Yeah that GM bailout sure is turning out badly

[Fabbs]

Board 'Puggies need to come up with some usual b.s. spin....

http://finance.yahoo.com/news/GM-raises-stock-price-range-apf-3716436345.html?x=0

[boutons_deux]

As always with these IPOs, "retail" buyers are mostly excluded. The only good news is that a slightly larger percentage of retail buyers are being allowed. Retail outfits like TD Ameritrade and Charles Schwab are excluded. iow, the saviours, the avg Joe US taxpayers, are excluded.

Setting the IPO price too low causes over-subscription which drives up the price quickly, making high percentage for the industry insiders and underwriters and their big clients.

It's a rigged game, as always.

[Fabbs]

^^ of course but bottom line is gov't gets paid back.
The Pug Obama hating squakers will have nothing to say.

[Wild Cobra]

As long as the government gets paid back in full, I don't mind. What bothers me is how much of the IPO sales may be going to China, and other countries, rather than US investors..

[George Gervin's Afro]

So there wasn't a govt takeover after all.. :lmao

[fyatuk]

Just to point out, the entire stock sale is only going to bring in about $15b, so the government isn't getting that investment back yet.

Also, the big gain was restructuring it's debt, which it could have done without the government buying into it.

But honestly, I never really minded the government buying non-majority portions of struggling large companies. It's a better idea than loans or give-a-ways, at least.

[boutons_deux]

80,000,000 x $50 = $4B

We got a ways to go before we get our money back

"The reorganization erased debt and lowered labor costs. It also removed $27 billion from the wallets of bondholders and left stockholders with nothing. Taxpayers spent more than $50 billion to save GM from ruin between December 2008 and July 2009 and are not expected to get all their money back."

http://www.huffingtonpost.com/2010/11/15/gms-ipo-5-reasons-to-avoi_n_783464.html#s182343

But I still think bailing out GM was better than letting fail. The US burns $100B every year on bullshit wars, and $700B every year on a corrupt, wasteful, gold-plated MIC.

[RandomGuy]

Just to point out, the entire stock sale is only going to bring in about $15b, so the government isn't getting that investment back yet.

Also, the big gain was restructuring it's debt, which it could have done without the government buying into it.

But honestly, I never really minded the government buying non-majority portions of struggling large companies. It's a better idea than loans or give-a-ways, at least.

They would not have been able to restructure their debt without the government buying into it. Don't forget the credit market was non-existant at the time, and GM would have been been forced to liquidate by any expert analysis that I read.

We have gotten more than half of the money back from the TARP program, if memory serves, and had a decent return on what has been paid back.

Most analysts doubt that the taxpayer will make a direct profit on the GM bailout.

[CosmicCowboy]

Uhhhh....you realize that the common stock needs to sell in the $60 range for break-even, right?

[Mikesatx]

So without Wall Street this transaction would not be possible. Wait, I thought Wall Street was bad.

[CosmicCowboy]

This also fails to mention the 45 BILLION in tax breaks they gave GM to make it look solvent.

Are you just stupid, or not paying attention?

[RandomGuy]

Uhhhh....you realize that the common stock needs to sell in the $60 range for break-even, right?

Honestly I haven't really crunched the numbers.

I seem to remember reading that they would have to sell the stock at $150 per share for that.

I will look into it later, probably not a hard number to independently calculate.

If you have any links ready at hand to source data, let me know.

(don't mind doing it myself, but hey, on the off chance someone else has done the legwork, I'll take that)

[angrydude]

cost of the unseen

all for union contracts.

[RandomGuy]

This also fails to mention the 45 BILLION in tax breaks they gave GM to make it look solvent.

Are you just stupid, or not paying attention?

Source link?

I ask because it has a bearing on figuring out an appropriate "break even" calculation.

Gotta log out. See you guys later.

[CosmicCowboy]

Honestly I haven't really crunched the numbers.

I seem to remember reading that they would have to sell the stock at $150 per share for that.

I will look into it later, probably not a hard number to independently calculate.

If you have any links ready at hand to source data, let me know.

(don't mind doing it myself, but hey, on the off chance someone else has done the legwork, I'll take that)

Barovsky report says $133.78.

http://www.autoblog.com/2010/09/23/report-u-s-breaks-even-if-gm-stock-hits-133-78/

[CosmicCowboy]

Source link?

I ask because it has a bearing on figuring out an appropriate "break even" calculation.

Gotta log out. See you guys later.
http://chicagobreakingbusiness.com/2010/11/gms-tax-break-worth-as-much-as-45-billion.html


GM’s tax break worth as much as $45 billion
By Reuters
Posted Nov. 3 at 10:07 a.m.

General Motors can get a tax break of up to $45 billion as part of its U.S. government-financed restructuring, documents filed with federal regulators earlier this year showed.

The Wall Street Journal earlier reported that GM would not have to pay federal taxes on up to $50 billion in profits. A later version of this story revised this figure to about $45 billion.

This figure also includes $18.88 billion of carry-forwards, according to the automaker’s annual filing from April.

Under the Troubled Asset Relief Program, losses racked up by GM before its government-funded bankruptcy can be used to offset its future tax liabilities

The tax revenue LOST in this deal is not even included in the usual "break even" calculations.

[fyatuk]

They would not have been able to restructure their debt without the government buying into it. Don't forget the credit market was non-existant at the time, and GM would have been been forced to liquidate by any expert analysis that I read.

Admittedly, I haven't looked too closely into it. I forgot how dry the commercial credit market was back then.


We have gotten more than half of the money back from the TARP program, if memory serves, and had a decent return on what has been paid back.

I didn't too terribly mind the TARP program. It came at an appropriate time, helped stem the downswing, and had some pretty good stuff in there. I had a problem with them forcing some banks who didn't need or want TARP money to take it to camoflague which banks were really in trouble, though. And there should have been a few more restrictions on it, like forfeiture of executive bonuses, etc.


Most analysts doubt that the taxpayer will make a direct profit on the GM bailout.

I wouldn't have expected anyone to believe the government would actually break even directly on that one. At least not unless the govenrment holds onto the stock for years and GM makes a killing.

[coyotes_geek]

Just to point out, the entire stock sale is only going to bring in about $15b, so the government isn't getting that investment back yet.


Glad to see there's at least one person in this thread with a clue. The taxpayers are into GM to the tune of about $50 billion, this IPO is only going to raise about $15 billion, and not all of the shares being offered belong to the government.

The $15 billion the IPO raises covers roughly half of what GM's deferred pension obligations to the UAW are. Toss in the fact that bondholders getting screwed over in the bankruptcy will make it difficult, i.e. expensive, for GM to borrow money in the future and I'd say it's about a decade premature to chalk this up as a victory for the US taxpayer.

But, why let any of this get in the way of this celebration over the "success" (:lol) of our government holding taxpayers liable for business losses?

[Fabbs]

Glad to see there's at least one person in this thread with a clue. The taxpayers are into GM to the tune of about $50 billion, this IPO is only going to raise about $15 billion, and not all of the shares being offered belong to the government.
And you think the payments will stop at 15 billion paid back?
The article said GM expects to profit between 17 and 19 bill per year. So, the payments should continue.

Would i rather GM be like Ford and be business wise and not need a bailout? Yes of course. But given the economic climate that W Bushead in large part created and with the entire world economy on verge of collapse, the bailout was not a bad thing.

[fyatuk]

The article said GM expects to profit between 17 and 19 bill per year. So, the payments should continue.

Uhh, no it doesn't. It says "When sells fully recover" (no guarantee, and no guarantee GM will maintain or increase upon their share of sells), it "could" make that much.

The fact that it used "could" instead of "should" or "expect to" pretty much says that's a high estimate that probably won't be reached.

[CosmicCowboy]

And you think the payments will stop at 15 billion paid back?
The article said GM expects to profit between 17 and 19 bill per year. So, the payments should continue.

Would i rather GM be like Ford and be business wise and not need a bailout? Yes of course. But given the economic climate that W Bushead in large part created and with the entire world economy on verge of collapse, the bailout was not a bad thing.

Do you understand how stock works? As the US tries to "trickle" it's massive stock holding into the marketplace to try to recover it's "investment" it dilutes the value of the existing publicly traded shares (those being issued now).

GM's profits would have to rise exponentially to maintain a static stock price.

[coyotes_geek]

And you think the payments will stop at 15 billion paid back?
The article said GM expects to profit between 17 and 19 bill per year. So, the payments should continue.

There are no payments, only stock. The stock either appreciates to the point where the government can sell it at a value that recoups the taxpayer investment or it doesn't.

IMO the odds of the stock price appreciating to that point are slim at best considering the factors I mentioned earlier. The union obligation is due starting in 2013. Once that kicks in that's a couple billion worth of earnings, per year, being siphoned off to the union instead of to shareholders and that's going to put a significant downward influence on the stock price. As I see it, the taxpayers have just over 2 years to hope that the stock price goes from $33 to $133 to have a realistic expectation of getting paid back in full. And as CC pointed out, that's not even taking into account the $45 bil in tax breaks GM is getting.

[Fabbs]

Uhh, no it doesn't. It says "When sells fully recover" (no guarantee, and no guarantee GM will maintain or increase upon their share of sells), it "could" make that much.

The fact that it used "could" instead of "should" or "expect to" pretty much says that's a high estimate that probably won't be reached.
That does suck. I stand corrected.

coyotes_geek and CC good points both. Wow so unless the new Volt sales really rock it's looking pretty iffy for full payback? And realistically Volt only expects to get 0.5% at best of the market, right?

[CosmicCowboy]

That does suck. I stand corrected.

coyotes_geek and CC good points both. Wow so unless the new Volt sales really rock it's looking pretty iffy for full payback? And realistically Volt only expects to get 0.5% at best of the market, right?

The Volt is just a feel good PR gimmick. It's massively overpriced for what you get. GM's profits are still in trucks and Suburbans/Tahoes. When gas prices go back up because of the Fed printing dollars GM's profits are gonna take it right in the nuts.

[coyotes_geek]

The Volt is just a feel good PR gimmick. It's massively overpriced for what you get. GM's profits are still in trucks and Suburbans/Tahoes. When gas prices go back up because of the Fed printing dollars GM's profits are gonna take it right in the nuts.

If it weren't for all the tax incentives on the volt GM would probably have to be selling about two trucks/suvs per each volt just to break even.

[coyotes_geek]

Speaking of GM, this piece paints a pretty damning picture of how GM has artificially inflated sales numbers by shipping cars to dealerships and booking them as sales leading up to the IPO.

Uncle Sam's pump and dump (http://www.washingtonexaminer.com/opinion/blogs/Examiner-Opinion-Zone/GMs-IPO-Uncle-Sams-pump-and-dump-108183874.html)

So Uncle Sam gets to sell a good chunk of his shares at an artificially created high and boast about making a profit on those shares. After the IPO, sales will fall because dealerships have all that extra inventory to sell off.

[DMX7]

I thought Obama became President so that he could become CEO of GM? :(

[Winehole23]

Mr. Obama would do well to put as much distance b/w himself and GM as possible.

[DMX7]

GM is a success story. GM workers are his base. He should have the GM logo tattooed to his face.

[Winehole23]

GM is a success story.Don't count your chickens before they hatch.

[DMX7]

Don't count your chickens before they hatch.

GM hasn't liquidated, is now profitable and is about to make a killing in the IPO (especially relative to where it could be).

I'd say enough chickens have hatched to call it a success story.

[Winehole23]

GM hasn't liquidated, is now profitable and is about to make a killing in the IPO (especially relative to where it could be).

I'd say enough chickens have hatched to call it a success story.Page one of this thread made no impression on you?

[CosmicCowboy]

GM hasn't liquidated, is now profitable and is about to make a killing in the IPO (especially relative to where it could be).

I'd say enough chickens have hatched to call it a success story.

:lmao:lmao:lmao:lmao

If thats a success I'd like to see what you call a failure...:lol

Let me summarize for you:

GM gets 60 BILLION from the US and Canadian governments.

GM gets an additional 45 BILLION in tax breaks

GM "gives back" 8.1 Billion of the original 60 billion borrowed.

Media outlets and idiots like DMX7 say..."SEE, GM paid all the money back!"

:lmao

[coyotes_geek]

Media outlets and idiots like DMX7 say..."SEE, GM paid all the money back!"

:lmao

:cheer Yay Obama! Yay Bailouts! :cheer

[Wild Cobra]

GM hasn't liquidated, is now profitable and is about to make a killing in the IPO (especially relative to where it could be).

I'd say enough chickens have hatched to call it a success story.

I seriously doubt that. The government will unload at a serious loss, otherwise investors will not risk buying the stock.

[RandomGuy]

http://chicagobreakingbusiness.com/2010/11/gms-tax-break-worth-as-much-as-45-billion.html


GM’s tax break worth as much as $45 billion
By Reuters
Posted Nov. 3 at 10:07 a.m.

General Motors can get a tax break of up to $45 billion as part of its U.S. government-financed restructuring, documents filed with federal regulators earlier this year showed.

The Wall Street Journal earlier reported that GM would not have to pay federal taxes on up to $50 billion in profits. A later version of this story revised this figure to about $45 billion.

This figure also includes $18.88 billion of carry-forwards, according to the automaker’s annual filing from April.

Under the Troubled Asset Relief Program, losses racked up by GM before its government-funded bankruptcy can be used to offset its future tax liabilities

The tax revenue LOST in this deal is not even included in the usual "break even" calculations.

Remember the "loss-carryforwards" would have taken place regardess of the bailout, if the company had remained viable.

I would not include the $18.88bn as part of the "recoup" costs, since it was technically an "ordinary" cost to the government. Companies have bad years all the time, and the rules allow for them to carry-forward the losses as a credit against future profits.

