Viability of GM (Government Motors)

General Discussion
21

Yes, Cig, I do believe the executive branch has run afoul of its charter as intended by the founding fathers.

Yes, Cig, I do believe our tax dollars are being used inapprpriately…by the trillions.

Yes, Cig, I do believe what’s being done will ultimately plunge this country into either a prolonged recession or perhaps even a depression. One cannot take this amount of money from the taxpayer pockets and inject it into another segment of the economy without, I believe, dire consequences.

My problem is not with GM. It’s with Washington. And it began not with GM, it began with AIG. I believe Henry Paulson (with Ben Bernanke) took us down a wrong road and wer’re now heading down it with breakneck speed. Federally backing loans is one thing (although I have reservations there too), but acquiaition of stocks in private firms using taxpayer money is a whole different issue. I don’t believe out tax system was ever intended or designed to do this.

And yes, taxpayer money is clearly being used to force these companies to make the decisions the executive branch feels they should.

Many economists now believe that FDR’s approach out of the great depression actually prolonged it. But at leats the tax dollars were used for public works projects, to the benefit of the taxpayers. What’s happening now is completely different.

Yes, I’m a constitutionalist. The founders wrote the constitution as a document that limited the powers of the government, and created the three branches to prevent any one branch from assuming dictatorial powers. We’ve strayed too far afield of thst vision. There seem to be no limits at the moment to the powers of the executive branch.

Mark my words, our heirs will pay for this for generations to come.

22

At noon on Friday, GM stock began the final plunge to $0.00 as the last speculators bailed out. A huge disruption in The Force is sweeping across the galaxy…Trying to put a Happy Face on this just doesn’t work…

23

When I referenced stomping the dreams of the early republic, I wasn’t talking talking about things that happened in the last decade (AIGs & artificially low interests rates & real estate bubbles & etc.) I was talking about what happened through the 19th & into the early 20th century. That is when the legal structure that allows our current corporate forms was put in place. There is plenty of reason to criticize the feds - but not exclusively. And I’m telling you - big business is what bred big government. And as long as we have the corporate form we do now we will continue to have big government.

One of the things I was trying to say is that folks should not reserve all of their venom for the state. It is BIG organizations - no matter what kind that stomp all over things and make BIG messes.

24

I see your point, but I would argue that the real problems started in the latter half of the 20th century. The feds’ push in the 1970s to make low-interest high-risk loans available to those that could not afford homes through conventional loans, the subsequent deregulation allowing creative financing (and the almost mandate from the feds for the financial institutions to do so), and the subsequent “bundling” of high risk loans with low risk loans to sell on the secondary market (necessary for the banks to sell the loans) are what created this mess.

While GM had become a bloated beaurocracy (sp?) unable to get out of the way of its own inefficiencies and too disconnected from the marketplace, the real problems originated in Washington IMHO. And I fear that the current executive branch approach to solving it is careening way out of the sphere in which they are (or perhaps should be) limited by law. IMHO there is a serious misuse of tax dollars going on here.

25

Perfectly stated.

26

Gentlemen, we have our answer. We are watching history unfold.

End of an Era: GM Going Bankrupt on Monday
Posted May 29, 2009 12:20pm EDT by Henry Blodget

From TheBusinessInsider.com, May 29, 2009

GM will file for bankruptcy on Monday, Bloomberg says. It will then split into a “good GM, bad GM,” with the good GM looking to be profitable within 60-90 days. In a change from the previous plan, current shareholders will get nothing.
When General Motors Corp. files for bankruptcy protection next week, a Dickensian tale of two legal processes will unfold, according to Bloomberg:

?In one, a judge will be told that a new entity will emerge within three months with prized assets and a plan to revisit the best of times when GM was the world?s largest carmaker. In the other, Bleak House comes to bankruptcy court as creditors shut out of the new entity will be told to argue for perhaps years about who gets company properties the new GM doesn?t want.

?In the rosy scenario, the new company, armed with vehicles from GM?s Cadillac, Chevrolet, Buick and GMC divisions, plans to begin making money again within 60 to 90 days, while a bankruptcy court sells or liquidates unprofitable brands such as Saturn and Hummer. Saab already is in bankruptcy.
Here’s who gets what:
?The new GM will take some liabilities with it such as an auto supplier financing program and warranty obligations. Detroit-based GM had global liabilities of $176.4 billion as of Dec. 31, 2008.
?Pontiac models will be scrapped, along with as many as 16 factories, some of which may involve massive cleanup costs. GM must also try to find buyers for its Hummer and Saturn units after not finding any takers so far.
?Given the planned stakes, the new GM will be controlled by the U.S. government, with the Canadian government possibly owning a small share. A union health-care trust will own 17.5 percent and 10 percent will be given to the old GM to hand to creditors to resolve claims, according to GM?s filing.
?The Treasury plans to allocate that 10 percent stake to bondholders, plus offer warrants to buy an additional 15 percent of equity, provided a ?satisfactory? number of holders agree to go along with GM?s restructuring program, according to the filing. Bondholders may get nothing if they don?t satisfy the Treasury by 5 p.m. New York time tomorrow, GM said…
?GM?s current stockholders would get no recovery from the new-entity asset sale, according to the filing, a change from an earlier plan to give them 1 percent of the new company.

