GM Repays their government loan!!!...oh, wait a sec

[Hacp]

If GM were allowed to fail... yes it would hurt. But the demand for automobiles will not just disappear. Another better run company will grow to fill the need... meaning jobs.

Same thing with banks. You have a small bank sitting there with excellent balance sheets looking at a huge bank that is taking tax payer money to stay alive. What is wrong with letting that big bank fail and letting the small bank grow into those markets? I am sure Ford would be more than happy to pick up the slack after GM was left to its own devices.

Exactly. People act like failing is a bad thing. It is not. failing is good. It sends bad inefficient companies to the dumpster and rewards good efficient companies for being profitable and efficient.

 

[heyheybooboo]

Exactly. People act like failing is a bad thing. It is not. failing is good. It sends bad inefficient companies to the dumpster and rewards good efficient companies for being profitable and efficient.

I imagine you were real big on the Domino Theory except, of course, when it comes to American manufacturing and jobs.

The failure of GM and Chrysler would also take down dealers, parts suppliers (IIRC 40 or so have already entered bankruptcy over the last 16 months) and the steel industry. This would result in a direct loss of as much as $35 billion in earned pension benefits in the auto sector alone, and expose the PBGC to a 500% increase (to over $100 billion) in possible exposure in the manufacturing sector alone.

GAO: Automaker Pension Funding

Thinking is Hard. Don't strain or pull a glute ...





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[PricklyPete]

No, it just means the government cut them a second check to allow them to pay back the first one for marketing purposes. Now GM is running commercials claiming to have paid back all of their loans 5 years ahead of schedule.

They didn't cut them a new check. This was money they had already received from previous bailouts.

 

[piasabird]

The government still owns a lot of the GM stock. So paying back the loan is irrellevent. As long as the government owns their stock, they are not really trading on a free-market system. It is all a lie.

So if they actually make a profit at least the government owned stock should increase in value or maybe they will pay a dividend.

 

[CPA]

The government still owns a lot of the GM stock. So paying back the loan is irrellevent. As long as the government owns their stock, they are not really trading on a free-market system. It is all a lie.

So if they actually make a profit at least the government owned stock should increase in value or maybe they will pay a dividend.

Correct. US government owns about 63% of GM, Canada government owns about 12% of GM.

 

[Thump553]

Liquidate and sell off GM. Be done with them. Cut our losses and recoup what we can from this stink fest.

Well we could do that. Or we could wait another six months or a year when the new GM goes public and the stock sale proceeds pay the USA back in full. Under your alternative you have the philisophical enjoyment of saying I told you so, but the country loses hundreds of billions of dollars and is plunged into a deep recession.

Which alternative makes sense?

 

[woodie1]

I wonder if GM will ever offer anything to the stock and bond holders who lost everything pre-bankruptcy? Guess that would be impossible.

 

[JEDIYoda]

Business as usual, the Obama way.

This was happenning way before Obama...idiot!!

 

[JEDIYoda]

I wonder if GM will ever offer anything to the stock and bond holders who lost everything pre-bankruptcy? Guess that would be impossible.

why????

 

[HumblePie]

Well we could do that. Or we could wait another six months or a year when the new GM goes public and the stock sale proceeds pay the USA back in full. Under your alternative you have the philisophical enjoyment of saying I told you so, but the country loses hundreds of billions of dollars and is plunged into a deep recession.

Which alternative makes sense?

Which is part of why I understand the appeal of the bailouts from a business as usual standpoint. The problem with that, is it continually reinforced the status quo, does nothing to remove the bar of entry into that industry and forces satellite industries to continue the status quo as well. As such, more than likely we'll face the SAME situation again sometime in the future. All we are doing is putting on a bandaid. There is a chance the bandaid holds and that things do eventually change. I can see that. I would be perfect if this was a perfect world. However, this is reality and something I like to deal with. Most of the time a bandaid is nothing but a short term stop gap. It doesn't fix the underlying problems and those problems never get fixed as long as the bandaid in place.

