action would be to hold the shares until they are above water.

Unless the whole company is headed for the lavatory, of course.

What if they never get above water?

**Kilkrazy**

Why set an artificial deadline of this November for getting above water? Why not December 2013 or five years from now?

I mean, it's just obviously politically partisan BS with no connection to financial reality.

Here in the UK we are holding our bank shares until they get above water and we don't care which party bought them.

**Frazzled**

Kilkrazy wrote:
Here in the UK we are holding our bank shares until they get above water and we don't care which party bought them.

Like I said, why do you think they will get above water?

**dogma**

Aerethan wrote:
I agree to a point. I think that most of the US population would have voted in favor of nuking whoever they FELT was responsible for 9/11. That doesn't mean we'd have been in the right, but that is what would have likely happened.

Sure, but most people aren't qualified to make that decision. There's this weird, and terribly pervasive, idea that people with no grounding in how government and statecraft work should be allowed to have their voice heard on matters of government and statecraft. Its like asking the guys in the lobby what the doctor should cut.

Aerethan wrote:
I think the more important part is that we can't vote on when to end such "wars". It's our money, we should have discretionary rights over it.

You have the same ability to vote as you did when the war began. The problem is that its really, really easy to start wars and really, really difficult to end them; both militarily and politically.

Aerethan wrote:
Personally, I'm a fiscal conservative. I favor anything that means spending less money on things that are often pointless. 28,000 troops in South Korea? sure, there is a decent threat just north of them. More than 100 troops in the 3rd world trying to dictate how a nation is run and trying to snuff out "insurgents" from the general populace? No thanks, waste of money.

South Korea isn't 3rd world, not even by the archaic usage.

Aerethan wrote:
How it should have happened? Create a government branch that you bring your total real estate debts to, provided you didn't try to buy some million dollar home when you make minimum wage. So anyone who bought a house in good faith that they would be able to afford it. Then vet out people who refinanced just so they could buy that beach house or vacation in Europe for 3 months.
So people who honestly got screwed by the whole economic fallout. Then, take that bailout money, and pay off the house loans for Joe Schmoe.

How do you make that determination in a manner that isn't arbitrary? I mean, theoretically the state can do as it pleases, but practically we have legal matters to consider. What you propose ends in litigation...lots of litigation.

**Easy E**

TLDR: Obama= BAD