[RandomGuy]

:lmao:lmao:lmao:lmao

If thats a success I'd like to see what you call a failure...:lol

Let me summarize for you:

GM gets 60 BILLION from the US and Canadian governments.

GM gets an additional 45 BILLION in tax breaks

GM "gives back" 8.1 Billion of the original 60 billion borrowed.

Media outlets and idiots like DMX7 say..."SEE, GM paid all the money back!"

:lmao

It is, at the very least, not in a death spiral.

What would the losses to the economy have been had GM been liquidated?

If we are to evaluate success, I would say spending $100bn to avoid even greater losses would constitute "success", even if we got no return on the investment whatsoever.

The fact that we gained the benefit of avoiding a massive loss AND it gets "cheaper" as time goes by due to recovering funds is definitely a success, EVEN IF WE NEVER MAKE AN ACTUAL PROFIT.

That is the logical conclusion.

Any other conclusion is simply playing politics at the expense of common sense.

[CosmicCowboy]

Remember the "loss-carryforwards" would have taken place regardess of the bailout, if the company had remained viable.

I would not include the $18.88bn as part of the "recoup" costs, since it was technically an "ordinary" cost to the government. Companies have bad years all the time, and the rules allow for them to carry-forward the losses as a credit against future profits.

Except for the fact that the company did NOT remain viable and they wiped the "old" GM out. The investors (bondholders and stockholders) in the "old" GM were wiped out and THEY took the loss.

In this case, the loss gets deducted twice. It was literally a way for the US to give GM billions "under the table".

[RandomGuy]

The company needs about $150 per share to "break even"


Barovsky report says $133.78.

http://www.autoblog.com/2010/09/23/report-u-s-breaks-even-if-gm-stock-hits-133-78/

That sounds closer to what I remember reading. It is probably the source of that, I would guess.

Given that the amount of bids outnumbered available shares by some eight to one, I would say the price will approach that. I guess we will eventually get to see what the weighted average sale prices is after the Government is finished selling out.

Here's wishing us and GM good fortune in turning their company around. :toast

[RandomGuy]

Except for the fact that the company did NOT remain viable and they wiped the "old" GM out. The investors (bondholders and stockholders) in the "old" GM were wiped out and THEY took the loss.

In this case, the loss gets deducted twice. It was literally a way for the US to give GM billions "under the table".

They would have lost similar, if not more, had the company been liquidated.

The stockholders would have, in all likelihood been wiped out, and bondholders would have gotten pennies on the dollar.

Such costs can't be considered in comparing options, because they didn't really differ all that much between the bailout/non-bailout options.

Cost Accounting 101. :)

[CosmicCowboy]

It is, at the very least, not in a death spiral.

What would the losses to the economy have been had GM been liquidated?

If we are to evaluate success, I would say spending $100bn to avoid even greater losses would constitute "success", even if we got no return on the investment whatsoever.

The fact that we gained the benefit of avoiding a massive loss AND it gets "cheaper" as time goes by due to recovering funds is definitely a success, EVEN IF WE NEVER MAKE AN ACTUAL PROFIT.

That is the logical conclusion.

Any other conclusion is simply playing politics at the expense of common sense.

GM should have been broken up and sold. There is nothing "sacred" about GM.

The technology and brands had value and the company would have continued with private funding/investment in one form or fashion.

Using taxpayer money to subsidize a non-profit union endeavor is wrong.

This is a logical conclusion.

Any other conclusion is simply playing politics at the expense of common sense.

[RandomGuy]

GM should have been broken up and sold. There is nothing "sacred" about GM.

The technology and brands had value and the company would have continued with private funding/investment in one form or fashion.

Using taxpayer money to subsidize a non-profit union endeavor is wrong.

This is a logical conclusion, based on the political values and opinions I expressed above.

Any other conclusion is simply playing politics that I don't agree with at the expense of what I think is common sense.

Fixed. At least admit your opinions are opinions, man.

[CosmicCowboy]

They would have lost similar, if not more, had the company been liquidated.

The stockholders would have, in all likelihood been wiped out, and bondholders would have gotten pennies on the dollar.

Such costs can't be considered in comparing options, because they didn't really differ all that much between the bailout/non-bailout options.

Cost Accounting 101. :)

You can't (or wouldn't without government collusion) have it both ways. Yeah, the bondholders would have been virtually wiped out and they would have deducted the loss on their investment from their current and future taxable income and carried the loss forward. Thats the same thing they did when "old" GM was dissolved.

BUT

"NEW" GM would not have been able to take the SAME loss because it already went to the wiped out investors in the bankruptcy.

Tax Accounting 101

[CosmicCowboy]

Fixed. At least admit your opinions are opinions, man.

So, in your OPINION, it is totally OK for GM ( now essentially owned by the United Auto workers) to not be accountable for repaying the 60 Billion dollars of taxpayer money that was dumped there plus get an additional 45 million of tax breaks...

and THEN...

be allowed to go out and compete head to head with Ford, which DIDN'T take tax dollars and DIDN'T get the same tax breaks? Not only that but FORD pays TAXES that politicians take and use to subsidize it's competitor...

How fucking fair is THAT?

[Sportcamper]

Another twisted GM Logic…Chevy dealers in So Cal would not participate in the “Cash for clunkers” program because they did not trust the government to reimburse them for the clunker trade ins…I mean how messed up is that…They plead for billions in bail outs & then claim that they are too good to participate in a government program intended to boost their sales…

[TeyshaBlue]

So, in your OPINION, it is totally OK for GM ( now essentially owned by the United Auto workers) to not be accountable for repaying the 60 Billion dollars of taxpayer money that was dumped there plus get an additional 45 million of tax breaks...

and THEN...

be allowed to go out and compete head to head with Ford, which DIDN'T take tax dollars and DIDN'T get the same tax breaks? Not only that but FORD pays TAXES that politicians take and use to subsidize it's competitor...

How fucking fair is THAT?

Ford got plenty of play from the Gov that's not as sexy as a bailout (ie a Fed line of credit). Also they, like the rest of the industry, benefited mightily from the Cash for Clunkers program. They did turn down a bailout package, but that resulted in being saddled with some serious debt. They're making nice moves now to pay some of that down, but to say they are out of the woods is a bit premature, IMO. They are also playing some serious Wal*Mart style hardball with their suppliers.

[coyotes_geek]

It is, at the very least, not in a death spiral.

What would the losses to the economy have been had GM been liquidated?

If we are to evaluate success, I would say spending $100bn to avoid even greater losses would constitute "success", even if we got no return on the investment whatsoever.

The fact that we gained the benefit of avoiding a massive loss AND it gets "cheaper" as time goes by due to recovering funds is definitely a success, EVEN IF WE NEVER MAKE AN ACTUAL PROFIT.

That is the logical conclusion.

Any other conclusion is simply playing politics at the expense of common sense.

What a bunch of garbage.

What was the impact to the economy when millions of people in construction, retail and financial sectors lost their jobs? Work at the mall? No biggie, the economy can sustain the loss of your job. Build homes? Not important. Work at the bank? Not important. Own a restaurant? Not important. Drive a truck? Not important. Fireman? Not important. Build cars? Holy fuck! We've got to do something!!!!!!!

By your "logic", shouldn't we have spent whatever amount it took to save all those other jobs? If not, please explain to the rest of us jobs in the auto manufacturing sector are the only jobs that the economy can not afford to lose.

Again using your "logic", it seems that the prudent thing for the government to have done was just tell every businesses in America that was losing money to just submit their financial statements to the government and their losses would be reimbursed at taxpayer expense. That would keep everyone employed, right? Doesn't matter if the taxpayers never get paid back because whatever we're losing certainly can't be any bigger than what the effect on the economy would be otherwise. Right?

This is a logical conclusion.

Any other conclusion is simply playing politics at the expense of common sense.

[TeyshaBlue]

What a bunch of garbage.

What was the impact to the economy when millions of people in construction, retail and financial sectors lost their jobs? Work at the mall? No biggie, the economy can sustain the loss of your job. Build homes? Not important. Work at the bank? Not important. Own a restaurant? Not important. Drive a truck? Not important. Fireman? Not important. Build cars? Holy fuck! We've got to do something!!!!!!!

By your "logic", shouldn't we have spent whatever amount it took to save all those other jobs? If not, please explain to the rest of us jobs in the auto manufacturing sector are the only jobs that the economy can not afford to lose.

Again using your "logic", it seems that the prudent thing for the government to have done was just tell every businesses in America that was losing money to just submit their financial statements to the government and their losses would be reimbursed at taxpayer expense. That would keep everyone employed, right? Doesn't matter if the taxpayers never get paid back because whatever we're losing certainly can't be any bigger than what the effect on the economy would be otherwise. Right?

I dunno CG, I think Random has a point. If GM went down, they would've taken a huge chunk of suppliers with them. No suppliers = hard times for the rest of the automakers. Supply and demand is a bitch.

[coyotes_geek]

I dunno CG, I think Random has a point. If GM went down, they would've taken a huge chunk of suppliers with them. No suppliers = hard times for the rest of the automakers. Supply and demand is a bitch.

Is the auto industry the only industry that deals with suppliers or has other jobs that are in some way related?

[TeyshaBlue]

Is the auto industry the only industry that deals with suppliers or has other jobs that are in some way related?

Of course not. But the multiplication effect would've been exponentially worse in the auto industry. There's only so many suppliers of OEM alternators, for example. The remainder of suppliers that weren't wiped out would be charging much, much more for what suddenly became a hot commodity.
Multiply this by every subassembly, widget, door handle...etc. Car companies are assemblers.

[coyotes_geek]

Of course not. But the multiplication effect would've been exponentially worse in the auto industry. There's only so many suppliers of OEM alternators, for example. The remainder of suppliers that weren't wiped out would be charging much, much more for what suddenly became a hot commodity.
Multiply this by every subassembly, widget, door handle...etc. Car companies are assemblers.

There's only so many suppliers who make roof shingles. Multiply that by every subassembly, cabinet, sink, light fixture, etc. Homebuilders are assemblers too. Where was the call to fork over a hundred billion taxpayer dollars to them, return on investment be damned?

[TeyshaBlue]

There's only so many suppliers who make roof shingles. Multiply that by every subassembly, cabinet, sink, light fixture, etc. Homebuilders are assemblers too. Where was the call to fork over a hundred billion taxpayer dollars to them, return on investment be damned?

Oh, they got their handout as well. It's just more dilute because there are a bazillion times more builders than car companies, which is the crux of my argument actually.

Foreclosure Prevention Act of 2008 was a $29 billion dollar tax gift to the builders.
First Time Buyer's credit pumped a shit ton of capital into the market.

Nobody remembers these and others...

[TeyshaBlue]

In summary: One rifle shot could have taken down the auto industy, they are so closely intertwined. It would take a couple of frag grenades to take down the housing industry.

IMO, the arguments for bailouts of the respective industries are not comparable on any level, CG because of the dilution (sheer numbers) of homebuilders.

[CosmicCowboy]

Would there be a shortage of new cars if GM did not exist?

[MannyIsGod]

Would there be a shortage of new cars if GM did not exist?

Its plausible I suppose but I really don't now how possible.

[coyotes_geek]

Oh, they got their handout as well. It's just more dilute because there are a bazillion times more builders than car companies, which is the crux of my argument actually.

Foreclosure Prevention Act of 2008 was a $29 billion dollar tax gift to the builders.
First Time Buyer's credit pumped a shit ton of capital into the market.

Nobody remembers these and others...

Foreclosure prevention was a gift to the banks, not the builders. I suppose you could consider first time buyers somewhat builder related, but I think that had more to do with trying to move existing homes off the market than trying to create demand for new homes.

[coyotes_geek]

In summary: One rifle shot could have taken down the auto industy, they are so closely intertwined. It would take a couple of frag grenades to take down the housing industry.

IMO, the arguments for bailouts of the respective industries are not comparable on any level, CG because of the dilution (sheer numbers) of homebuilders.

That logic only works if you choose to believe that GM is the entire auto indsutry. I respectfully disagree that it is.

[coyotes_geek]

Would there be a shortage of new cars if GM did not exist?

I don't think so. Had GM been allowed to go through a normal bankruptcy someone would have purchased the Chevy, GMC, Buick and Caddy brands and continued production of those lines.

[CosmicCowboy]

Would there be a shortage of new cars if GM did not exist?



Its plausible I suppose but I really don't now how possible.

My point exactly.

Lets say 12 million cars total will be purchased in the US this year (about right).

If GM didn't make "their share" of them, someone else would.

[TeyshaBlue]

I don't think so. Had GM been allowed to go through a normal bankruptcy someone would have purchased the Chevy, GMC, Buick and Caddy brands and continued production of those lines.

I think this is the strongest point of your argument. What's unknown is the effects of the process on the halo of suppliers.

[TeyshaBlue]

That logic only works if you choose to believe that GM is the entire auto indsutry. I respectfully disagree that it is.

I don't think GM is the entire auto industry. But disturbances in small ponds cause more havoc than in a large lake.

[MannyIsGod]

My point exactly.

Lets say 12 million cars total will be purchased in the US this year (about right).

If GM didn't make "their share" of them, someone else would.

Well, maybe but the argument put forth was that GM would take suppliers with them and thereby reducing the supply of parts available to anyone.

In any event, my argument for the bailout tobegin with had more to do with the fact that we were going to spend that money in one way shape or form because if GM went down then we were going to spend it in social services.

[CosmicCowboy]

I think this is the strongest point of your argument. What's unknown is the effects of the process on the halo of suppliers.

Those suppliers would have then bid on Ford, Toyota, Hyundai, etc. sub-assemblies instead of GM's. Other manufacturers would have taken that market share and required the same amount of employees to produce those cars and sub-assemblies. Some suppliers might have gone out of business but others would grow or be created to meet the sales demand.

