GM bailout final numbers


#1

DETROIT (AP) - “The U.S. government ended up losing $10.5 billion on the General Motors bailout”

http://t.money.msn.com/business-news/newsarticle?feed=AP&date=20131209&id=17177482

You may find the details interesting. The feds, of course, say it could have been worse. I don’t believe that.


#2

If the truth be known, odds are that loss number of made smaller by creative accounting.

So they’re sitting on 26+ billion in cash and pondering dividends? How about handing 10.5 B of that back to the taxpayers…

GM came out very well when they closed the OK City assembly plant a few years ago also. It was sold to the county for 55 million dollars and the county in turn leases the building to Tinker AFB for 1 dollar a year.
In a measly 55 million years it will break even; assuming the plumbing doesn’t fail and the paint holds up… :wink:


#3

I know you may just be priming the pump, but what’s the difference between bailout and low interest business loans the govt. makes all of the time to lots and lots of businesses. Arguably they are loosing money on them with the lower interest rates. Or, Pell grants…aren’t they individual bailouts. What about FEMA ? Aren’t we just bailing out people too poor or too ingrained who just keep living in areas of natural disaster? You know, like every where in the US. Isn’t every aid…a bail out, Including Medicare and SS ?

Remember this…THE GOVT IS NOT A BUSINESS BENT ON MAKING A PROFIT. Some how, we keep using business models for govt. functions. It s a trust designed to help those who can’t help themselves in the interest of a majority of the people. The Govt. literally, bails out the American airplane business when it chooses them for miltary contracts instead of better bids from abroad.

Would our national defense rather not have GM to bid in miltary equipment and instead, buy only Fords made in Mexico or foreign owned Chrysler. Notice, we haven’t said one thing about the jobs saved, of course, all those 50 to 60 year olds can just retrain and move in much greater numbers then they did.

Sorry, we are a trust, not a business. The premise is a Faux News channel story.


#4

@dag,

Even a “bleeding heart” would say an activist gov’t has a responsibility to see to the welfare of people, not firms. A more hawkish person might point to the strategic advantages of retaining heavy industry; however, that could have been accomplished by just keeping ONE US auto mfr alive.

Besides, if the US gov’t really cared about that, they would’ve bailed out steel in the 70s/80s.

It’s possible, though, the bailout was the “least lousy alternative”: the loss of tax revenue/unemployment payouts associated with “letting things run their course” might have been even more costly.


#5

I agree @mean, but in this case, the firms hired a lot of people. Besides, the money’s given over to the auto industries under stipulations and conditions, is dwarft by that signed over by the Bush administration to the major banks under absolutely no conditions. Money that never saw the light of day to help the middle class home owners forvyears but was used in part to this day, to line the pockets of their mangers. Now that was a bailout of poor design. Because we are “Cartalk” we are obligated to discuss an auto loan that by the CBO accounts did help our economy instead questioning a huge bail out given in a way that still today, as decreed by the same economists, is slowing our recovery.

IMHO, your account that “it is the least lousy alternative " is true of all " bailouts”, loans and grants. It’s expensive, but the alternative is worse.


#6

I know many will disagree but I still think it was the right thing to do at the time. Thinking back at the dire circumstances regardless of how they got there. If a guy falls through the ice you try and pull him out and lecture him on walking on thin ice afterward. I just wish Chrysler could get back to the company they used to be in the 50’s and 60’s though.


#7

" I just wish Chrysler could get back to the company they used to be in the 50’s and 60’s though."

I totally agree (they built big chunks of the Saturn rockets that took us to the moon for Pete’s sake), though they were left little choice in the distasteful aftermath of the partnership with Daimler and the revolting situation with Cerberus. Sort of like a rich couple that adopts a downtrodden child from an orphanage, then unceremoniously returns the child when they discover this parenting thing is messy and will cost some money.

It was pretty much get in bed with the Italians or die. A true “making an offer that they can’t refuse” At least it was Italy, a country the US has always had strong ties with and not lots of controversy, such as China. And they repaid their debt with interest, unlike GM.

