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GM Posts Record Profits

Have they paid back the US for the gift/loan??

Lets see if they finally decide to shore up the pension plan that according to them is their biggest pay-out each year.

http://bottomline.msnbc.msn.com/_news/2012/02/16/10424219-gm-annual-profit-soars-4th-quarter-disappoints

According to The Detroit News a couple of weeks ago the U.S. Treasury has refigured the amount that GM still owes the taxpayers and raised that amount by a few hundred million dollars. In spite of the TV commercials GM was running about paying their loans back that is not true. They’ve paid something like 20% of it back and even that could be debateable depending on how the paper is shuffled.

The Feds state that GM stock prices (hovering in the 20s currently) will have to reach 55 dollars per share before there’s a break even point.

GM should have been allowed to sink and then rise from the ashes on their own if possible. Chrysler also still owes the taxpayers; just not nearly as much as GM does.

GM should have been allowed to sink and then rise from the ashes on their own if possible. Chrysler also still owes the taxpayers; just not nearly as much as GM does.

I’ve always agreed with that. It’s NOT a true capitalistic system if don’t allow companies to fail.

It’s pretty easy to show a profit if the liability side of the ledger has been thrown into the waste bin.

GM, and others, have gotten much more money than that over the years due to incentives from the Federal, state and local governments.
When the OK City GM plant was opened a little over 30 years ago the state and local governments handed GM the farm in the name of job creation. (about 2000 jobs it was claimed)
Not too long before the plant was scheduled to open I had to attend a school in Houston, TX and on the way back the GCA radar at DFW was going stupid so I had a 3 hour layover. Grabbing a newspaper and while having a few drinks in the airport bar I read on the business page that GM was closing their Fort Worth facility and causing a loss of several thousand jobs.
The article also stated that the TX workers were being given first crack at the OK jobs so in the grand scheme of things nothing was improved with the only factor being that OK ponied up more tax money than TX did.

To make matters worse, the GM plant closed in 2006 and Oklahoma County bought the empty White Elephant building for over 50 million dollars. They’re leasing this in turn to Tinker AFB for 1 dollar a year.
GM cashed in on the taxpayers for 50 million plus on the way out of town and in 50 million or so years that 1 dollar a year lease will retire the debt; not factoring in anything other than the actual purchase price.

Amen, Mike.

I suppose any company can survive with the most enormous infusion of cash in history, the rights to violate contracts screw the stockholders of their legal claims, the right to walk away from contractual obligations and be legally protected, and various other “devices” to support them…such as the failed “cash for cllunkers” and the tax rebate for buyers of their new overpriced hybrid products. Take my money and give it to someone so they can buy a car they can’t afford. But that don’t make it right.

A much healthier approach would have been to let them find their own way out of the mess they’d created…or go down with the ship. Other manufacturers better able to do their jobs would have filled the void and the marketplace (and the economy) would be healthier for it.

OK4450, those ads angered a lot of people. They were pulled almost immediately, as the internet lit up with the truth within 24 hrs of the first such commercial. GM execs still think they’re in the '70s, when it would take months for the truth to come out. HEY, GM, THE INTERNET IS HERE!!!

I agree in principle to most of the comments here. GM made a lot of bonehead decisions but in my heart of hearts I don’t want to see any U.S. company fail. My biggest concern or worry is that China will someday build a decent vehicle like Hyundai and Kia are building now. Twenty years ago Hyundai and Kia were both building junk cars just like Honda and Toyota did in the sixties and early seventies. If China comes up with a reliable vehicle at a great price then we can probably all kiss Ford, GM and Chrysler goodbye.

What’s angered me the MOST with GM in the past decade is them “crying” about how they spend way too much money on pension and pension health care. Well 10 years ago they had the money to shore up this problem. If they did then WE (the US government) NEVER (Well Maybe) would have had to bail them out. Instead they go on this advertising campaign about how the Auto Worker is over paid and it’s mainly because of the enormous amount of money they pay retired employees.