[RandomGuy]

So, in your OPINION, it is totally OK for GM ( now essentially owned by the United Auto workers) to not be accountable for repaying the 60 Billion dollars of taxpayer money that was dumped there plus get an additional 45 million of tax breaks...

and THEN...

be allowed to go out and compete head to head with Ford, which DIDN'T take tax dollars and DIDN'T get the same tax breaks? Not only that but FORD pays TAXES that politicians take and use to subsidize it's competitor...

How fucking fair is THAT?

I would not say that GM was "essentially owned by the UAW".

It isn't really fair. It wasn't meant to be.

It was meant to avoid a massive liquidation, and it did that, did it not?

[CosmicCowboy]

I would not say that GM was "essentially owned by the UAW".

It isn't really fair. It wasn't meant to be.

It was meant to avoid a massive liquidation, and it did that, did it not?


Whats not fair?

The United Auto Workers will be the single biggest shareholder in GM and Chrysler after the government liquidates it's share at a loss. What part of this don't you understand?

[RandomGuy]

GM should have been broken up and sold. There is nothing "sacred" about GM.

The technology and brands had value and the company would have continued with private funding/investment in one form or fashion.


Going back to your other two opinions,

What "should" have happened to GM is central to the debate here. While I agree there is nothing sacred about GM, I think the economic damage would have been MUCH greater, had that happened.

The break up would have taken place during the worst financial asset meltdown in living memory. It is arguable whether ANYBODY would have had the financial werewithal to taken on any of the brands, even at the steeply discounted prices that they would have gone for. Several analyses I read doubted that even a small fraction of GM in North America would have survived.

Should we have allowed the massive economic damage, just to satisfy your apparent dislike of unions?

[RandomGuy]

Whats not fair?

The United Auto Workers will be the single biggest shareholder in GM and Chrysler after the government liquidates it's share at a loss. What part of this don't you understand?


be allowed to go out and compete head to head with Ford, which DIDN'T take tax dollars and DIDN'T get the same tax breaks? Not only that but FORD pays TAXES that politicians take and use to subsidize it's competitor...

How fucking fair is THAT?

You asked me if this is fair. I said no.

The UAW is not as of now the "essential owner".

As GM issues more stock that ownership stake will be diluted, and I don't know if the UAW will retain the shares, given that the shares were created in lieu of a liability owed. I would think that the UAW would likely slowly sell off its stake to meet the financial needs of the union as they arise, since that was the underlying nature of the liability discharged, to my understanding.

[CosmicCowboy]

Going back to your other two opinions,

What "should" have happened to GM is central to the debate here. While I agree there is nothing sacred about GM, I think the economic damage would have been MUCH greater, had that happened.

The break up would have taken place during the worst financial asset meltdown in living memory. It is arguable whether ANYBODY would have had the financial werewithal to taken on any of the brands, even at the steeply discounted prices that they would have gone for. Several analyses I read doubted that even a small fraction of GM in North America would have survived.

Should we have allowed the massive economic damage, just to satisfy your apparent dislike of unions?

Joe, Fred, and Pete sell apples at the farmers market. Together they sell 100 apples a day.

Pete starts smoking crack and gambling and loses his fruit stand in a craps game to Jose.

Now Joe, Fred, and Jose sell apples at the farmers market. Together they sell 100 apples a day.

Where is the economic loss?

[velik_m]

What a bunch of garbage.

What was the impact to the economy when millions of people in construction, retail and financial sectors lost their jobs? Work at the mall? No biggie, the economy can sustain the loss of your job. Build homes? Not important. Work at the bank? Not important. Own a restaurant? Not important. Drive a truck? Not important. Fireman? Not important. Build cars? Holy fuck! We've got to do something!!!!!!!

I generally agree that government shouldn't bail-out any industry, particularly if their troubles are their own doing.
However: jobs you listed are service jobs, they differ from manufacturing jobs. If a restaurant goes out of business, the people will still need to eat, and another restaurant will open. An American may have lost a job, but another one will get it. If GM went out of business that vacuum would be (mostly) filled by foreign companies and their suppliers.

[coyotes_geek]

I think this is the strongest point of your argument. What's unknown is the effects of the process on the halo of suppliers.

Depends how the bankruptcy would have been handled. I don't see why there couldn't have been some kind of arrangement where GM continued to build some number of cars while bankruptcy proceedings went on. The bondholders would have been for that since liquidation of a GM that was still building cars would fetch more $$$ than liquidation of a GM that wasn't building cars. The union would be bitching up a storm since operations under that condition would certainly involve throwing out the union contracts with a BK judge determining compensation, but given the alternative of no one having a job at all, I think they'd begrudgingly have gone along with it. The stockholders were going to get wiped out under any scenario so their input didn't matter.

Under that scenario, GM continues to build cars while the company is being liquidated. Secured creditors get first dibs on the proceeds in accordance with bankruptcy law, secondary creditors come next. Taxpayers aren't on the hook. The corporate entity known as GM dies, but the production continues and the only significant ripple in the pond is the falling consumer demand which no one can do anything about anyways.

[coyotes_geek]

Well, maybe but the argument put forth was that GM would take suppliers with them and thereby reducing the supply of parts available to anyone.

In any event, my argument for the bailout tobegin with had more to do with the fact that we were going to spend that money in one way shape or form because if GM went down then we were going to spend it in social services.

The fault in that arguement is that the jobs that were "saved" are far more expensive than putting people on unemployment. $100 Billion worth of unemployment benefits is enough to put 2 million people on unemployment for 2 years. And I find it hard to believe that 2 million people in America were going to end up unemployed if a company that only employeed 200,000 worldwide went under.

[MannyIsGod]

Unemployment benefits are not the only cost associated with mass unemployment. The estimates on unemployment were for 1 million, however.

[TeyshaBlue]

Those suppliers would have then bid on Ford, Toyota, Hyundai, etc. sub-assemblies instead of GM's. Other manufacturers would have taken that market share and required the same amount of employees to produce those cars and sub-assemblies. Some suppliers might have gone out of business but others would grow or be created to meet the sales demand.

Perhaps in a healthy credit market. That didn't exist then, and still doesn't.

[CosmicCowboy]

Unemployment benefits are not the only cost associated with mass unemployment. The estimates on unemployment were for 1 million, however.

GM had approximately 20% of the US market share. If they had gone completely out of business other manufacturers would have filled that 20% gap and hired additional employees/suppliers in order to do so. There should not have been a significant net job loss.

[CosmicCowboy]

Perhaps in a healthy credit market. That didn't exist then, and still doesn't.

So you are claiming that GM's 20% of market share would not have been replaced and we would have a car shortage now?

[RandomGuy]

What a bunch of garbage.

What was the impact to the economy when millions of people in construction, retail and financial sectors lost their jobs? Work at the mall? No biggie, the economy can sustain the loss of your job. Build homes? Not important. Work at the bank? Not important. Own a restaurant? Not important. Drive a truck? Not important. Fireman? Not important. Build cars? Holy fuck! We've got to do something!!!!!!!

By your "logic", shouldn't we have spent whatever amount it took to save all those other jobs? If not, please explain to the rest of us jobs in the auto manufacturing sector are the only jobs that the economy can not afford to lose.

Again using your "logic", it seems that the prudent thing for the government to have done was just tell every businesses in America that was losing money to just submit their financial statements to the government and their losses would be reimbursed at taxpayer expense. That would keep everyone employed, right? Doesn't matter if the taxpayers never get paid back because whatever we're losing certainly can't be any bigger than what the effect on the economy would be otherwise. Right?

This is a logical conclusion.

Any other conclusion is simply playing politics at the expense of common sense.

That is a "slippery slope" logical fallacy.

It is the very definition of illogical.

"If we apply your logic,
then we must do everything under the sun."

GM was, and is, one of the largest companies in the US. Allowing it to collapse in an enormous vortex of disappearing capital in the middle of the worst financial crisis would have caused a lot of "collateral damage" far beyond simply letting the company die. The glib "should have let it die" bits never acknowledge the depth of the effect of how much would have been interconnected.

We applied a moderate amount of intervention in a very volatile situation. The government cannot, nor should it, invervene in everything. Weak businesses must be allowed to fail. GM's restructuring certainly cost a good number of jobs even if it wasn't destroyed as some wished.

Was it fair? No.

It does NOT matter at all if the taxpayers get paid back. The purpose of the intervention was not to pay the taxpayer back, but to prevent even more catastrophic losses, as I have stated before. Does that suck? Yes. Does that suck less than the alternative? Yes.

Is it good that we might get a good chunk of it back? Yes. That is an added bonus.

[TeyshaBlue]

So you are claiming that GM's 20% of market share would not have been replaced and we would have a car shortage now?
You seem to think everything happens instantly.:lol

I doubt a car shortage would've ensued with inventory levels being high and such. Suppliers would gradually fold creating upward pricing pressure on remaining parts inventories. With a destabilized credit market, the surviving suppliers wouldn't have been able to leverage the capital to expand supplier shops, add machinists and the machines they work with, in a cost-effective manner. Result? Rising unemployment...a serious spike in car prices of which the long term effects would not be pretty.

[RandomGuy]

Would there be a shortage of new cars if GM did not exist?

No.

[TeyshaBlue]

If GM had folded, the winners would have been the used car market.

[RandomGuy]

You can't (or wouldn't without government collusion) have it both ways. Yeah, the bondholders would have been virtually wiped out and they would have deducted the loss on their investment from their current and future taxable income and carried the loss forward. Thats the same thing they did when "old" GM was dissolved.

BUT

"NEW" GM would not have been able to take the SAME loss because it already went to the wiped out investors in the bankruptcy.

Tax Accounting 101

Quite frankly I am not familiar enough with the specifics of how that was handled to really comment on it. I don't know enough about the nature of the losses taken out to say one way or another.

They did have a lot of operating losses to contribute to the carry-forwards of the new entity. My understanding is that you discharge a lot of the liabilities, and keep all of the assets in such a restructuring. Assets would include tax credits. Again, without looking at the specific components, I can't really say for certain what happened and how fair/unfair or how much real "gimmie" credits they got.

[RandomGuy]

If GM had folded, the winners would have been the used car market.

The used car market is currently a winner.

Remember that the number of new cars sold was less than what was required to keep the current fleet of vehicles on the road, i.e. the "birth rate" was less than the "death rate".

People are holding on to cars a bit longer, and that has caused used cars to retain more value.

[coyotes_geek]

Unemployment benefits are not the only cost associated with mass unemployment. The estimates on unemployment were for 1 million, however.

$100 billion / 1 million = $100,000. I have a hard time buying that all the costs associated with unemployment add up to $100,000 per person.

[MannyIsGod]

$100 billion / 1 million = $100,000. I have a hard time buying that all the costs associated with unemployment add up to $100,000 per person.

Why does it just have to be costs? Why can't it also be lost tax revenue? If you have a hard time believing it then thats fine I guess but I posted studies when we talked about this back then. I was just simply talking out of my ass.

In any event, if you so choose the threads are there to be looked at and are only a search away but at some point it gets tired having the same debate over and over. I won't be trying to prove it again.

[RandomGuy]

$100 billion / 1 million = $100,000. I have a hard time buying that all the costs associated with unemployment add up to $100,000 per person.

Current worker pay, total (arbitrary, roughly about US average):
$55,000 per year (all directly contributed to GDP)

Multiply this by the average length of unemployment stint. 24.5 weeks
The average length of unemployment is higher than it's been since government began tracking the data in 1948. (http://online.wsj.com/article/SB124753066246235811.html) (2009 data)

55,000*(24.5/52)= 25,913 in lost wages.

Add

unemployment insurance benefit, a paydown in assets, for same period, at 75% (again arbitrary, not sure exactly what precise % is) rate of pay

25913*.75 = 18684

Total losses to economy from this job loss before any additional factors:
25913+18684= $44,497 in losses.

That gets to close to half of that even before counting on the add-on losses from bills not paid, houses foreclosed on, etc.

Not entirely out of the ballpark, it seems.

[coyotes_geek]

Why does it just have to be costs? Why can't it also be lost tax revenue? If you have a hard time believing it then thats fine I guess but I posted studies when we talked about this back then. I was just simply talking out of my ass.

In any event, if you so choose the threads are there to be looked at and are only a search away but at some point it gets tired having the same debate over and over. I won't be trying to prove it again.


Current worker pay, total (arbitrary, roughly about US average):
$55,000 per year (all directly contributed to GDP)

Multiply this by the average length of unemployment stint. 24.5 weeks
The average length of unemployment is higher than it's been since government began tracking the data in 1948. (http://online.wsj.com/article/SB124753066246235811.html) (2009 data)

55,000*(24.5/52)= 25,913 in lost wages.

Add

unemployment insurance benefit, a paydown in assets, for same period, at 75% (again arbitrary, not sure exactly what precise % is) rate of pay

25913*.75 = 18684

Total losses to economy from this job loss before any additional factors:
25913+18684= $44,497 in losses.

That gets to close to half of that even before counting on the add-on losses from bills not paid, houses foreclosed on, etc.

Not entirely out of the ballpark, it seems.

If it works, why stop with GM? Why not give the banks extra money so that they don't have to lay off anyone? Why not give retailers money to keep their salespeople employed? Why not end unemployment altogether and just pay companies to employ everyone? They'll all be paying taxes, no one will be on welfare and it will all just work itself out, right?

Certainly if those 1 million jobs that would allegedly be lost if GM went under justified the expenditure then similar expenditures would be more than justified for the 9 million jobs in other sectors that we actually have lost.

