Skip to comments.The Auto Bailout Failure Is Now Complete
Posted on 12/20/2012 7:36:39 AM PST by Kaslin
You may recall that during the presidential election, the Treasury Department refused requests by General Motors to unload the government's stake in the giant automaker.
Taxpayers had sunk $50 billion into a union bailout in 2009 and were now proud owners of 26.5 percent of the struggling company. Reportedly, GM had growing concerns that the stigma of "Government Motors" was hurting sales in the United States. At the time, any transaction would have come at a steep loss to taxpayers and undermined the president's questionable campaign assertions that the auto union rescue had been a huge success.
Well, now that the election is over and the Treasury Department is freed of political considerations, it plans to sell its 500 million shares of stock over the next 12 to 15 months and ease its way out of the company. GM will buy around 200 million shares at $27.50 per share by the end of the year. GM's buy brings taxpayers back to around $5.5 billion of the $27 billion the company still owes. The special inspector general for TARP estimated in October that the Treasury would need to sell the remaining 500 million shares at $53.98 per share just to break even on its investment.
Once GM buys its 200 million shares, the taxpayer stake in the company will drop to 19 percent, but the price to break even on the remaining 300 million shares will be around $70 per -- or, in other words, probably never. As of this writing, GM shares are trading at around $27 per share. That, in the Obama era, is considered a successful transaction between the state and private industry. So successful that you'll also remember that during the campaign, Obama maintained that "what we did with the auto industry, we can do in manufacturing across America."
Taxpayer funds and unions for everyone.
Even if taxpayers recouped all of their money from the bailout, there are a slew of economic arguments against rescuing failing industries. But the more immediate problem is that we will never get our money back, anyway.
GM's labor costs, estimated at $56 an hour, still are higher than any of its competitors. Since the Obama administration cajoled the normal bankruptcy hearings and eradicated the pensions of nonunion workers to ensure union success, employees, like the ones at Delphi, the auto parts manufacturer and one-time GM subsidiary, took it on the chin while $26 billion of taxpayer funds were used to keep United Auto Workers in a secure position.
The Treasury Department has just revised its estimate upward to $25 billion in losses, and it will probably be more than that when it's all said and done. Taxpayers also suffered a $2.9 billion loss in Chrysler (the carmaker had received $12.5 billion through TARP programs) in 2011.
"This announcement is an important step in bringing closure to the successful auto industry rescue, it further removes the perception of government ownership of GM among customers, and it demonstrates confidence in GM's progress and our future," claimed GM Chairman and Chief Executive Dan Akerson in a press release. But really, the bailout exemplifies much of what's wrong with government. The cronyism. Wasted taxpayer money. The government's propensity to interfere with the marketplace and prop up losing propositions.
With news of the government getting out of the car business, we'll probably see a spike in the stock price. Maybe once Obama has completely dropped our "investment" it'll take off. But a success for taxpayers? Hardly.
I will NEVER buy a GM or Chrysler product again.
Yep, this was just a giant payoff to Obama’s union thug buddies. He disregarded bankruptcy law and proceedings to shaft the bond holders, and rescued his pals so they could, in turn, give him lots of cash. I really wonder if this country can be saved, or is the US just another banana republic now?
Obama has never even gotten his hands dirty changing a flat tire. Do you really expect this fag to understand manufacturing of any kind? Not that he cares because all he cares about is how he looks on TV for the sheeple and so far he is doing OK
Obama is a salesman involved in the “PERMANENT CAMPAIGN”. He could care less about understanding economics or foreign policy. He leaves all that to his leftist underlings while he goes out golfing or shoots hoops with Reggie
Someone has figured the actual number and I think the total is North of 100 Billion, I want to see a real GAAP Accounting of what is going on internally, either I need an accounting refresher course, or I smell a rotten fish here...
Ignore the taxpayer money for a moment and look at the difference in results:
GM was managed by the US gov’t from bankruptcy forward and has not recovered at all while losing money and market share.
Chrysler was given to another company that is managed by businessmen and has recovered, paid back its loans and is gaining market share.
Sorry dudes. The stigma of producing a crappy product has hurt sales in the US.
I wonder if GM isn’t using TARP money to buy back the stocks ? <*/sarcasm> off
They will forever be “Government Motors” to me. Once their most loyal fan - I will never buy another.
But they protected our jobs for our people. And good paying jobs a that. Buy American...right? Now we have to buy Japenese cars?
not with those high costs
Taxpayers = Feds ATM
Sorry, but that horse has already left the barn. The last GM product which I owned was good for nothing but sale to a scrapyard after a mere 120K miles.
The most recent Honda product (aside from my present vehicle) which I owned had 210K miles on it and 27 calls when I listed it for sale on Craig's List. The successful buyer counted out my asking price in cash and had two more prospects right behind him, one physically there and another en route.
As an added bonus, my Honda was built in the USA by American non-union workers. The GM was built by unAmerican union workers.
Government has become money laundering to unions & Rats.
“Now we have to buy Japenese cars?”
Check the first digit of the VIN-—
If it’s 1,4, or 5, it’s made in the USA.
If it’s 2, the car was built in Canada.
If it’s 3, the car was built in Mexico.
So a Ford Fusion (Mazda 6) is built in Mexico, while an actual Mazda 6 was built in the USA.
Same here. The GM bailout was unforgivably corrupt, so I will never forgive the company or those involved. GM and Chrysler are dead to me. Last month, I rented a car (a Honda was reserved), and the company tried to give me a GM. I refused, telling them I would take a cab rather than accept a GM car, and they upgraded me to a Mercedes at no extra charge. I won't even take a GM rental - ever again.
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