As a software developer I'm see the reasoning and philosophy in both on a daily basis. I come to a job where I see the system, code, and lifecycle of a product is obviously broken and the current status quo is to add patches. This works to a limited degree and the system hobbles along until finally some one decides to finally make the right decision and start fresh. This sometimes costs jobs, profits, and other short term problems. However, after a system has been redesigned and implemented from the ground up using sound methodologies, things bounce back quickly and like never before.




I do agree the is a cost and risk analysis that is going on. It WILL cost industry, the satellite industries, and the whole of the USA no matter what decision is made. The thing is, how much cost versus risk is at stake by letting it fail and be rebuilt versus bandaiding the current situation and hoping to redo everything more slowly? With something this big it's hard to make a decision either way with any authority because quite frankly, we can not know until it happens.

However, my gut and instinct and in my opinion I think we are doing it the wrong way. My opinion is that the current implementation of the US automaker industry is flawed enough it needs to die and something else be rebuilt in it's place that is better. There is no guarantee that something better will replace it, however, the fresh example of the dead flawed system will serve a big reminder to whatever comes to not fuck up the same way. That incentive I believe would be a big motive to do things the correct way. I do not believe the current way of trying to bail out everything and hoping to institute drastic changes slowly in the future will work. I do not think the incentive to make those changes is the same.

Now do you clearly see the point to my opinion on this subject?

 

[CycloWizard]

They didn't cut them a new check. This was money they had already received from previous bailouts.

They cut them two checks at the same time so they would be able to pay off one loan and claim that they had paid back everything. That's marketing. What is so difficult to understand?

 

[Hacp]

I imagine you were real big on the Domino Theory except, of course, when it comes to American manufacturing and jobs.

The failure of GM and Chrysler would also take down dealers, parts suppliers (IIRC 40 or so have already entered bankruptcy over the last 16 months) and the steel industry. This would result in a direct loss of as much as $35 billion in earned pension benefits in the auto sector alone, and expose the PBGC to a 500% increase (to over $100 billion) in possible exposure in the manufacturing sector alone.

GAO: Automaker Pension Funding

Thinking is Hard. Don't strain or pull a glute ...





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Guess what? New industries will rise. Propping up these industries might be helpful in the short term, but over the long run, it will be very wasteful. That is what we all want right? A healthy US economy that will supply plenty of jobs in the long run.

 

[ShawnD1]

Liquidate and sell off GM. Be done with them. Cut our losses and recoup what we can from this stink fest.

I don't understand why they can't just shrink the company so the production matches market demand. 40 years ago we had only ~5 companies to choose when you buy a car, so naturally GM was huge. Right now there are probably twice as many companies that make cars for average income people (BMW does not fall into this category), so GM's market share would shrink even if they made great cars. Why are they still trying to pump out more cars than they can sell?

Fire half the company. Sell off half of everything. Keep maybe 1 brand. Basically try to work on the same scale as maybe Honda.

 

[heyheybooboo]

I wonder if GM will ever offer anything to the stock and bond holders who lost everything pre-bankruptcy? Guess that would be impossible.

why????

As I understand it there are now 2 GMs ---- one is called Liquidation Motors (it holds a lot of GMs 'bad stuff' and old assets) and is still in bankruptcy.

The deal with bond holders was at something like $.30 on a dollar. My understanding is a lot of them sold off for as low as $.12 on the dollar, and that the has price has now rebounded back above $.30 as the assets have been liquidated.

Liquidation Motors





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[PricklyPete]

They cut them two checks at the same time so they would be able to pay off one loan and claim that they had paid back everything. That's marketing. What is so difficult to understand?

It was TARP money already given to them according to the article. I understand it came from the government and is going back. But it is not like it went like this:

GM Exec: We need to make a marketing statement...can you lend us some more money to pay you back...
Gov: Sure...here you go.
GM Exec: Awesome...and can I have more to make the commercial?
Gov: Sure...we'll just write a little bigger check.