[RandomGuy]

Depends how the bankruptcy would have been handled. I don't see why there couldn't have been some kind of arrangement where GM continued to build some number of cars while bankruptcy proceedings went on. The bondholders would have been for that since liquidation of a GM that was still building cars would fetch more $$$ than liquidation of a GM that wasn't building cars. The union would be bitching up a storm since operations under that condition would certainly involve throwing out the union contracts with a BK judge determining compensation, but given the alternative of no one having a job at all, I think they'd begrudgingly have gone along with it. The stockholders were going to get wiped out under any scenario so their input didn't matter.

Under that scenario, GM continues to build cars while the company is being liquidated. Secured creditors get first dibs on the proceeds in accordance with bankruptcy law, secondary creditors come next. Taxpayers aren't on the hook. The corporate entity known as GM dies, but the production continues and the only significant ripple in the pond is the falling consumer demand which no one can do anything about anyways.

As I have pointed out, you are forgetting the fiscal environment that this took place in.

1) No one, NO ONE, would have had the $$ to step in and buy the assets for anything near the true value. There was no credit market. The assets, if divvied up would have been neglible compared to keeping the entity as a going concern.

2) If you don't remember the surveys at the time of people who stopped buying GM because they were unsure of whether their warranties would be honored, or if they could even get parts for their cars, were they to buy them.

Do you really think ANYONE would have bought a GM car under such conditions?

Would you?

If you would not buy a car under that condition, then I think it is safe to conclude that no one else would have either.

"a GM that was still building cars would fetch more $$$ than liquidation of a GM that wasn't building cars" is all well and good, but if no one is buying those cars, building cars is a losing proposition.

Your assessment of how well things would have gone in bankruptcy is unrealistically optimistic.

Tell me you would buy a new car with a questionable warranty, and no gaurantee that you could get parts in 12 months, and I take it all back.

[RandomGuy]

If it works, why stop with GM? Why not give the banks extra money so that they don't have to lay off anyone? Why not give retailers money to keep their salespeople employed? Why not end unemployment altogether and just pay companies to employ everyone? They'll all be paying taxes, no one will be on welfare and it will all just work itself out, right?

Certainly if those 1 million jobs that would allegedly be lost if GM went under justified the expenditure then similar expenditures would be more than justified for the 9 million jobs in other sectors that we actually have lost.

You don't do it because there simply is not enough money to do so, nor would it be the right thing to do in the long run.

The ability to justify GM, but not extend it to everything is a rational stop to the "slippery slope" argument, and why it is a logical fallacy.

Just because you can't/won't do it for everyone is not a reason NEVER to do it.

I think it was a cost/benefit decision, and arguably (heh) the right one. At least Buffet thinks so. :p:

[coyotes_geek]

Your assessment of how well things would have gone in bankruptcy is unrealistically optimistic.

I suppose there's not anything unrealistically pessimistic about thinking one million people were automatically going to end up unemployeed if GM and the 91,000 Americans they employed at the time of their bankruptcy filing went under.


You don't do it because there simply is not enough money to do so, nor would it be the right thing to do in the long run.

The ability to justify GM, but not extend it to everything is a rational stop to the "slippery slope" argument, and why it is a logical fallacy.

Just because you can't/won't do it for everyone is not a reason NEVER to do it.

I think it was a cost/benefit decision, and arguably (heh) the right one. At least Buffet thinks so. :p:

Agree to disagree. I accepted long ago that my opposition to corporate welfare is a minority opinion.

[TeyshaBlue]

Agree to disagree. I accepted long ago that my opposition to corporate welfare is a minority opinion.

Because you're wrong and stupid and stuff!:bang:ihit :lol:toast

[coyotes_geek]

Because you're wrong and stupid and stuff!:bang:ihit :lol:toast

:lol

My gratitude to yourself, RG and MIG for the entertaining discussion.

[TeyshaBlue]

:lol

My gratitude to yourself, RG and MIG for the entertaining discussion.

Yeah, occasionally, a reasoned discussion actually breakouts at this hockey game.:toast

[RandomGuy]

I suppose there's not anything unrealistically pessimistic about thinking one million people were automatically going to end up unemployeed if GM and the 91,000 Americans they employed at the time of their bankruptcy filing went under.



Agree to disagree. I accepted long ago that my opposition to corporate welfare is a minority opinion.

Don't get me wrong. I'm not happy about it. I fucking can't stand the fact that it had to happen.

I think if a corp gets that big and in that much trouble, it shouldn't have gotten that big to begin with.

The bailouts were a stop-gap, patch-the-hole-in-the-hull-THEN-worry-about-how-not-to-steer-into-iceburgs thing to do.

I really think that laws and structures need to be in place to wind down, in as orderly a fashion as possible, such large companies in the future.

I am all for some pretty strict size limits on financial institutions and companies, as well as some method for decoupling them so they can't take each other down.

The suck thing is that a lot of big financial institutions bet (not that they would admit it) on just such government bailouts, and continue to do so.

If that is what they want, private profits, and public risk, then we need to drop the facade, and plant government bureaucrats on their boards of directors, and force them to pay dividends to the treasury in a big ol' set aside fund akin to the FDIC. Let them suck on that.

Then if they fuck up, we kill the company, and have some cause to throw some greedy fucks in federal pound-em-in-the-ass prison.

I might defend the decision, but I do not want it to happen in the future. If it does, I want someone's head on a stick. Literally.

[RandomGuy]

:lol

My gratitude to yourself, RG and MIG for the entertaining discussion.

I think we managed to pull that off without anybody using the words "you idiot".

That may be a political forum first. :wow

[MannyIsGod]

Yeah, occasionally, a reasoned discussion actually breakouts at this hockey game.:toast

The parties involved tend to be some of the more reasonable ones here. Its not surprising.

[CosmicCowboy]

I think we managed to pull that off without anybody using the words "you idiot".

That may be a political forum first. :wow

However, we couldn't get by without a Bouton's VRWC and MIC post...:lol

[Winehole23]

http://www.skeptically.org/sitebuildercontent/sitebuilderpictures/.pond/wd-head-stick.jpg.w560h784.jpg

[boutons_deux]

In the stock offering, the government made $11.8 billion by selling 358 million shares at $33 apiece. It stands to make $13.6 billion if bankers exercise options for up to 412 million shares, as planned. The government would still have about 500 million shares, a one-third stake. It would have to sell those shares over the next two to three years at about $53 a share for taxpayers to come out even.


http://hosted.ap.org/dynamic/stories/U/US_GM_IPO?SITE=TXSAE&SECTION=US&TEMPLATE=DEFAULT&CTIME=2010-11-18-09-41-05

[CosmicCowboy]

LOL @ MYSA.com

[boutons_deux]

LOL @ MYSA.com

It's AP. What specific facts are wrong, in your OPINION?

[CosmicCowboy]

It's AP. What specific facts are wrong, in your OPINION?

Fuzzy math.

[RandomGuy]

Fuzzy math.

They actually have enough data points to double-check the math.

50bn given to company

minus


GM has already paid or agreed to pay back $9.5 billion

minus


It stands to make $13.6 billion if bankers exercise options for up to 412 million shares, as planned.

50-9.5-13.6= 26.9bn

divided by


The government would still have about 500 million shares

26.9/.5= $53.8 per share is breakeven point for cash doled out.

Doesn't seem fuzzy to me. The reporter did round down though.

Still have to check on the tax implications, because explicit, specific tax breaks given to company would have to be considered as part of the "bailout total".

[RandomGuy]

Barovsky report says $133.78.

http://www.autoblog.com/2010/09/23/report-u-s-breaks-even-if-gm-stock-hits-133-78/


Thanks to the massive auto industry bailout, the government currently holds a total of 304 million shares of common stock and $2.1 billion in preferred stock in the automaker.

Data does not jive.

If the government held 304M shares then, but suddenly, per the most recent information, holds 500M after SELLING 348M shares, that indicates they split the stock in some manner during the run-up to the IPO.

Seems like 53.7 per share is the magic number.

It is at 34 and change when I last checked, so reaching that is not out of the ballpark.

We have recovered almost half of the cash bailout now, and stand to get at least 2/3 of what is left, assuming the price stagnates for years.

Convert the fractions...
3/6 + 2/6 = 5/6
Ending cost to the taxpayer of the whole shebang assuming this conservative payback is a bit over 8bn.


The President's budget for 2010 totals $3.55 trillion

.008/3.55 or approximatly two tenths of one percent of the 2010 Federal Budget.

Given that perspective, I think the hand-wringing is a *wee* bit overblown. We have other things to worry about.

[CosmicCowboy]

Well, for sure they lost 9 billion on the stock they sold today. And thats supposed to be a "good" thing.

[Winehole23]

http://online.wsj.com/article/SB10001424052748704648604575621533011639228.html?m od=WSJ_hp_mostpop_read

[cool cat]

You know what car company is doing great without a bailout? Delorean!

http://www.delorean.com/

[CosmicCowboy]

You know what car company is doing great without a bailout? Delorean!

http://www.delorean.com/

Hell, Delorean STARTED with a bailout.

[Marcus Bryant]

GM buys politicians.

Politicians buy GM.

Either way, Americans get fucked.

[PublicOption]

foxnews' in oil companies pockets again

http://www.foxnews.com/leisure/2010/11/17/big-electricity-push-electric-cars/

I just have to laugh at this shit.

[CosmicCowboy]

foxnews' in oil companies pockets again

http://www.foxnews.com/leisure/2010/11/17/big-electricity-push-electric-cars/

I just have to laugh at this shit.


Did you even read the article? It's very pro-electric.

[RandomGuy]

GM buys politicians.

Politicians buy GM.

Either way, Americans get fucked.


We have recovered almost half of the cash bailout now, and stand to get at least 2/3 of what is left, assuming the price stagnates for years.

Convert the fractions...
3/6 + 2/6 = 5/6
Ending cost to the taxpayer of the whole shebang assuming this conservative payback is a bit over 8bn.


The President's budget for 2010 totals $3.55 trillion

.008/3.55 or approximatly two tenths of one percent of the 2010 Federal Budget.

Given that perspective, I think the hand-wringing is a *wee* bit overblown. We have other things to worry about.

Please tell me how two tenths of one percent of the federal budget shows that we "are fucked".

Then give me a rational estimate as to the likely effects of NOT bailing out GM would have had on the economy.

If your assertion is that the only reason GM was bailed out was because they "bought politicians", you must show that the cost of the bailout exceeded the cost of not bailing out, at the very least.







... or you could just admit your opinion was based on nothing more than vapid cynicism, and save us a lot of time.

Your call.

[RandomGuy]

foxnews' in oil companies pockets again

http://www.foxnews.com/leisure/2010/11/17/big-electricity-push-electric-cars/

I just have to laugh at this shit.

Tell me how that was "pro-oil"?

Be specific.

[TeyshaBlue]

foxnews' in oil companies pockets again

http://www.foxnews.com/leisure/2010/11/17/big-electricity-push-electric-cars/

I just have to laugh at this shit.

lol @ critical thinking fail.

[Marcus Bryant]

Please tell me how two tenths of one percent of the federal budget shows that we "are fucked".

Then give me a rational estimate as to the likely effects of NOT bailing out GM would have had on the economy.

If your assertion is that the only reason GM was bailed out was because they "bought politicians", you must show that the cost of the bailout exceeded the cost of not bailing out, at the very least.







... or you could just admit your opinion was based on nothing more than vapid cynicism, and save us a lot of time.

Your call.


Yet another hyperventalist screed, designed to boost his flagging ego.

[RandomGuy]

Yet another hyperventalist screed, designed to boost his flagging ego.

So... the anwswer is "no, I don't have any real proof for my opinion that the bailout of GM was motivated purely by politicians who were bought and paid for"

Thank you.

Vapid.
Cynicism.

:sleep

[Marcus Bryant]

Yeah, who could ever think that politicians might be corrupt or swayed by certain interests?

And you'll notice I didn't date the time during which I alleged said interest was bought. It's obviously been going on for decades. And then, of course, there's the UAW...

For such a brilliant mind you are subject to committing some rather common mistakes. Egads.

[RandomGuy]

Yeah, who could ever think that politicians might be corrupt or swayed by certain interests?

And you'll notice I didn't date the time during which I alleged said interest was bought. It's obviously been going on for decades. And then, of course, there's the UAW...

For such a brilliant mind you are subject to committing some rather common mistakes. Egads.

I am sure there was indeed some impetus on the part of some Democrats to do a solid for the UAW.

I am also just as sure that was not the sole consideration, or even the most important one, despite the bovine flatulatory noises to the contrary by the poltical hacks on the right, whose knee-jerk dislike of unions causes them to see reality through useless blinders.

[RandomGuy]

The problem with the "GM was rescued just to save the UAW" theory is that there were no few number of people who had nothing to do with the unions also saying it was probably a bad idea to let GM implode catastrophically.

[Winehole23]

I am also just as sure that was not the sole consideration, or even the most important one, despite the bovine flatulatory noises to the contrary...I wouldn't crow too much about that. Being certain about one's own strawman carries a very low degree of difficulty.

...by the political hacks on the right, whose knee-jerk dislike of unions causes them to see reality through useless blinders.Is this a rant, an incipient association fallacy, or both? :lol

[Winehole23]

The Treasury Department dramatically boosted its estimate of losses from its $85 billion auto (http://www.detnews.com/article/20111114/AUTO01/111140434/1361/U.S.-boosts-estimate-of-auto-bailout-losses-to-$23.6B#) industry bailout by more than $9 billion in the face of General Motors Co.'s steep stock decline.

In its monthly report to Congress, the Treasury Department now says it expects to lose $23.6 billion, up from its previous estimate of $14.33 billion.



The Treasury now pegs the cost of the bailout of GM, Chrysler Group LLC and the auto finance companies at $79.6 billion. It no longer includes $5 billion it set aside to guarantee payments to auto suppliers in 2009.