Looking forward, I don’t know how you can separate everything. All automakers (and their top tier suppliers) have their hands in foreign pies and vice-versa these days. And I only think it will get worse as time goes on. Even in the 80s and 90s, GM was partnered with Honda and Daewoo, Chrysler with Mitsubishi and others, Ford with Mazda. Hardly anyone makes their own electronics. (at least not without foreign help) And if you want to get nitpicky, the fancy CAD equipment, software, and machine tools to design and build cars and components often come from Japan and Germany.

Ford, though not my favorite, can be applauded for still having the most North American content in their vehicles as far as I know. But I stand by my opinion that if Ford hadn’t screwed up management-wise earlier than GM and Chrysler, such that they were able to reorganize under the much better pre-recession climate, that they’d have had their hand out too for government loans. I think GM made the worst mess of it personally, sloughing off parts of itself it no longer found profitable along with the workers and communities that depended on it. At least Chrysler hung in there and still managed to make reasonably good vehicles with the sword of Damocles hanging over their heads during the whole mess.


#8

For years and years…GM stopped making vehicles. Instead they made their money by financing these “things” one of their smaller divisions made (Chevrolet, Buick, GMC…etc…etc). Most of the higher-ups hadn’t driven a vehicle in years…and had no interest in making a quality vehicle. All they cared about was the sales and money they could make in interest from those sales.

We bailed them out and LOST. Is there a difference between that an other companies we bailed out with low-interest loans…or tax cuts. Probably not. But that doesn’t make it right. I stated from the beginning we never should have bailed them out.


#9

10.5 billion sounds like a good deal to me. The “lost” number is strictly based on the stock sales vs the govt. outlay for the bailout.

It doesn’t include the money that would have been lost in tax revenues (to date), lost social security payments from unemployed workers, made SS payments from employed workers, unemployment benefits paid out, food stamp and other payments to unemployed workers, or future tax revenues (federal, state, local) in years to come.

The net lost or gained number would take an economist to figure out. And a “lost” today will become a “gained” in 10 years as taxes are paid, workers pay into SS, etc. In the long run it will be a gain and I think we close to or at that point already.


#10
It doesn't include the money that would have been lost in tax revenues (to date), lost social security payments from unemployed workers, made SS payments from employed workers, unemployment benefits paid out, food stamp and other payments to unemployed workers, or future tax revenues (federal, state, local) in years to come.

POSSIBLY…I’m not convinced GM would have folded. It’s more likely that some other company would have bought them. I’m sure there would have been layoffs…but I’m pretty sure GM would still be around in one form or another. And it actually might be BETTER then what is currently in place.


#11

Everyone gives Ford so much credit for their money management but the truth is a couple years before they had hocked everything for the cash that saw them through the bad times.

I’m having a mental block on the guy that wrote the bean counter book from GM but he said GM discovered they weren’t in the car business but in the parts business.

The other thing is that the government in their infinate wisdom lead by well meaning staffers and bureaucrats came out with the CAFE standards and handed the car business to the Japanese on a silver platter.


#12

Compared to the money sunk into financial institutions, it’s not very much to preserve a lot of jobs. Letting Chrysler and GM go under would have wrecked the parts business as well, and turned the whole idustry over to foreigh companies.

Although I am a free enterpriser, I believe this bailout was necessary and it let the industry restructure itself. Whereas no one could make money on small cars in the US under the old cost structure, we now see GM actually manufacturing small cars in the US. And it cut the UAW down to size for good.

The key is to stop supporting the industry now. Fiat in Italy, for instance, wants continued government support, while their unions don’t want any change in pay, benefits or work rules, which make them the least productive car company in Europe. Chrysler is actaulyl supporting Fiat now. British Leyland or Rover PLC went down the tube for the same reason, in addition to having poor products.


#13

I consider the economic collapse that led to problems for the auto business (and all other businesses) to be a “natural disaster”. Natural in that they had nothing to do with the disaster. They happened to be in business when the housing bubble burst and destroyed all credit markets, including auto loans. The US Government helps businesses affected by other natural disasters, why not those affected by a credit crisis they didn’t cause.


#14

If you think GM didn’t have anything to do with their own demise…I’ve got this bridge in Brooklyn for sale!!!