This money had already been given to GM based on prior need. GM has not needed as much as was originally thought and now they are using some of that excess to reduce the debt they have to the government. Again, I think this is a good step. No, I did not like that we bailed them out to begin with...but the fact that we're getting some of our money back and that they are restructuring under the originally predicted costs is a positive direction. I could care less if they are using this a as a publicity stunt to sell more cars.

 

[CycloWizard]

It was TARP money already given to them according to the article. I understand it came from the government and is going back. But it is not like it went like this:

GM Exec: We need to make a marketing statement...can you lend us some more money to pay you back...
Gov: Sure...here you go.
GM Exec: Awesome...and can I have more to make the commercial?
Gov: Sure...we'll just write a little bigger check.

This money had already been given to GM based on prior need. GM has not needed as much as was originally thought and now they are using some of that excess to reduce the debt they have to the government. Again, I think this is a good step. No, I did not like that we bailed them out to begin with...but the fact that we're getting some of our money back and that they are restructuring under the originally predicted costs is a positive direction. I could care less if they are using this a as a publicity stunt to sell more cars.

But obviously they didn't need it - they just sent it back. Either that, or GM has been setting sales records recently, which they're not. Open your eyes and seeeeeeeeee.

 

[PricklyPete]

But obviously they didn't need it - they just sent it back. Either that, or GM has been setting sales records recently, which they're not. Open your eyes and seeeeeeeeee.

And see what? I agree with you that they are giving back money that was given to them. I just don't agree that it was done specifically for some publicity stunt. They had more money (from the bailouts) than they ultimately needed and they paid it back. It gives them positive media and shows that they are making the right steps. I've already said several times that I did not agree with bailing out them in the first place...I'm just glad we're starting to get our money back.

 

[Budmantom]

This is called Obamanomics.

 

[XZeroII]

Ford is going strong and will be around, especially with the Fusion kicking ass. Hyundai is really picking up the slack as well. GM/Chrysler will probably stick around but won't be dominant.

You realize that the only reason why Ford didn't go under is because they mortgaged themselves stupid before the credit freeze, right? If GM had done the same thing, they would have survived without the bailout as well. If Ford had waited another 6 months to try to mortgage everything, they would have been in the same boat as GM.

Both GM and Ford have some pretty amazing vehicles coming out or out right now. They are both very strong (product-wise).

 

[Ktulu]

You realize that the only reason why Ford didn't go under is because they mortgaged themselves stupid before the credit freeze, right? If GM had done the same thing, they would have survived without the bailout as well. If Ford had waited another 6 months to try to mortgage everything, they would have been in the same boat as GM.

Both GM and Ford have some pretty amazing vehicles coming out or out right now. They are both very strong (product-wise).

Amazing how many people completely ignore this fact. Ford was doing just as bad as GM a few years ago, luckily for them they ran out of money first and were in danger of going under had they not mortgaged everything including their office furniture. GM wasn't so lucky, damn banks refused to lend out anymore money.

 

[heyheybooboo]

Amazing how many people completely ignore this fact. Ford was doing just as bad as GM a few years ago, luckily for them they ran out of money first and were in danger of going under had they not mortgaged everything including their office furniture. GM wasn't so lucky, damn banks refused to lend out anymore money.

GM 'mortgaged' their future well before Ford.

GM long-term bonds at times traded at $1.25+/dollar. By 2003 they begin to 'junk' at $.70/dollar --- and began a downhill slog from there.




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[Triumph]

I imagine you were real big on the Domino Theory except, of course, when it comes to American manufacturing and jobs.

The failure of GM and Chrysler would also take down dealers, parts suppliers (IIRC 40 or so have already entered bankruptcy over the last 16 months) and the steel industry. This would result in a direct loss of as much as $35 billion in earned pension benefits in the auto sector alone, and expose the PBGC to a 500% increase (to over $100 billion) in possible exposure in the manufacturing sector alone.

GAO: Automaker Pension Funding

Thinking is Hard. Don't strain or pull a glute ...