The big increase is a reflection of the sharp decline in the value of GM's share price.
The current estimate of losses is based on GM's Sept. 30 closing price of $20.18, down one-third over the previous quarterly price.



GM's stock closed Monday at $22.99, up 2 percent. The government won't reassess the estimate of the costs until Dec. 30.



The government has recovered $23.2 billion of its $49.5 billion GM bailout, and cut its stake in the company from 61 percent to 26.5 percent. But it has been forced to put on hold the sale of its remaining 500 million shares of stock.



The new estimate also hikes (http://www.detnews.com/article/20111114/AUTO01/111140434/1361/U.S.-boosts-estimate-of-auto-bailout-losses-to-$23.6B#) the overall cost of the $700 billion Troubled Asset Relief Program costs to taxpayers. TARP is the emergency program approved by Congress in late 2008 at the height of the financial crisis.



In total, the government used $425 billion to bailout banks, insurance companies and automakers, and provided $45 billion in housing program assistance.



The government now expects to lose $57.33 billion, including the full cost of the housing program, up from $36.7 billion. The new estimate means the government doesn't believe it will make an overall profit on its bailouts.

http://detnews.com/article/20111114/AUTO01/111140434/U.S.-boosts-estimate-of-auto-bailout-losses-to-$23.6B#ixzz1dtagqpB5

[101A]

I don't think anyone is listening, WH.

[Winehole23]

You are, which makes me modestly hopeful others may too.

[coyotes_geek]

Not much to say really. It was going to be a shitty deal for the taxpayers from the beginning.

[CosmicCowboy]

And surprise, surprise, nobody wants to buy their shitty Volt...

[Bender]

You are, which makes me modestly hopeful others may too.
I'm just waiting for the thread starter to chime in...

[CosmicCowboy]

I'm just waiting for the thread starter to chime in...

Or DMX7 or any of the other idiots that were swearing the US was gonna make a killing in the IPO. I called this one from day one.

BTW, Chrysler is now fully owned by an Italian company and the world didn't end and the Chrysler/Jeep brand still exists. Imagine that.

[Winehole23]

I'm just waiting for the thread starter to chime in...I'm not holding my breath. Most posters are too proud to own their errors.

[boutons_deux]

how shitty a deal for taxpayers would it have been to let Chrysler and GM go bankrupt, taking down 100s if not 1000s of dealers, suppliers and their jobs?

[Winehole23]

Doesn't matter. In a capitalistic system insolvent firms are permitted to fail.

Do you believe in socialism for megacorporations, boutons?

[CosmicCowboy]

how shitty a deal for taxpayers would it have been to let Chrysler and GM go bankrupt, taking down 100s if not 1000s of dealers, suppliers and their jobs?

Chrysler is a perfect example that it didn't have to work that way. They are doing fine being owned by Fiat and all those jobs are still there.

We bought GM, fucked the bondholders, and gave it to the UAW. That one won't end so well.

[coyotes_geek]

how shitty a deal for taxpayers would it have been to let Chrysler and GM go bankrupt, taking down 100s if not 1000s of dealers, suppliers and their jobs?

No shittier than when a bunch of people in the housing, construction, retail and financial sectors lost their jobs. But, the workers in those industries didn't have the appropriate political connections, so fuck 'em.

[101A]

Doesn't matter. In a capitalistic system insolvent firms are permitted to fail.

Do you believe in socialism for megacorporations, boutons?

:corn:

[Wild Cobra]

And surprise, surprise, nobody wants to buy their shitty Volt...
What if they gave you a $40,000 tax credit? Would you buy one?

[CosmicCowboy]

What if they gave you a $40,000 tax credit? Would you buy one?

Interesting question. If it was a carry forward credit and the effective cost was zero, probably.

[Winehole23]

Well, boutons?

[boutons_deux]

yeah, I'm for it. it's the 99%

10s of 1000s of the 99%

[Winehole23]

Well then you have little room to disparage the corporatocracy, since the government, in your view, is obliged to backstop the very largest corporations.

[Winehole23]

Indeed, publicly backstopping the failure of any firm whose failure would adversely affect "10s of 1000s" of the 99%, is the very definition of corporatocracy.

By this reasoning, you should be for the TARP, the secret Fed loans, bailing out Fannie and Freddie Mac etc., etc..

[TeyshaBlue]

Boom goes the logic bomb.

[boutons_deux]

what? corporatocracy is the UCA buying govt to protect/enrich itself.

the head of GM and others mgrs lost their jobs, unlike the wall st bailout.

bailing out GM was a stimulus, like giving money to states and municipalities to preserver public service jobs. the GM money went right to salaries of the 99% GM employees and employees of GM's supply chain.

[CosmicCowboy]

Boom goes the logic bomb.

sweet! :toast

[coyotes_geek]

The only thing GM's bailout stimulated was the UAW's retirement and benefits fund.

BTW, less than half of GM's workforce is American. 37% to be exact. But I'm sure the outsourced GM employees are eternally grateful to the American taxpayer for saving their jobs.....

[Drachen]

The only thing GM's bailout stimulated was the UAW's retirement and benefits fund.

BTW, less than half of GM's workforce is American. 37% to be exact. But I'm sure the outsourced GM employees are eternally grateful to the American taxpayer for saving their jobs.....

Not to argue your point, but in the spirit of full disclosure, Canada also bailed out GM.

[Winehole23]

nm

[Winehole23]

what? corporatocracy is the UCA buying govt to protect/enrich itself.Profits are private, dire losses, public.

(For the ginormously well-connected, of course.)


the head of GM and others mgrs lost their jobs, unlike the wall st bailout.Boo hoo.


bailing out GM was a stimulus, like giving money to states and municipalities to preserver public service jobs. the GM money went right to salaries of the 99% GM employees and employees of GM's supply chain.Leaving to one side the absurdity of reckoning GM as being primarily by and for the little guy, thank you for making explicit your own version of corporatism: favoring the largest over all others.

[Winehole23]

The only thing GM's bailout stimulated was the UAW's retirement and benefits fund.

BTW, less than half of GM's workforce is American. 37% to be exact. But I'm sure the outsourced GM employees are eternally grateful to the American taxpayer for saving their jobs.....Ouch.

[coyotes_geek]

Not to argue your point, but in the spirit of full disclosure, Canada also bailed out GM.

True. Canadian taxpayers are also going to lose money on GM.

[Winehole23]

The U.S. Treasury Department boosted its estimate of government losses in the $85 billion auto bailout by $170 million.

In the government's latest report to Congress this month, the Treasury upped its estimate to $23.77 billion, up from $23.6 billion.
http://www.detroitnews.com/article/20120130/AUTO01/201300393/Treasury-ups-auto-bailout-loss-estimate?odyssey=mod|newswell|text|FRONTPAGE|s

[ChumpDumper]

I bet most people think the loss is $85 billion.

[greyforest]

fuck gm.

the first thing they did with their bailout money was run an advertisement campaign. "let the best car win" they said.

it is 1984 double-talk. the best cars did already win, that's why your company failed.

[Wild Cobra]

I bet most people think the loss is $85 billion.
They way this administration has repeatedly said they were paid back, I'll bet most liberals think the loss was almost nothing.

[ChumpDumper]

liberals!

[z0sa]

23.77 billion dollars makes me want to vomit, tbh

[vy65]

lol CC
lol chevy volt
lol death squads

http://news.yahoo.com/gm-records-highest-profit-ever-7-6-billion-123523501.html

[boutons_deux]

GM North America earnings before interest and taxes more than tripled for the year to $7.19 billion on improved U.S. sales

http://www.businessweek.com/news/2012-02-16/gm-earns-record-net-income-while-fixing-opel-will-take-longer.html

employees due to get up $7K profit-sharing bonuses.

[coyotes_geek]

corporate welfare still sucks.

[TeyshaBlue]

:lol

[CosmicCowboy]

Yeah you can definitely make your numbers look good when you dump your pension obligations on the taxpayers. Pay attention, dudes...

[FuzzyLumpkins]

Yeah you can definitely make your numbers look good when you dump your pension obligations on the taxpayers. Pay attention, dudes...

Now who would have ever have thought that you of all people would try to frame the accounting in such a way to make a labor benefit at fault.

I must say I am shocked.

[TDMVPDPOY]

GM North America earnings before interest and taxes more than tripled for the year to $7.19 billion on improved U.S. sales

http://www.businessweek.com/news/2012-02-16/gm-earns-record-net-income-while-fixing-opel-will-take-longer.html

employees due to get up $7K profit-sharing bonuses.

lol a few days b4 this its australian arm, ask the aussie govt for a $100m bailout, so what does the govt do to save the industry....bends over and accepts to come up with the money...so far this year, they have contributed funds to toyota, ford and gm....now the other companies are also asking for a bailout....

when you have an expensive labour force, trade unions not bending over and making things more expensive and labour unaffordable to hire, buiding shit cars no one wants to buy...then you have no business in manufacturing...

[byrontx]

Count the ripple effect of GM going under to its suppliers, add the cost of unemployment for all the workers, loss of future taxes, and, hell, there are all kinds of variables. A myopic look at tax breaks or share value is only a part of the analysis. I am glad that we saved the company and jobs. This Prez has done a hellava lot better job than the last one.

[CosmicCowboy]

GM Pays Less Tax Than Buffet’s Secretary; UAW Gets Bonuses
National Legal & Policy Center ^ | February 16, 2012 | Mark Modica
Posted on Thu Feb 16 2012 13:21:19 GMT-0600 (CST) by jazusamo

General Motors reported year end earnings figures today. The company made about $9 billion dollars in 2011. How much of its "fair share" is GM paying in taxes? Zero. In fact, from GM's financial report, they actually received a "benefit" of $110 million for the year. The UAW benefited as well, as they are set to receive $7,000 per worker in profit sharing bonuses.

The sweet tax deal GM receives was set up by the Obama Administration as the company was granted a multi-billion dollar tax credit for loss carry-overs when they exited their bankruptcy proceeding. Normally, the company would not have received the tax credit but the bankruptcy process was anything but normal. Creditors were put in the back of the line to protect UAW interests and tax code was changed so that GM could profit for years without paying its fair share in taxes. President Obama now campaigns on the perceived success at GM and any help he can give to the company will result in additional votes come November. As taxpayers lose out, GM profits and shares the wealth with the politically favored UAW.

Despite all the claims of sacrifices at the UAW, members continue to benefit as evidenced by the $7,000 profit sharing checks they will receive as a result of the wealth redistribution scheme orchestrated by the Obama Administration. Executives at GM seem to be doing pretty well also as they receive millions of dollars in stock options. For their part, the UAW has agreed to strongly support the President come election time. And the hypocrisy of GM's tax deal is obvious as Obama makes claims that corporations need to pay their fair share. Crony corporations like GM and General Electric (which also is known to avoid taxes) are conveniently left out of the criticisms. Also on the favored list are wealthy purchasers of Chevy Volts who receive federal tax credits of $7500 to buy the cars. President Obama wants the rich buyers to have even more wealth redistributed to them in the form of higher credits, which he reportedly wants to raise to $10,000.

The GM earnings report seems to be getting favorable reviews as the share price rose on the news. Considering the $50 billion that taxpayers forked over to bailout GM along with the sweet tax deal, it is understandable that the company seems to be on the road to recovery. There was some evidence of roadblocks, however, as European woes surfaced and pension obligations rose to over $25 billion. Government Motors has recently announced that non-union salaried employees will have their pensions frozen. The company also is looking in to cutting white collar workers. It seems that the goal of job creation and preservation at GM only applies to union workers.

I can not fault the individual UAW workers at GM for benefiting from the political actions of the Obama Administration and GM. I'm sure many of them are hard working individuals. The problem is, most of the rest of us do not have the benefit of belonging to politically favored unions. Non-union taxpayers are picking up the tab for those favored classes that help with President Obama's election campaign. And that's just not "fair."

[ElNono]

^ Perhaps Mark should join an union if he feels underrepresented...

[coyotes_geek]

Count the ripple effect of GM going under to its suppliers, add the cost of unemployment for all the workers, loss of future taxes, and, hell, there are all kinds of variables. A myopic look at tax breaks or share value is only a part of the analysis. I am glad that we saved the company and jobs. This Prez has done a hellava lot better job than the last one.

What a bunch of garbage. We spent $50 billion dollars (not including GM's special tax breaks) bailing out a company that's currently employing less than 80,000 Americans. That's $625,000 per direct GM job. Divide that number by 5 or 10 if you're worried about the ripple effect and you still end up at a number that costs taxpayers a hell of a lot more than unemployment benefits do.

2 out of 3 GM employees work in a country other than the United States. 2 out of 3 cars GM builds get built on a continent other than North America. A bunch of the cars that get built in north america get built in Mexico or Canada, but for some reason GM doesn't tell anyone how many in their quarterly reports.

[FuzzyLumpkins]

lol National Legal & Policy Center

that almost as good as saying that Fox News prime newscast is impartial.

[Th'Pusher]

Mark Modica whines like a spurned lover. He's a former manager of a defunct Saturn dealership.

[vy65]

The sweet tax deal GM receives was set up by the Obama Administration as the company was granted a multi-billion dollar tax credit for loss carry-overs when they exited their bankruptcy proceeding. Normally, the company would not have received the tax credit but the bankruptcy process was anything but normal. Creditors were put in the back of the line to protect UAW interests and tax code was changed so that GM could profit for years without paying its fair share in taxes. President Obama now campaigns on the perceived success at GM and any help he can give to the company will result in additional votes come November. As taxpayers lose out, GM profits and shares the wealth with the politically favored UAW.


The tax benefit stems from so-called tax-loss carry-forwards and other provisions, which allow companies to use losses in prior years and costs related to pensions and other expenses to shield profits from U.S. taxes for up to 20 years. In GM's case, the losses stem from years prior to when GM entered bankruptcy.