The US Government helps businesses affected by other natural disasters, why not those affected by a credit crisis they didn't cause.

Sorry not buying it. Based on this logic we should bail out EVERY company that goes under. We bailed out GM and Chryco…well what about the mom and pop restaurants in Detroit that were also hit because of this disaster…what about the landscaping companies that went out business because all the GM/Ford and Chryco workers moved away to find work??? If we bailed out every company that ever went out of business because of some downturn in the economy that they themselves had NOTHING to do with…then we’d be spending about $100 BILLION every DAY. The US would be bankrupt in a month.


#15

If the bailout had failed and GM folded, then you’d have a real loss for the taxpayers.

Interesting that GM just announced the CEO is retiring in a month or so and the new CEO taking over is the 1st woman to head GM.


#16
If the bailout had failed and GM folded, then you'd have a real loss for the taxpayers.

And as I said…very very doubtful that would happen. Some company would have stepped up and bought them for pennies on the dollar.


#17

The theoretical “loss” would be a valid criticism if the government’s intention had been to make a profit. However, the intention was never for this to be a profit-making enterprise, and instead, the intention was to…
…preserve jobs
…maintain as much financial stability in Michigan, Indiana, Ohio, and a few other states as much as possible
…prevent the already-high unemployment rate from going even higher

The people whose jobs were saved pay taxes to both the federal government and to their state governments. Without those tax revenues, services such as police/fire protection, education, road maintenance, and–yes–even defense could have been affected. The auto workers shop in local stores, which employ countless numbers of other people who would be affected in a ripple effect that would result from loss of auto-related jobs. The already devastated housing market would have gotten much worse, once unemployed auto workers defaulted on their mortgages and/or were unable to pay their property taxes.

Yes, maybe some corporate entity would have stepped in and bought out GM for pennies on the dollar, but who is to say that this would have happened right away? And, if it didn’t take place right away, then the aforementioned negatives would have taken place for at least the short term, and even a short-term worsening of the housing market, tax collections, and employment would have been a very bad thing.


#18

@jtsanders The US car companies wsere losing money prior to the economic crisis. Their cost structure was way out of line. Ford used to lose $1400 on every Escort they built in the US, while Toyota mad a hndsome profit on very Corolla built in the US or Canada. None of Ford’s cars were really profitable; they relied on SUVs and trucks to see them through. During this time Japanese and Korean as a well as German companies were doing realatively OK here. Toyota only had one year when they did not make a profit.

The crisis was necessary to force restructuring of the industry. Ford did not go bankrupt but made all the same changes, dropping Mercury, new wage scales, etc. Except Ford decided to permantly locate their small car manufacturing abroad.


#19

For those who are so upset over the “loss” of ~$10 billion that was spent to preserve financial stability during a true national crisis, I wonder how those folks feel about the total cost of the Iraq war, which is estimated to be between $806 billion and $1 trillion? And, of course, that is just the dollar cost, and does not take into account the Americans (and others) who died in that war, and their families that were devastated by those deaths.

Hmmmm…Let’s see…$10.5 billion to preserve the financial stability of the nation… vs. over 80 times that amount to wage a war that had absolutely no valid purpose in the first place, and accomplished absolutely nothing for the American people.
Which expenditures were more damaging to our nation? Hmmmm…?

Of course, if you are a fan of Faux News, you probably think that we found the mythical WMDs in Iraq. Even though we did not find any WMDs, surveys have found that the majority of Faux News watchers believe that we did find them, which is just one excellent example of the damage that this slanted “news” source carries out.


#20
Yes, maybe some corporate entity would have stepped in and bought out GM for pennies on the dollar, but who is to say that this would have happened right away?

Who knows…so what?? It’s the cost of doing business. Businesses MUST be allowed to fail. If not then it’s bailout after bailout after bailout. I as a tax payer should NOT have to pay because GM screwed up. Because GM was handing out MILLIONS every year in Bonuses to Execs (even when the company was doing bad). Sorry…still not buying it. If we let GM fail…then they’d probably change their business model. Right now their business model is still setup to fail. What’s going to happen in 5 years if we have another Great Recession? We going to bail them out again?