Well GM…Now you have the Money to take care of this problem. Last report I read in the WSJ they only needed 1.2 Billion to secure the pension plan. It’s probably closer to 2-3 Billion now. But in the long run this is the best financially thing they could do.

Ok GM, where’s my check ?

If China comes up with a reliable vehicle at a great price then we can probably all kiss Ford, GM and Chrysler goodbye.

On MORE then one occasion I’ve bashed GM/Ford and Chryco here for their stupid business practices.

I’m a firm believer that if they didn’t pay these outrageous bonuses…and actually looked “Long Term” instead of the philosophy of (“How much money can we make THIS quarter”)…then I think the Big-3 CAN build a quality vehicle that is competitively priced.

Mike…I could not agree more. You hit the proverbial nail right on the head.

MikeInNH - Ironically, before the financial collapse, GM’s pension plan was actually considered overfunded by a decent amount (about 8%, IIRC). Of course, like most companies, GM didn’t take this as a reason to shift to a more conservative investment strategy, but rather used it as an excuse to not fund pensions over the course of a few years and keep a riskier portfolio in hopes of freeing up more cash. The result was that they mismanaged what should have been a solid stable plan and turned it into a bit of a trainwreck.

The healthcare funds were a little different - there really was no proper accounting for this, and GM just traditionally paid for the expenses as they were incurred, not when the benefit was earned. Had they used better accounting methods and paid for them as they were earned, that whole mess would likely have been avoided.

What REALLY irked me was how people pointed to those costs to claim that the current workers were massively overpaid. Just removing the retiree healthcare expense to the VEBA brought down the commonly-referred to cost of UAW labor by about $20 per hour. That wasn’t money the current workers were making - that was something their predecessors got, and the current workers were getting blamed for it. That’s reprehensible, IMO.

Mike, I too think you hit the “nail on the head”. Everybody keeps thinking of this as “government money”. It isn’t. It’s MY MONEY. And yours. It was taken out of OUR POCKETS and given to those boneheads that had screwed up one of the largest, most prosperous companies in the history of the world, to bail them out of their own mistakes.

Well, I suppose it could be argued that the money actually came from selling T-bonds to CHina, and will acftually come out of our children’s pockets, but that’s a technical argument.

What REALLY irked me was how people pointed to those costs to claim that the current workers were massively overpaid. Just removing the retiree healthcare expense to the VEBA brought down the commonly-referred to cost of UAW labor by about $20 per hour. That wasn’t money the current workers were making - that was something their predecessors got, and the current workers were getting blamed for it. That’s reprehensible, IMO.

Agree 100%. Many were the Conservative Talking Mouths who HATE unions. But some of this came directly from GM management.

GM WAS (maybe still is) mismanaged. I have said this many times in this forum…I will be the first in line to buy one of their vehicles when I feel they are building quality vehicles again. I’m not believing it yet.

The healthcare funds were a little different - there really was no proper accounting for this, and GM just traditionally paid for the expenses as they were incurred, not when the benefit was earned. Had they used better accounting methods and paid for them as they were earned, that whole mess would likely have been avoided.

WSJ had an article about GM’s healthcare fund several years ago. That’s where I got the number of about $1.2 Billion to shore up their Pension plan from. I was combining the Pension plan and pension health benefits into one. Maybe I shouldn’t have. But the point is…GM could have avoided this if they just took some of their profit a few years ago and put it into a fund for healthcare. Then that wouldn’t be an unknown expense paid out of their income each year. When the times are hard (like they were just 2 years ago) GM might still have been profitable because the healthcare would have been coming out of the fund they set up. I’ve worked for large corporations before…and that’s how they do it. Why GM hasn’t done it…is beyond me.

ok4450 -

I’d be interested in seeing where your 20% paid back claim comes from.