Usually, companies that undergo a significant change in ownership risk having major restrictions put on their tax benefits. The U.S. bailout of GM, in which the Treasury took a 61% stake in the company, ordinarily would have resulted in GM having such limits put on its tax benefits, according to tax experts.

But the federal government, in a little-noticed ruling last year, decided that companies that received U.S. bailout money under the Troubled Asset Relief Program won't fall under that rule.

Neal Boudette discusses GM's IPO plans, which will raise up to $10 billion and cut the government's stake to below 50%.

"The Internal Revenue Service has decided that the government's involvement with these companies, both its acquisitions plus its disposals of their stock, means they should be exempt" from the rule, said Robert Willens, a New York tax consultant who advises investment banks and hedge funds.

The government's rationale, said people familiar with the situation, is that the profit-shielding tax credit makes the bailed-out companies more attractive to investors, and that the value of the benefit is greater than the lost tax payments, especially since the tax payments would not exist if the companies fail.

http://online.wsj.com/article/SB10001424052748704462704575590642149103202.html

1) There's nothing that suggests that GM shouldn't have gotten its tax-credit -- just that DIPs who undergo significant changes in ownership during the bankruptcy process have their carry-forwards restricted.

2) I'd be curious to hear a response to the rationale why -- in this case -- GM should have lost its tax credit

3) As for the UAW/Creditors claim - I'd be interested to see something substantive on that point. I tried looking and couldn't find anything. I'd also be curious to know who these creditors were? Were they secured or unsecured? Were they owed some sort of priority under the code? Were they just simple bondholders?

[boutons_deux]

Industry Insiders And Reporters Slam Romney’s Auto Rescue Editorial As ‘Reckless,’ ‘Dishonest,’ And ‘Pure Fantasy’

As the Republican presidential nominating contest moves to Michigan, former Massachusetts Gov. Mitt Romney (R) is touting his ties to the state — he was born there and his father is a former governor — and its auto industry. Romney wrote an editorial early this week re-upping his opposition to the 2009 auto rescue that saved Chrysler and General Motors, a sequel to the editorial outlining his original opposition, titled “Let Detroit Go Bankrupt.”

The response to the editorial probably hasn’t gone as Romney hoped. Since it ran in the Detroit News Tuesday, auto industry insiders have repeatedly slammed it as “reckless,” “dishonest,” and “wrong,” noting that Romney either mistakes or ignores some of the basic facts surrounding the rescue. ThinkProgress compiled a sample of the reactions to Romney’s latest view of the rescue:

AutoNation CEO Mike Jackson: As far as Mitt piece in yesterday’s Detroit News it was truly reckless, detached from reality, and dishonest. … Mitt’s assertion that private financing “DIP” was available in fall of ’08 into ’09 is fantasy. Everyone knows we were in the midst of the greatest financial meltdown since the 1930’s. … The catastrophe in ’08 was so calamitous that government actions were necessary to avoid a great depression. Sometimes reality trumps principle and a courageous leader will understand that and will take the leap even when it is dramatically unpopular.

Yahoo! Autos reporter Justin Hyde: “Romney’s take just doesn’t square with the facts as I lived them. … Had the government not intervened as Romney suggests, GM and Chrysler likely would have been liquidated by their Wall Street bondholders. … One auto industry think tank estimated doing so would have led to 1.3 million job losses and threatened Ford, Toyota and other automakers.”

Reuters columnist Paul Ingrassia: “The government bailout was the only way to save GM and Chrysler, and thus was a critical element in preventing the Great Recession from morphing into Great Depression II. … The only alternative to a government bailout was the outright liquidation of both companies. Maybe the U.S. economy could have survived that blow, but maybe not. What’s clear is that it would have been foolhardy to find out.”

The Economist: “The course Mr Romney recommended in 2008 began with the government stepping back, and it is unlikely things would’ve turned out so well had this happened. … The credit markets were bone-dry, making the privately financed bankruptcy that Mr Romney favoured improbable. He conveniently ignores this bit of history in claiming to have been right all along.”

Romney’s view of the bailout isn’t even popular among his best friends in Michigan. Gov. Rick Snyder (R), who endorsed Romney yesterday, chastised Republicans who continue to criticize the bailout last November. “I would have had some differences on how they did it, but I’m not going to second-guess it,” Snyder told the New York Times. “The more important thing is the results. And the auto industry is doing very well today.”

http://thinkprogress.org/economy/2012/02/17/427489/insiders-slam-romney-autos/

[clambake]

boom

[EVAY]

I remain willing to give this idea a chance, just as I did at the time.

My reasons are these:

1.It is undeniable that if the American auto companies would have been allowed to just go under and get liquidated, it would have cost far more than the 80,000 or so jobs in the direct companies involved. The enormous ripple effect on smaller 'feed' manufacturers all over the U.S. was said to number almost a million. We were already out millions of jobs when this bailout occurred, after the financial collapse.

Thus, the most severe recession since the 1930's would have been even harder to get out of, and we don't know how hard it would have been.

2.The money for this bailout was a fraction of the financial bailout of financial firms. If it was proper to bail out the financial industry to keep the country from going into recession, I'm not sure how it was inappropriate to use some of the TARP money to bail out another industry, i.e. manufacturing.

2. Unlike the government intervention of the financial institutions, this bailout was accompanied by direct governmental control, including forced bankruptcy. None of the financial institutions, other than Lehman, were forced to go into bankruptcy. The forced bankruptcy was critical to the recovery of these auto companies because it allowed them to get some of the most worrisome obligations off the books, including some to unions. Moreover, the head honchos of these firms were canned by the government, unlike the financial institutions. Government appointed the CEO of GM, and the Board was ruled by Government appointees. None of that happened in the financial sector.

3. There is still a chance that the government may be able to come out of this whole in terms of money. While GM's stock price would have to double from where it is now, that may still happen. I see no such hope for recovery from the financial bailout.


I guess, in general, it seems to me that if anthing is going to be accepted as appropriate for bailout, this industry was no worse than the financial bailout.

If you believe that ALL of these firms should have been left to die, (financial and manufacturing) then that position is at least consistent. But the result of allowing those things would not have been zero cost to the taxpayer. It would have been hugely costly to pay for all of the unemployment, and the loss of tax revenues would have been considerably more significant than it has been to date.

I just don't accept that this is as black and white as some herein suggest.

[RandomGuy]

What a bunch of garbage. We spent $50 billion dollars (not including GM's special tax breaks) bailing out a company that's currently employing less than 80,000 Americans. That's $625,000 per direct GM job. Divide that number by 5 or 10 if you're worried about the ripple effect and you still end up at a number that costs taxpayers a hell of a lot more than unemployment benefits do.

2 out of 3 GM employees work in a country other than the United States. 2 out of 3 cars GM builds get built on a continent other than North America. A bunch of the cars that get built in north america get built in Mexico or Canada, but for some reason GM doesn't tell anyone how many in their quarterly reports.

Subtract any money back. Subtract out the time value of money for all the future periods for all the collateral damage, and cessation of operations.
Divide it by 5 to be conservative.

I think we got a bargain. It would not surprise me if the NPV were in the taxpayers favor, based on what I know.

NPV FTW.

[RandomGuy]

GM bailout cost, at current stock price, $13Bn, according to the rabidly anti-Obama website:
http://www.bailoutcost.com/

Let's start gathering some other data on returns on investment. All of this would have to pass through a time value of money filter, but we are close enough in time to make some good, back of the envelope calculations.

GM 2010 income tax expense:
$672,000,000

Subtract that from the $13Bn, as this benefit to the taxpayer has now been realized.

We would also have to figure out the tax revenue from all the employees, add in the avoided unemployment benefits, as well as the "ripple effect" job, like dealerships etc.

[RandomGuy]

I remain willing to give this idea a chance, just as I did at the time.

My reasons are these:

1.It is undeniable that if the American auto companies would have been allowed to just go under and get liquidated, it would have cost far more than the 80,000 or so jobs in the direct companies involved. The enormous ripple effect on smaller 'feed' manufacturers all over the U.S. was said to number almost a million. We were already out millions of jobs when this bailout occurred, after the financial collapse.

Thus, the most severe recession since the 1930's would have been even harder to get out of, and we don't know how hard it would have been.

2.The money for this bailout was a fraction of the financial bailout of financial firms. If it was proper to bail out the financial industry to keep the country from going into recession, I'm not sure how it was inappropriate to use some of the TARP money to bail out another industry, i.e. manufacturing.

2. Unlike the government intervention of the financial institutions, this bailout was accompanied by direct governmental control, including forced bankruptcy. None of the financial institutions, other than Lehman, were forced to go into bankruptcy. The forced bankruptcy was critical to the recovery of these auto companies because it allowed them to get some of the most worrisome obligations off the books, including some to unions. Moreover, the head honchos of these firms were canned by the government, unlike the financial institutions. Government appointed the CEO of GM, and the Board was ruled by Government appointees. None of that happened in the financial sector.

3. There is still a chance that the government may be able to come out of this whole in terms of money. While GM's stock price would have to double from where it is now, that may still happen. I see no such hope for recovery from the financial bailout.


I guess, in general, it seems to me that if anthing is going to be accepted as appropriate for bailout, this industry was no worse than the financial bailout.

If you believe that ALL of these firms should have been left to die, (financial and manufacturing) then that position is at least consistent. But the result of allowing those things would not have been zero cost to the taxpayer. It would have been hugely costly to pay for all of the unemployment, and the loss of tax revenues would have been considerably more significant than it has been to date.

I just don't accept that this is as black and white as some herein suggest.

FWIW, GM's PEG is .46

http://finance.yahoo.com/q/ks?s=GM+Key+Statistics
http://www.investopedia.com/articles/analyst/043002.asp#axzz1n4CJcBig

That is remarkably good. Less than 1 = good.
Less than .5 = most projections place it as likely to go up by quite a bit over the next 5 years.

[RandomGuy]

I wonder what the dorkwads at bailoutcost.com will do if the stock makes it above water.

My guess is they will take it down, but I think I will keep track of it. It will be funny if/when it breaks even.

[Winehole23]

GM bailout cost, at current stock price, $13Bn, according to the rabidly anti-Obama website:
http://www.bailoutcost.com/

The rabidly anti-Obama Treasury Department puts the cost at $23B or so.

http://www.detroitnews.com/article/20120130/AUTO01/201300393/Treasury-ups-auto-bailout-loss-estimate?odyssey=mod|newswell|text|FRONTPAGE|s (http://www.detroitnews.com/article/20120130/AUTO01/201300393/Treasury-ups-auto-bailout-loss-estimate?odyssey=mod%7Cnewswell%7Ctext%7CFRONTPAGE %7Cs)

[CosmicCowboy]

Considering that most of GM's profit is from trucks and SUV's they are TERRIBLY positioned for $5 gas. Ford is killing them on large vehicle power/vs gas mileage and Chevy isn't bringing out their planned fuel efficient new motor till 2015.

[TeyshaBlue]

The last gas price surge didn't hurt them at all. This one isn't likely to either.

[TeyshaBlue]

The rabidly anti-Obama Treasury Department puts the cost at $23B or so.

http://www.detroitnews.com/article/20120130/AUTO01/201300393/Treasury-ups-auto-bailout-loss-estimate?odyssey=mod|newswell|text|FRONTPAGE|s (http://www.detroitnews.com/article/20120130/AUTO01/201300393/Treasury-ups-auto-bailout-loss-estimate?odyssey=mod%7Cnewswell%7Ctext%7CFRONTPAGE %7Cs)

lol

[CosmicCowboy]

The last gas price surge didn't hurt them at all. This one isn't likely to either.

Are you kidding? They were practically giving trucks away last time...huge cash incentives and 0% financing and they still had a 120 day supply on the lot. They were idling plants they had so many on the dealers lots...

[Sportcamper]

Government motors has not & will never payback the bailout…You are all a bunch of sheep!

While automakers are all posting strong results, taxpayers are still on the hook for billions of dollars. Taxpayers fell $1.3 billion short on the Chrysler bailout and are still waiting for $25.5 billion back on the GM deal. In total, the companies received about $60 billion between them.
And, particularly in the case of GM, it seems unlikely the taxpayer will be made whole anytime soon. Treasury holds 500 million shares of GM stock, those represent about one third of the company and if sold at today's prices, they would be worth about $13 billion.
The stock would need to roughly double in price for taxpayers to break even. Analysts predict a much more modest rise in the stock price in 2012.

http://www.local10.com/news/money/Still-fighting-over-GM-s-bailout/-/1717308/8794282/-/ai9892z/-/index.html

[TeyshaBlue]

They seemed to come out of it just fine. Not sure what your getting at.

http://articles.latimes.com/2011/mar/02/business/la-fi-0302-autos-sales-20110302


"Trucks also were big sellers in February based on "a resurgence in the economy and the replacement of vehicles.... People are buying for need, either to add to their fleet as their business is growing or because their truck is worn out and they need that type of capability for business," said Don Johnson, GM's U.S. sales chief.
That's created a bifurcated market in which truck sales will remain strong in the face of rising fuel prices, while small-car and small-SUV sales will continue to climb, said Jesse Toprak, an analyst at TrueCar.com

[CosmicCowboy]

They seemed to come out of it just fine. Not sure what your getting at.

http://articles.latimes.com/2011/mar/02/business/la-fi-0302-autos-sales-20110302


"Trucks also were big sellers in February based on "a resurgence in the economy and the replacement of vehicles.... People are buying for need, either to add to their fleet as their business is growing or because their truck is worn out and they need that type of capability for business," said Don Johnson, GM's U.S. sales chief.
That's created a bifurcated market in which truck sales will remain strong in the face of rising fuel prices, while small-car and small-SUV sales will continue to climb, said Jesse Toprak, an analyst at TrueCar.com


I'm saying that the last time oil hit $140 a barrel it drove the casual truck/SUV buyers out of the market and sales dropped 30%. With truck/SUV profits being such a big part of GM's profit it kills them when those sales drop off.

