The GM Payback Magic

Linda A.,

Thanks for summarizing this for us.  Not being a financial whiz, I was wondering about that ad when I saw it and marveled that they had done what they claimed they had done.  I should have known it was not really true.

So, in answer to your question:  “Don’t you just love these bailouts!” I would have to say, “NO!”

What a cunning plan.  I’ll just start paying my Visa with my Mastercard. 

Good Lord–I saw that ad this morning and I thought, “oh cool.”  Now the truth.  UGGGGGHHHHH.
Thanks Linda for a great clarification.

Zombiehero -

I’d suggest it is the product of bad government!  Small government isn’t necessarily better government.  I can be just as badly skewed in their actions as big government.

In our current situation we have big, bad government.  I think smaller would be better, but it is the bad that is killing our economy.

Thanks Linda.  I saw that ad and thought the same thing as Tricia, “how wonderful”, all the time wondering on in the hell they managed to do it.  Now of course, as you pointed out, they didn’t.  I am so sick and tired of the lies and deceit.  These guys wouldn’t know the truth if it smacked them in the face.  What news agency is fact checking this whopper?  Crickets…?

The first new car I ever bought was a GM product. I will never buy another GM car as long as I live. I don’t care how they spin their corprate welfare. As far as I care, they can go broke.

I was surprised when I saw that ad. How was GM able to pay back so much money when they weren’t selling all that many cars?

When you put two lying, conniving entities together, advertising and government you are bound to get this kind of obfuscation.

Certainly there will be fools that believe this phony ad, they probably believed the “Sham Wom” guy too, but many will refuse to believe this crap.

I think that “Government Motors” is tainted in the minds of the American People too much for many/most to be fooled. Or perhaps many/most of those watching who are without a job themselves will be outraged that the government rushed in to “protect” all those Union jobs.

Many of us have seen, for generations, that the Government is a whole lot more concerned about “union” jobs than other jobs. But then other jobs don’t vote in blocks and donate millions to campaigns.

I’d go even further, Linda, and say that the US government can’t be characterized as good or bad but the individuals who make up the government certainly can. I work in the environmental area and I can tell you from experience that the end result desired is a good one and in many cases, absolutely esssential (see Hanford and Oak Ridge). However, it is the bureaucrats that make this task nearly impossible because they do not want to see their fiefdoms evaporate when the job is completed so they use every excuse in the book to ensure that there are jobs into perpetuity for them, their children, and their children’s children by throwing up roadblocks or by prolonged hand-wringing or hand-holding sessions. So what if the schedule slips to the right–they’ll just say they’re ensuring the “safety” of the public.

This is the case whether the administration is Republican or Democrat, whether POTUS takes a hands-on or hands-off approach, and whether the political tendency is towards bigger or smaller government. It is the little cogs in the government machine that cause it to grind to a state of complete inertia and ultimately to a halt.

When Reagan said that the problem IS government, he was incorrect and I think he understood that later. The problem is comprised of thousands upon thousands of mid-level tin-horn autocrats throwing their weight around.

Hey folks if we let GM go belly-up, it is we who will loose.  We own the company.
Stop with the union bashing.  It will accomplish absolutely nothing.  The unions already re-negotiated their contracts.  Their “generous retirement” benefits were negotiated as part of their wages.   Why would you begrudge  senior citizens of a decent pension?  The pensioners are not living high on the hog.  They are not getting golden parachutes and they don’t own yachts.  It sounds as if some of you want every American citizen to live and retire in poverty.

Union members don’t vote in blocks either.  How do you think we have 2 terms of Ronald Reagan and 2 terms of GWB?  So when the chair of GM does a slight of hand with accounting, immediately we discuss the perceived negative influence of the union workers?

We have just lost 29 coal workers to a explosion in a mine owned by a company that had been known to be unsafe.  The coal industry has had a long history of having government in their back pocket.  People died as a result of not being unionized to provide for a collective voice for the workers not only in wages but also in safety.  The same effects for safety and a livable wage  can also be historically traced to steelworkers and automakers.
http://www.thenation.com/blogs/thebeat/549998/there_s_no_question_that_union_mines_are_safer

If for “generations” we have seen the government  been more concerned about “union jobs”, then why do we have less union members and jobs covered by union representation?

Clearly the overall economy has been detrimental to companies, but sleight-of-hand management is a major contributor to our problems.
We need a strong manufacturing base with job-producing suppliers, but GM’s ad is deceptive and a bad way to embark on a fresh start.

 but GM’s ad is deceptive and a bad way to embark on a fresh start.
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And that is the crux of the matter. So long as misfeasance is all gussied up as resposible corporate management, they will not have me as a customer.

Linda,

I am not sure what exactly you are complaining about? What was the alternative? To let GM get liquidated. That would have put millions upon millions more out of work and would have resulted in the loss of a major part of the industrial base of this country and further killed this economy.

It is actually good news that GM is paying back its loan 5 years ahead of time. Do you disagree? As for a new $10 billion loan, as you suggest, nothing has been granted, so there is nothing to complain about. In addition, this kind of government help is nothing new and many other companies and industries do this. We also see this kind of stuff happening in countries all over the world, so to be competitive the U.S. does help out U.S. businesses all the time.

As for the equity that the U.S. government owns, that is not a surprise. That was what was worked out in the bankrupcy plan. The whole idea of the reorganization was to decrease the amount of debt the company had, so it could not have been all debt. Nothing wrong with the U.S. government taking a big equity stake. That was smart. The Canadian government did it too. And the unions traded some of their pension liabilities for equity.

See this article to add a little more to your fairly superficial post.

http://online.barrons.com/article/SB126961735804067955.html

Analysts put a $73 billion to $85 billion equity value on the company. So the 60% that GM owns could be worth as much at $44 billion to $51 billion. So at current valuations that says that out of the $42.8 billion the government put in as equity, there is a good chance they will make a lot of money, both from the loan and the equity. If GM does even better than what people are currently thinking, they the govt stands to make even more money. The government could easily make $10 billion on the equity position.

So again what exactly are you complaining about? The government made the very smart move to save millions of jobs, keep an important part of the industrial base of this country intact and will likely eventually make a lot of money for doing it. Smart move by Obama and the adminstration. The alternative would have been a disaster.

I could be wrong but why do I have the feeling some of this tremendous debt will be forgiven at some point?  The fact that GM’s borrowed so much more makes me question its wherewithal and prospects.    
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I have the same foreboding. GM was never a very smart company to begin with and hopping into bed with That One made my initial reaction to them both correct and indeed, solidified. I think at some point we will all pay for the shoddy administration, engineering, and workmanship that was rampant at GM. They should have been allowed to have a dignified demise.

Consider what the stock market has done in the last year and compare those gains to the ”return” taxpayers are getting for their $49B “investment” in GM: poor stewardship of public funds.