From the bailouts, GM received a total of $49.5 billion. After bankruptcy, that was restructured to be $9.5 billion in loans and preferred stock, with the rest of the $40 billion in the form of a government equity stake (about 61% of the company).

GM paid back what was the restructured loans and preferred stock, about $9.5 billion in total (yes, they paid back some of that with money that they had because of the equity stake the government had, but if someone loans you $50 and you turn right around and give them $20 of it back, you still just owe them $30 - they don’t have a right to claim you owe them $50 because that $20 was theirs in the first place).

That left ~$40 billion outstanding.

Then the government recovered $13.5 billion in the IPO by selling some of their stock. That leaves ~$26.5 billion outstanding. But the government still owns about 500 million shares of stock. That means to recover it all, you need a share price of $26.5e9/500e6 = $53. Granted, that isn’t accounting for interest on the national debt incurred because of the bailout, but that is VERY close to your $55 per share mark and in line with every other estimate I’ve seen. That means that:

$26.5/$49.5 = 53.5% is still outstanding, not 80%

BTW, sell all the remaining stock in GM, and the government recovers an additional $13.5 billion, putting the loss at $13 billion. That’s a LOT of money, but with 79,000 people still employed at GM, if they’re just paying federal taxes at the household median rate of about $8500 per year and not collecting unemployment (almost $19k per year), that’s $2.2 billion in federal balance sheet improvements per year per GM employee. Throw in suppliers still at work and others whose jobs depend on economic activity from GM employees, and that $13 billion loss may have already been “recovered”. That’s the same sort of math Alabama, Mississippi, Georgia, etc use to justify massive incentives for foreign automakers, so if it is fair to use there, we should be using that argument at the federal level, too.

MikeInNH -

I just looked at GM’s current earnings release. Their pension plan is now only 88% funded. Fortunately, they have made SOME movements to improve things. In the past year, they’ve altered the allocation of assets within the pension plan:

12/31/2010:
29% stocks
41% bonds
8% real estate
22% other

12/31/2011:
14% stocks
66% bonds
5% real estate
15% other

Clearly, they’ve moved to a much more dependable flow of returns, even if bonds are trading at very low yields. This does mean that they’ll likely have to put a cash infusion into the plan to fund it, but if they keep a more conservative approach and get the funding level back up, it should be easily sustainable.

While I’ve NEVER been a Al Gore fan…but the point he’s making in this article is what I’ve been saying is wrong with the Big-3 for years…I’m NOT taking credit for it…I heard it from other sources years ago…

http://news.yahoo.com/al-gore-takes-aim-unsustainable-capitalism-164819308.html

You can use “politimath” all you want. Bailing out GM was an inappropriate use of taxpayer money and messed with the basic tenants by which a free market prospers, and it should not have been done. And, in truth, it was done with borrowed money, not surplus money. So its cost is greater than presented.

The fourth quarter was flat. Is GM sure to do well in the future? News people have put their bias on the news once again by concentrating on the yearly, more dramatic news, but not the most recent results. The following news article also with a current view does not do that so much.

http://news.yahoo.com/gm-reports-weaker-expected-profit-125058441.html

I don’t remember where that 20% came from. It seems to me it was from an op-ed written by a former GM exec and may have been in the WSJ or Detroit News last year.
It also seems to me (memory is fuzzy here) that some of the money used to pay the Feds (a.k.a. taxpayers) was basically incentive money from another source. In a nutshell, using tax money to square up tax money.

GM should have been allowed to go belly-up. Someone would have taken them over and odds are there would not be one interruption in sales or service although some deadwod would have been cleared out.

I’m not a fan of the taxpayers being used as political pawns by politicians who spend tax money to create, relocate, or physically save a company from going under. They’re pandering to get votes and most politicians couldn’t run a paper route while keeping it in the black.

In case anyone missed it, a recent issue of Detroit News had a story about the head of the UAW, Bob King. He was not only pushing for an Opel bailout but was also asking for protests this year to include civil disobedience and using Arab countries as a model for this disobedience.