Remember, Oil hit $140 in June 2008 and GM started losing money like crazy and had to be bailed out in the fall. I'm not at all claiming that was the only reason they needed to be bailed out but it was definitely a contributing factor.

I'm saying that in big truck/SUV's Ford will be better positioned this time because across the board they currently can get better gas mileage than comparable GM models.

[Winehole23]

http://www.theoildrum.com/node/8944

[CosmicCowboy]

Florida Drivers Shelling Out Nearly $6 A Gallon At Some Gas Stations
By Matthew L. Higgins
February 22, 2012 11:47 AM

AAA, cars, drivers, Florida, gas prices, gas stations, Iran, Strait of Hormuz
TAMPA (CBS Tampa) — Talk about pain at the pump! Some Florida drivers are spending nearly $6 a gallon to fill up their gas tanks.

According to GasBuddy.com, motorists are shelling out $5.89 for a gallon of regular gas at a Shell station in Lake Buena Vista, topping out at $5.99 a gallon for premium. It doesn’t get better at a Suncoast Energy station in Orlando, where drivers are paying $5.79 for a gallon of regular.

“Prices over in the Disney World area are much higher than any other place in Florida,” Jessica Brady, AAA spokeswoman, told CBS Tampa, adding that people regularly complain about gas prices in that area.

The Sunshine State is opening up its wallet, paying an average of $3.67 a gallon of unleaded gas, 12 cents more than the national average. And it’s only expected to go up.

“It doesn’t look like we will have relief at the pump anytime soon,” Brady told CBS Tampa. “I do think we will see prices surpass $4 a gallon. I think we will see that closer to spring time.”


One reason for the high prices is the conflict with Iran over the Strait of Hormuz. Iran has threatened to disrupt oil shipments through the waterway due to the European Union sanctions leveled against the country over its nuclear program, causing the price of crude to skyrocket. Trading on a barrel of crude today is a little over $106.

Another reason for the high gas prices: positive economic news. The drop in the unemployment rate and improved housing market numbers have caused gas and oil prices to rise.

“I know it frustrates quite a few consumers why positive news will lead to higher prices,” Brady told CBS Tampa. “It really just comes down to speculation.”

A third culprit behind the gas price boom is Greece. The EU’s bailout for the indebted country only adds to the global fuel demand.

And because of these reasons, Brady believes that Florida and the rest of the U.S. could see historical gas prices.

“I think this year we will see much higher highs.”

[RandomGuy]

The rabidly anti-Obama Treasury Department puts the cost at $23B or so.

http://www.detroitnews.com/article/20120130/AUTO01/201300393/Treasury-ups-auto-bailout-loss-estimate?odyssey=mod|newswell|text|FRONTPAGE|s (http://www.detroitnews.com/article/20120130/AUTO01/201300393/Treasury-ups-auto-bailout-loss-estimate?odyssey=mod%7Cnewswell%7Ctext%7CFRONTPAGE %7Cs)

That's Chrysler + GM. :p:

[Winehole23]

strict adherence to the confines of the thread title apparently trumps the true cost to the US taxpayer for bailing out two of the big three auto companies.:p:

[DarkReign]

What a bunch of garbage. We spent $50 billion dollars (not including GM's special tax breaks) bailing out a company that's currently employing less than 80,000 Americans. That's $625,000 per direct GM job. Divide that number by 5 or 10 if you're worried about the ripple effect and you still end up at a number that costs taxpayers a hell of a lot more than unemployment benefits do.

2 out of 3 GM employees work in a country other than the United States. 2 out of 3 cars GM builds get built on a continent other than North America. A bunch of the cars that get built in north america get built in Mexico or Canada, but for some reason GM doesn't tell anyone how many in their quarterly reports.

You are completely ignoring their suppliers who number at least 10x (my guess is 50x) that amount.

GM may be the largest automotive manufacturer in the world, but they arent the largest employer. Their suppliers, combined, are however.

[RandomGuy]

http://www.theoildrum.com/node/8944

Intresting bit. One has to note how close to Japan China is in the author's calculations as to how much high oil prices impact economies.

Given that the period the guy looked at included no small amount of time where China was a net oil exporter, one has to wonder what future results would have for the world economy on the world's soon-to-be-biggest economy, China, who is now importing more oil than Japan.

I also didn't see India at all in his data.

That was an interesting start, but seems like the idea and concept needs to be fleshed out.

[DarkReign]

Everyone focuses on GM or on Chrysler.

Those companies failing in a vacuum is a loss but not terrible.

Problem is, the world isnt a vacuum. GM, Chrysler and Ford farmed out a lot of their operations a long time ago to other private corporations. ThyssenKrupp, ACH, BorgWarner, MagnaSteer, American Axle, Tenneco...I could go on and on and on and on and on....

Admit things you dont know. The automotive industry represents MILLIONS of American jobs. The US government was smart to do what it did. The UAW is the first beneficiary of the bailout, but not the largest. The suppliers are extremely grateful as are their millions of employees.

Big picture, guys.

[DarkReign]

...and thats all I got to say about that.

http://static.tvtropes.org/pmwiki/pub/images/forrest-gump-p111.jpg

[RandomGuy]

Everyone focuses on GM or on Chrysler.

Those companies failing in a vacuum is a loss but not terrible.

Problem is, the world isnt a vacuum. GM, Chrysler and Ford farmed out a lot of their operations a long time ago to other private corporations. ThyssenKrupp, ACH, BorgWarner, MagnaSteer, American Axle, Tenneco...I could go on and on and on and on and on....

Admit things you dont know. The automotive industry represents MILLIONS of American jobs. The US government was smart to do what it did. The UAW is the first beneficiary of the bailout, but not the largest. The suppliers are extremely grateful as are their millions of employees.

Big picture, guys.

I agree.

Given the size of our other problems bitching about this seems trite.

Meh, the right wing in this country never lets facts or perspective get in the way of a good narrative. As long as it feeds the Conservative Outrage Machine, it will get play.

[CosmicCowboy]

Everyone focuses on GM or on Chrysler.

Those companies failing in a vacuum is a loss but not terrible.

Problem is, the world isnt a vacuum. GM, Chrysler and Ford farmed out a lot of their operations a long time ago to other private corporations. ThyssenKrupp, ACH, BorgWarner, MagnaSteer, American Axle, Tenneco...I could go on and on and on and on and on....

Admit things you dont know. The automotive industry represents MILLIONS of American jobs. The US government was smart to do what it did. The UAW is the first beneficiary of the bailout, but not the largest. The suppliers are extremely grateful as are their millions of employees.

Big picture, guys.

My only question/rebuttal to that is if the industry is going to sell say...13 million units a year overall between all the brands and they are for the most part going to be produced in the US and buy components from those same subcontractors does it really matter if it is Ford or Chevy building and selling the cars?

[TeyshaBlue]

You are assuming domestic auto sales are the exclusive provience of the domestic auto makers?

[CosmicCowboy]

You are assuming domestic auto sales are the exclusive provience of the domestic auto makers?

Of course not. But as the Toyota plant here in SA proves they can be a foreign "brand" and still be built in the USA using some of the same suppliers.

[TeyshaBlue]

The way they utilize their suppliers or, for lack of a better term, "train" them is fairly unique in the auto arena. I doubt seriously a supplier building starters for Toyota will ccompletely overhaul their processes to accomodate Chrysler...at least under the credit conditions at the time of the GM debacle.

[DarkReign]

My only question/rebuttal to that is if the industry is going to sell say...13 million units a year overall between all the brands and they are for the most part going to be produced in the US and buy components from those same subcontractors does it really matter if it is Ford or Chevy building and selling the cars?

But this assumes that the vacuum of cars would immediately be replaced with said foreign entities.

Which I dont believe would be the case.

Moreover, Toyota/Honda/Whomever typically deal with foreign suppliers for damn near the whole vehicle. Toyota deals primarily with a company called NHK, for example, a Japanese company that owns a formerly-American supplier called New Mather Metals. Used to have two plants, one in Toledo, OH and another in Franklin, KY.

Toledo plant had 6 lines operating 3 shifts, which means that plant could produce its component for ~12 different vehicles through prototype, production and service.

Toledo was closed the moment Franklin was built and expanded because KY is a right to work state, so no union to deal with (unlike OH).

Franklin now has 13 lines and can service roughly ~25 models through the same life cycle, half are foreign, half are domestic in my estimation.

So lets assume that GM and Chrysler faded to black in 2008. The existing supplier base for Toyota, Honda, etc would just expand where they currently reside. Instead of 13 lines, they'd expand to say 20 and hire the needed personnel.

While multi-billion dollar suppliers like Delphi, Tenneco, TK, American Axle and the innumerable small business that supply those Tier 1 suppliers would be left with nothing and be out of business in less than a year.

A small business, for those who dont know, is any company who employs less than 150 people (I know you know that CC, just putting it out there for those who dont). To get into a relationship with Toyota/Honda takes years. To even be approved as a Tier 2 supplier to one of their suppliers takes years.

GM and Chrysler going down would have only caused great harm for many and benefited the very select few. Those select few being mostly foreign corporations who are legally allowed to own land state-side, are given land by governors to build on (literally given at no cost) while Americans are not able to do the same in their land.

We are all aware of the trade imbalance between America and everyone else. We know that foreign goods imported anywhere but the EU and America have tariffs so as not to compete with local/national companies preferred by the governments of those countries.

This bailout, imo, was necessary.

You would have allowed the manufacture of vehicles to be dominated by a foreign country at the paltry expense of $23B with the added benefit of adding roughly 2-3 million to the unemployment rolls in less than one year.

I am sorry, but to say otherwise is short-sighted, misguided and smacks of a strict adherence to creed even when reality begs to differ.

Side note: Thank God the Chinese emperor or whatever from back-in-the-day drove some pimped out Buick all around. Because the Buick brand is to the Chinese what Mercedes/BMW is to us. A status symbol of wealth and prosperity.

[DarkReign]

The way they utilize their suppliers or, for lack of a better term, "train" them is fairly unique in the auto arena. I doubt seriously a supplier building starters for Toyota will ccompletely overhaul their processes to accomodate Chrysler...at least under the credit conditions at the time of the GM debacle.

Bingo. Suppliers are not one size fits all and they never could be...unless one entity came to dominate the entire industry overnight. Foreign design philosophy is different in every conceivable way.

[DarkReign]

The NHK and New Mather Metals is just one very small example of how foreign companies operate. It is quite rare that the roots of Toyota/Honda do not reside in the same soil as their suppliers. If the Japanese see a business where they would have a need now or in the future, they buy it.

American companies cannot do the same thing in Japan, China or India. Its illegal.

But there I go being a protectionist again. Silly me.

[TeyshaBlue]

DR...see page 3 of this thread.:toast

[DarkReign]

DR...see page 3 of this thread.:toast

Wow...you nailed it with a laser guided hammer. Bravo!

I stayed out of this thread on purpose. I figured I am too close to the situation to offer an unbiased, objective opinion.

But I can tell you all in no uncertain terms, as a supplier to all major automotive companies that would not have been decimated if GM/Chrysler went under, that if they had, it would have been catastrophic.

You think you southern folks have a lot of Northern immigrants now?!

Ha. The entirety of Michigan, Ohio, Indiana, Western Pennsylvania and Wisconsin would have moved en masse right next door to you. With our stupid midwestern accents (and we think your southern drawls are just as repulsive), lack of fashion sense, flannel shirts and sardonic wit (told we speak slow compared, never noticed much).

Dont bail them out, we'll just move in next to you and marry your daughter and call it even. It'll be great!

[TeyshaBlue]

Take that makeup off yer face and I'll let you take my daughter out.

The dowries down here are a bitch tho.:lol

[CosmicCowboy]

Companies are reorganized in bankruptcy or bought out all the time and still continue to be ongoing entities. See Fiat now owning Chrysler. The airlines are also good examples. I'm not saying it was wrong, but how it was done IMHO was wrong. Crushing the bondholders and then basically giving the new company to the unions was political and not the best business decision IMHO.

[vy65]

How were the bondholders crushed?

[CosmicCowboy]

How were the bondholders crushed?

Google is your friend. I'm not getting back into this one.

[vy65]

Google is your friend. I'm not getting back into this one.


http://online.wsj.com/article/SB10001424052748704462704575590642149103202.html

3) As for the UAW/Creditors claim - I'd be interested to see something substantive on that point. I tried looking and couldn't find anything. I'd also be curious to know who these creditors were? Were they secured or unsecured? Were they owed some sort of priority under the code? Were they just simple bondholders?

Why won't you support your own claim?

[Winehole23]

lol the Wild Cobra "asked and answered" gambit

[vy65]

Not worth the trouble eliciting a full response, eh?

[CosmicCowboy]

Because I am not going to wast 20 minutes of my life typing out a detailed response to someone that can find the same info already freely available on the internet. If you want to really educate yourself instead of play games then google is your friend. Just compare how a normal bankruptcy works to the way the GM bankruptcy was handled by the government.

[DarkReign]

Companies are reorganized in bankruptcy or bought out all the time and still continue to be ongoing entities. See Fiat now owning Chrysler. The airlines are also good examples. I'm not saying it was wrong, but how it was done IMHO was wrong. Crushing the bondholders and then basically giving the new company to the unions was political and not the best business decision IMHO.

Like I said, Ive stayed out of this thread for good reason but I have now injected myself into it and have been asked a question...

I can understand your disagreement with the way it was done, thats fine. I just flat out disagree with you without an example for an alternative that would have the same intended results.