--

The entire premise behind your argument is that if GM goes under, then the US (and the world) will simply buy 8 or 9 million less vehicles per year. This is untrue. The sales would be redistributed to the other companies. Not 100% of those sales in the first few years; some people/companies would simply stick with what they have for longer, or buy used, but it would eventually adjust. Now personally, I'm not for GM going under, because I like their products, they are producing a lot of good vehicles. Chrysler, on the other hand...f them. That company needs to go away.

 

[heyheybooboo]

The entire premise behind your argument is that if GM goes under, then the US (and the world) will simply buy 8 or 9 million less vehicles per year. This is untrue. The sales would be redistributed to the other companies. Not 100% of those sales in the first few years; some people/companies would simply stick with what they have for longer, or buy used, but it would eventually adjust. Now personally, I'm not for GM going under, because I like their products, they are producing a lot of good vehicles. Chrysler, on the other hand...f them. That company needs to go away.

Sorry ... my premise has nothing to do with the sale of autos.

The direct cost to GM auto pensioners would be a loss of $35 billion in benefits.

The additional 'exposure' to the PBGC for the 'Domino Effect' of GM failing (in the parts supplier chain, loss of dealers, steel industry, etc.) would be a significant portion of the $80 billion shown in the graph.

For the sake of argument let's say the potential unfunded liability ends up being $50 billion in that $80 billion exposure.

So ... pensioners have their retirement slashed by $35 billion (pick a number - a 50% loss in monthly benefits?) and the PBGC has to spend $50 billion to prop up the retirement funds over time. So ...

'Government Motors' has a 60.8% stake in GM with a current 'investment' of around $45 billion. In the not-to-distant future GM will again become a 'public company' and the gub'mint may begin to recoup our investment (and the question becomes, "How fast do we do it?")

Let's say in one year GM has an IPO with a market value of $60 billion. If Government Motors immediately 'sells-out' our interest we recoup $36.5 billion (with a realized 'loss' of $10 billion).

The $10 billion loss in Government Motors is substantially less that the $50 billion loss to the PBGC (plus the loss of an additional $35 billion in benefits to the pensioners).

The question really is how quickly does the gub'mint divest itself of our taxpayer interest in GM. Sell out immediately and take a loss? Or sell out over 5 years and possibly make a few bucks for the taxpayer investment?

That's pretty much what this whole 'deal' has to do with (regardless of all the rhetoric) --- and the premise does not relate to 'sales'.

Except to the future extent of the more cars that GM does sell the better the taxpayer investment looks over time 😀





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[Triumph]

Switching sales to other brands would result in an increase in sales at the dealerships, an increase in sales at their parts suppliers, an increase in workload for the manufacturing personnel, a switch in who the steel industry sells their steel to, etc. It has everything to do with auto sales.

Now, trying to keep a sinking boat afloat because of pensions is pretty much the British method of business, see British takeover of British Leyland group. Either way, again I want to see GM stick around, so I support their bailouts. I believe that they will survive their recent troubles because they are making good cars, and will eventually turn a profit and be able to actually pay back the government and buy back their stocks.

 

[heyheybooboo]

Switching sales to other brands would result in an increase in sales at the dealerships, an increase in sales at their parts suppliers, an increase in workload for the manufacturing personnel, a switch in who the steel industry sells their steel to, etc. It has everything to do with auto sales.

Now, trying to keep a sinking boat afloat because of pensions is pretty much the British method of business, see British takeover of British Leyland group. Either way, again I want to see GM stick around, so I support their bailouts. I believe that they will survive their recent troubles because they are making good cars, and will eventually turn a profit and be able to actually pay back the government and buy back their stocks.

Maybe I'm not making this clear ...

GM goes down: minimum $85 billion HIT to the PBGC and pensioners

That's $35 billion that will not be circulating in local economies, and $50 billion that must be drawn from private companies and taxpayers.

Auto sales 'wash' (doesn't matter where they come from - except foreign manufacturer profits tend to go to 'home' countries)




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