27

Again…I care only for the financial woes of GM in so far as it affects the jobs of American workers. It is still a wonder why we are financing the dismissal of so many workers. Instead of bailout funds, I repeat my suggestion to my two state SENATORS. Use the money to subsidize the purchase of motor vehicles for state and local govt. with tax credits for private purchase for those that qualify, for cars that are fuel efficient and stamped “assembled in America” by American workers with American parts (as much as possible). No Mexican/Canadian Fords or Asian GMs. There’s your billion dollar market; show us your best cars and we’ll buy them now.
But that’s a decision too late made by those so much wiser than we…

28

If I understand you correctly, you’re suggesting that our tax dollars should have been funneled into GM via the purchase of their product rather than their stock?

I like that idea. The vehicles could also have been used as federal support to states and municipalities…not as displacement for current federal funds, but as additional assistance. Think of how much of an assist it would be if state and municipal vehicles were provided for a few years by the feds…including statie cars, local cop cars, highway department vehicles (garbage trucks, plow trucks, etc.) and so on. It’s an interesting concept.

29

Is it just Magna, or is Sberbank still in the mix? If Sberbank is still a partner, they would hold the major share (35%), Magna would hold 20%, GM would hold 35%, and Opel employees would own 10%.

30

I believe the Russian bank is still in the mix, how much voting power they would have, I don’t know. The German government wants Stronach to lead the venture. The German government will loan $2.1 billion to ensure most of the 20,000 Opel jobs are maintained.

31

That’s what they did with Studebaker. Government parking lots were full of Larks and Studebaker pick-ups…All in vain…A couple of years later, you could buy a grey Lark at auction for $400…

32

So now bankruptcy means NOTHING…The creditors and owners get NOTHING while the “New Owners” get all the assets that have value…Talk about being played for suckers…

33

The owners get nothing. The creditors get 10% if bankruptcy court goes along. That may be worth very little now, but if GM becomes a viable company again, it will be worth a lot more. You should be glad that the UAW pension got a piece of the action. If they hadn’t, you, personally, (and the rest of us citizens) would pay for their retirement for decades to come. And the company will be divided in two: Good GM keeps all the worthwhile assets. Bad GM gets the dregs. That will make them a viable entity. This happened to Bethlehem Steel when they were sold off in bankruptcy. The good assets were bundled and sold to another steel company. The bad assets were kept and faded away with the company name.

34

I just wish they would stop calling it Free Market Capitalism…This is Fascism. The Public (taxpayers) takes all the risk (dregs) and private entities get all the gravy

35

That’s not entirely true. The public is in no way obligated to pay bondholders anything, or anyone else for that matter. It does not appear that the retirement plans will be dissolved, so the Pension Benefit Guarantee Corp. is not needed. We probably will get stuck paying for environmental clean-up of abandoned factories. That may, or may not, be paid for by the sale of GM stock when the Government believes it is time.

36

“The public is in no way obligated to pay bondholders anything, or anyone else for that matter.”

“The Public” has already dumped $30 Billion into this disaster and will dump 30 more before it’s over…

37

"“The Public” has already dumped $30 Billion into this disaster and will dump 30 more before it’s over… "

We might get it back, too, if GM can stay in business. Or not. Stay tuned and find out.

38

GM is doing very well in China (sales increased 30% over last year), and is doing OK in many other areas of the world. Europe and North America are the only areas in financial trouble. GM products are well regarded in Asia, Latin America, Australia, Europe and elsewhere.

Still, there is worldwide overcapacity, and the new shrunk company (New GM, according the Henderson) will have to be competitive with the Japanese, Koreans and Volkswagen to remain a top tier player.

The current "investment " is costing every American nearly $100; not a large price to pay if it all works out, since the money will be returned when the government sells its shares. Some financial institutions that got bailout money are already planning to do this with the money they raised from issuing new shares.

39

Destroying GM & Chrysler by destroying (shorting) their stock will prevent them from producing the tanks and planes we will need when the war started in Afganistan and Iraq spreads.
Free Sound byte:
Will your children be defending us by driving Toyota tanks ?

40

Neither build any military fighting equipment at this time. Maybe General Dynamics, Boeing, Lockheed Martin, Northrop Grumman, and a few others could take a crack at it. Ya think?