GM also got a LOAN which has already been paid back. Only difference is the government gave the loan instead of private share holders or banks. Loans still have to be paid back regardless of who did the lending. As was stated previsouly if GM taking a government loan to keep thousands of people employed and not shutting down factories is what it took then so be it. The problem in the world isnt governemnt loans that have been paid back. Its with the dead beat welfare cases that dont have the common courtesy to serisouly look for a job and instead keep popping out babies so they can live better than a couple fresh out of college trying to earn their living.
General Motors Will Never Repay Taxpayers
Obama's spin on GM's latest profit report is pure baloney
Shikha Dalmia | May 24, 2011
The Obama administration, and its media backers, have seized upon news that General Motors made a $3.2 billion profit in the first quarter of 2011 as proof positive that its auto bailout is a success. President Obama is so buoyed that he is
reportedly planning to make the bailout a major part of his reelection campaign.
But by this standard, Charlie Sheen’s comedy tour ought to be declared a smash hit. Sheen’s backers will lose relatively less money on him than taxpayers will on the bailout.
No sooner had GM made its announcement than
Washington Post columnist E.J. Dionne dashed off a
stinging rebuke to naysayers (like me) who had dared doubt the wisdom of the bailout. Likewise, the auto czar Ron Bloom
credited the turnaround to the president’s “tough love” approach.
No doubt, $3.2 billion is a big number. But an even bigger number is $60 billion. That’s what this administration and the last one together sank into GM (not to mention another $20 billion or so they dumped into Chrysler). When President Obama gave GM this money, he
insisted that it was not a handout but an “investment” that would cost taxpayers “not a dime.”
But if there was ever any doubt that this wasn’t going to happen, this earning report dispels it.
For starters, included in the $3.2 billion figure is the net $1.5 billion that the company generated from the one-time sale of Delphi, its auto parts supplier, and Ally Financial, its financial arm. Subtract that, and its performance looks much less impressive, especially compared to its rival Ford that really didn’t receive a dime from taxpayers yet made $2.6 billion last quarter—or nearly a billion more than GM.
But cold, hard cash is not the only help that GM got. Usually when companies declare bankruptcy, their tax liabilities increase since they have no more losses to write off. But GM got Uncle Sam’s special bankruptcy package that allows it write off up to $45 billion of old losses going forward. That puts its total bailout at up to $75 billion*. Even that’s not all. The Treasury gave GM $10 billion of the $60 billion as a loan; the rest was through the purchase of equity. (It has more or less paid back the loan.)
The equity means two things: One, GM has zero interest payments, something that gives it a distinct advantage over competitors. Ford, by contrast, had to pay $251 million in debt-service costs. Despite this, GM’s real per vehicle
margin was over $1,000 less than Ford’s, thanks to the heavy incentives it was forced to give buyers. (If the administration can call this success, can it please call me the next American Idol?)
And two, taxpayers have no guaranteed return as they would have with a loan. Therefore, market valuation of GM’s stock will determine what they will recover. They got back $20 billion when the Treasury sold half of its equity when GM floated its first post-bankruptcy IPO in December. But that still leaves a $30 billion shortfall (excluding the $45 billion tax break). To get this back, the federal government would have to sell its remaining 365 million shares—about 26.5 percent of company equity—for about
$55 per share. But after GM posted its latest earnings report, its stock price dropped to $31, a few dollars below even its IPO price of $33.
Nor are things going to look up for taxpayers going forward. One reason GM’s first-quarter profits were even as high as they were was that low gas prices boosted the sale of SUVs and trucks, GM’s (as Ford’s) most profitable products. But with gas prices rising, customer demand is expected to shift to smaller, more fuel-efficient cars. GM’s small cars such as Chevy Cruz and Malibu have certainly done well in recent months, but their profit margins are small because GM’s labor costs are still too high.
GM slashed these costs during bankruptcy to $58 per hour, comparable to Toyota’s $56. But the problem, notes Henry Payne, editor of
Michigan View, is that Toyota is not the industry cost leader anymore; smaller Asian transplants such as Hyundai and Kia with $40-per-hour labor costs are. To compete with them, GM needs to extract more concessions from its labor unions during contract negotiations this September. But United Auto Workers President Bob King has declared that workers have already sacrificed enough to keep GM solvent and now expect givebacks.
Given such realities, Bloomberg’s survey of 21 auto analysts put the average projected price for GM at $42.85 per share a year from now. This means that, outside of miracle, taxpayers will lose anywhere from $13 to $19 billion on their principal and another $15 billion on taxes for a grand total of up to $28 to $34 billion* in losses. And that’s just for GM. Chrysler is whole different—and equally sordid—story. Even Treasury Secretary Timothy Geithner acknowledged last month: “We’re going to lose money in the auto industry.”
"Let’s hope that next time this administration decides to rescue someone, it’s Charlie Sheen. He might be less high maintenance than GM for taxpayers."
I will never buy a GM vehicle because of the taxpayer bailout. Not because I don't want Americans working but because the taxpayer bailout was really a Union vote payback from the democrat party.
By the way I liked the Fiat commercial the best.
Followed by the Doritos dog commercial.