How the bailout was handled can be disputed. The results, however, cannot be. GM spun off a lot of its "bad parts" into something called American Motors (iirc). Basically every GM asset that wasnt worth shit was put into this dummy company that is now a holder of billions of dollars of obsolete equipment, property and debt. It is still being parsed, sorted, stored, scrapped and sold as we speak.

Fun example: http://www.nytimes.com/2010/09/15/business/15auto.html

EDITED: I was wrong, its called Motors Liquidation Company.

[CosmicCowboy]

Hell, VY, I'll even throw you a crumb...

http://www.dailyfinance.com/2009/06/02/politics-trumps-seniority-for-bondholders-in-gm-chrysler-bankru/

http://am.blogs.cnn.com/2009/06/01/bondholder-furious-over-gm-bankruptcy/

[TeyshaBlue]

GM spun off a lot of its "bad parts" into something called American Motors (iirc). Basically every GM asset that wasnt worth shit was put into this dummy company that is now a holder of billions of dollars of obsolete equipment, property and debt. It is still being parsed, sorted, stored, scrapped and sold as we speak.

Fun example: http://www.nytimes.com/2010/09/15/business/15auto.html

Kinda like the original AMC?:lol

[vy65]

Because I am not going to wast 20 minutes of my life typing out a detailed response to someone that can find the same info already freely available on the internet. If you want to really educate yourself instead of play games then google is your friend. Just compare how a normal bankruptcy works to the way the GM bankruptcy was handled by the government.

I guess you missed the part where I said I used my friend google, and wasn't able to find anything about bondholders being crushed. Which leads me to my next point: you're full of shit.

It's cool if you don't want to take 20 minutes out of your busy schedule typing a response - or the 15 seconds it'd take to post a link or something. I'm content with thinking you're full of shit on this one if you are.

[vy65]

Hell, VY, I'll even throw you a crumb...

http://www.dailyfinance.com/2009/06/02/politics-trumps-seniority-for-bondholders-in-gm-chrysler-bankru/

Thanks, that's what I was looking for.

As for the article itself - aside from not being about the GM bankruptcy per se, it's wrong.

[DarkReign]

I read a local story at the Flint plant.

There was a rail that ran into and out of the plant that has been abandoned. If you dont know anything about Flint, MI, here is your first piece of advice. Dont go.

Anyway, thieves are stealing anything they can carry out of the plant. They have been doing it for months. MLC hired a security company to patrol the lot and were shot at. The security company quit and no one would take the job.

GM hires the sheriff's department to patrol it. They are shot at, too.

Basically, the thieves would use the abandoned rail cars to haul away their shit! They would tow the rail car into the plant (on the tracks of course), fill it to the brim with mostly scrap metal, and then tow it out! The whole gang of thieves are armed and will kill anyone who tries to stop them.

[vy65]

The notion that bondholders get the best deal in bankruptcy because they are senior creditors is incorrect. And the notion that prioritizing one unsecured stakeholder over another violates the bankruptcy code disregards the mandate that bankruptcy courts are courts of equity--the rules were meant to be bent.

[CosmicCowboy]

the rules were meant to be bent.

:lmao

when it's politically expedient to pander to a political base?

[vy65]

One last thing: that article discusses the stake bondholders would have in the post-bankruptcy entity. The point of bankruptcy is to liquidate the debtor's liabilities and have a new, clean, entity emerge. Point being - who cares if bondholder's don't have a big stake in the new entity? Was their payout inequitable?

[vy65]

:lmao

when it's politically expedient to pander to a political base?

You're in over your head, aren't you?

[CosmicCowboy]

The notion that bondholders get the best deal in bankruptcy because they are senior creditors is incorrect. And the notion that prioritizing one unsecured stakeholder over another violates the bankruptcy code disregards the mandate that bankruptcy courts are courts of equity--the rules were meant to be bent.

:lmao

Seriously...

It's hard to believe how ignorant you are.

Bondholders are secured creditors and in a normal bankruptcy they have different classes of creditors and the court basically prioritizes them in order from top to bottom of who gets paid first.

[vy65]

You're in over your head, aren't you?

[CosmicCowboy]

Pffft

I'm wasting my time talking to an ignorant ass.

[vy65]

What collateral do bondholders put up?

[vy65]

lol school teacher transcript

[Winehole23]

Pffft

I'm wasting my time talking to an ignorant ass.be that as it may, name calling and running away from points you didn't even bother to rebut makes you look like the ignorant ass.

[vy65]

In order of their priority...

In a bankruptcy, assets and proceeds are distributed to satisfy claims in order of the claims' priority. Investors who take the least amount of risk are paid first. As a result, creditors and bondholders who lend a company money will be paid before its stockholders, who have purchased an ownership stake. Creditors are paid after legal and administrative costs have been covered.

Secured creditors, whose claims are protected by specific assets or collateral, such as real estate, are paid first.

Then unsecured creditors, which often include bank lenders, bondholders and suppliers, are next in line.

Stockholders, who have purchased a portion of the company, are paid last, if there is money available after the secured and unsecured creditors' claims have been paid.

http://www.investinginbonds.com/learnmore.asp?catid=10&subcatid=67

[Winehole23]

nm

[clambake]

come on cowboy, the timing of the domino effect would have been unimaginable.

[CosmicCowboy]

be that as it may, name calling and running away from points you didn't even bother to rebut makes you look like the ignorant ass.

I can live with that.

If you find pleasure in attempting to explain things to ignorant asses that don't really want to listen or learn please feel free to answer his dumb question...


What collateral do bondholders put up?

[CosmicCowboy]

In order of their priority...

In a bankruptcy, assets and proceeds are distributed to satisfy claims in order of the claims' priority. Investors who take the least amount of risk are paid first. As a result, creditors and bondholders who lend a company money will be paid before its stockholders, who have purchased an ownership stake. Creditors are paid after legal and administrative costs have been covered.

Secured creditors, whose claims are protected by specific assets or collateral, such as real estate, are paid first.

Then unsecured creditors, which often include bank lenders, bondholders and suppliers, are next in line.

Stockholders, who have purchased a portion of the company, are paid last, if there is money available after the secured and unsecured creditors' claims have been paid.

http://www.investinginbonds.com/learnmore.asp?catid=10&subcatid=67

[Winehole23]

nm

[vy65]

You do know that in order to have a secured claim in bankruptcy, some form of collateral is needed to secure the debt.

Bondholders purchase securities. These are unsecured creditors of the corporation. Why do you think people freak out about European sovereign debt so much?

You've made no claim nor provided any evidence that secured bondholders (i.e. a mortgage bondholder) got fucked in the bankruptcy?

Why do you cry like a little girl instead of answering questions?

[vy65]

Stockholder =|= Creditor.

If I own a company, that doesn't mean I own that company's debt.

And I'm the ignorant ass?

[vy65]

I also liked the part where you ignored that block quote stating bondholders are unsecured creditors

[CosmicCowboy]

*sigh*

They are freaking about the sovereign debt because there is not even enough money to pay the senior tier bondholders in full, thus they HAVE to agree to a haircut.

[CosmicCowboy]

Stockholder =|= Creditor.

If I own a company, that doesn't mean I own that company's debt.

And I'm the ignorant ass?

WTF???????

Bonds are not Stocks dumbass.

[vy65]

So you can't answer the question then? Got it.

[vy65]

WTF???????

Bonds are not Stocks dumbass.

Yes, that's why there's a not-equal sign between stockholder and creditor

[Wild Cobra]

Stockholder =|= Creditor.

If I own a company, that doesn't mean I own that company's debt.

And I'm the ignorant ass?
It depends on the class of stock that you own.

[LnGrrrR]

Joe, Fred, and Pete sell apples at the farmers market. Together they sell 100 apples a day.

Pete starts smoking crack and gambling and loses his fruit stand in a craps game to Jose.

Now Joe, Fred, and Jose sell apples at the farmers market. Together they sell 100 apples a day.

Where is the economic loss?

A bit necro, but going through this thread I just wanted to highlight this post. I'd like to point out there's probably some loss of wealth here, as Jose may not know all the ins and outs of what apple trees to plant, the best times to pick, the best places to sell them, etc etc.

[CosmicCowboy]

A bit necro, but going through this thread I just wanted to highlight this post. I'd like to point out there's probably some loss of wealth here, as Jose may not know all the ins and outs of what apple trees to plant, the best times to pick, the best places to sell them, etc etc.

Apparently GM had the same problem as Jose...:toast

[RandomGuy]

I guess you missed the part where I said I used my friend google, and wasn't able to find anything about bondholders being crushed. Which leads me to my next point: you're full of shit.

It's cool if you don't want to take 20 minutes out of your busy schedule typing a response - or the 15 seconds it'd take to post a link or something. I'm content with thinking you're full of shit on this one if you are.

The bondholders weren't crushed. The common stockholders were.

Generally in a bankruptcy the common stock holders are lucky to get a penny or two on the dollar.

The bondholders, being creditors of the company, then generally assume equity interests, in the form of new common shares proportional to their claims (i.e. bond value relative to overall liabilities)

Preferred stockholders are somewhere in between in terms of who gets paid and in what order. (preferred stock can have a lot of variance in terms and is considered something of a hybrid between equity/debt for that reason)

Hope this helps.

I don't know for certain the details of the arrangements, but that is how it happens normally.

It was pointed out that the UAW, as creditors were given equity stakes, i.e. stock shares.

[RandomGuy]

A bit necro, but going through this thread I just wanted to highlight this post. I'd like to point out there's probably some loss of wealth here, as Jose may not know all the ins and outs of what apple trees to plant, the best times to pick, the best places to sell them, etc etc.

The economic loss is the loss of Pete's income.

What CC misses from an economic perspective:

In his example, the "economy" consists of four people, not the three he simplifies to.

Joe, Fred, and Pete, and Jose existed prior to Pete's problem.

Presumedly Jose already had a job, that he would have had to have quit to sell the apples.

In this case, the four person economy then lost the "income" of Pete.

There is more to it, but that is it in in a nutshell.

scott could probably speak at grearter length on the economic impact.

As it is, the best summary is that it isn't a very good example. Sorry, CC.

[CosmicCowboy]

The bondholders weren't crushed. The common stockholders were.

Generally in a bankruptcy the common stock holders are lucky to get a penny or two on the dollar.

The bondholders, being creditors of the company, then generally assume equity interests, in the form of new common shares proportional to their claims (i.e. bond value relative to overall liabilities)

Preferred stockholders are somewhere in between in terms of who gets paid and in what order. (preferred stock can have a lot of variance in terms and is considered something of a hybrid between equity/debt for that reason)

Hope this helps.

I don't know for certain the details of the arrangements, but that is how it happens normally.

It was pointed out that the UAW, as creditors were given equity stakes, i.e. stock shares.

In this case the UAW (unsecured creditors) were jumped ahead of the bondholders (secured creditors)...mainly for political purposes...it was pretty unprecedented...Yeah, the bondholders got a sliver of the new deal but NOTHING like they would have gotten in a normal bankruptcy.

[vy65]

In this case the UAW (unsecured creditors) were jumped ahead of the bondholders (secured creditors)...mainly for political purposes...it was pretty unprecedented...Yeah, the bondholders got a sliver of the new deal but NOTHING like they would have gotten in a normal bankruptcy.


But for all the indignant assertions about legal rights, it’s far from clear what exactly is meant to be illegal here. After all, the GM bondholders (unlike the banks holding Chrysler loans) are not secured creditors, so there’s no issue about them being senior to other stakeholders like the UAW

http://blogs.reuters.com/felix-salmon/2009/06/01/the-gm-bondholders-legal-rights-meme/

[vy65]

I dunno how else to say it.

[CosmicCowboy]

I dunno how else to say it.

I noticed that. You are not only ignorant you are too painfully stupid to even realize it.

[vy65]

According to the annoyingly-anonymous website, the government has used its control over the bondholders “to promote its political agenda over the rule of law” and “has proposed a restructuring scheme that disregards and would overwrite contractual rights of lenders and the statutory protections afforded them through the bankruptcy code’s priority rules”. But I still haven’t found anybody actually spell out what those contractual rights are supposed to be, whether they’re “enshrined in the bonds’ trust deeds” or otherwise.

The GM bondholders do have a PR representative, Tom Vogel. When I asked him about this, he replied by giving me some “comments on background”, which means that he was asking me, weirdly, not to repeat what he said. So I’d just ask this: the next time that somebody claims that the treatment of GM bondholders in any way violates their legal rights, can they be specific about exactly what legal rights are being violated?

As far as I can make out, the main legitimate complaint of the GM bondholders is that they’re getting paid out less than other unsecured creditors (specifically the UAW) with whom they’re pari passu. But I don’t think there’s a legal right anywhere for all pari passu creditors to receive exactly the same treatment. If you owe money on four different credit cards, there’s no law saying you have to pay them all the same proportion of the total amount outstanding.

Same link.

[vy65]

I noticed that. You are not only ignorant you are too painfully stupid to even realize it.

Do you have anything substantive to add? Or are you just gonna use the same, tired insult to try and hurt my feelings?

[CosmicCowboy]

Do you have anything substantive to add? Or are you just gonna use the same, tired insult to try and hurt my feelings?

The guy in the op-ed ADMITTED he hadn't read the trust documents for the bonds and couldn't document his claim that the bondholders were unsecured. Guess you missed that part, hmmmmm?

[vy65]

The guy in the op-ed ADMITTED he hadn't read the trust documents for the bonds and couldn't document his claim that the bondholders were unsecured.

Have you read the trust documents for the bonds?

[CosmicCowboy]

Have you read the trust documents for the bonds?

For every "op-ed" piece you can find claiming the bonds might be unsecured there were 10 news articles saying they were in fact secured creditors.

I'm not going to beat this dead horse again.