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Old 12-09-2013, 05:03 PM  
ChiefsandO'sfan ChiefsandO'sfan is offline
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U.S government lost us 10 billion in the GM Deal

General Motors is free from the stigma of public ownership almost five years to the day after Congress voted to give emergency funding to GM and Chrysler, but the debate will drag on through history over the cost and benefits.

The government recouped about $10 billion less than the $49.5 billion in aid it provided GM. But a study released Monday estimated that the U.S. would have lost 2.6 million more jobs in 2009 and 1.5 million more jobs in 2010 had the two automakers failed.

U.S. Treasury Secretary Jack Lew confirmed late Monday that the government no longer owns any GM stock. The exit comes nearly four months sooner than the Treasury Department estimated this year.

As expected, President Barack Obama defended the historic intervention, which began under his predecessor, President George W. Bush.

“When I took office, the American auto industry was on the verge of collapse,” the president said. “GM and Chrysler were on the brink of failure, threatening to take suppliers, distributors and entire communities down with them. In the midst of what was already the worst recession since the Great Depression, another one million Americans were in danger of losing their jobs.

“As president, I refused to walk away from American workers and an iconic American industry. But in exchange for rescuing and retooling GM and Chrysler with taxpayer dollars, we demanded responsibility and results.”

“The U.S. Treasury's ownership exit closes just one chapter in GM's ongoing turnaround story,” GM CEO Dan Akerson said in a statement. “We will always be grateful for the second chance extended to us, and we are doing our best to make the most of it.”

Was it worth it?
The study, was compiled by the Center for Automotive Research in Ann Arbor, also estimated that by rescuing GM and Chrysler, the government “saved or avoided the loss of” $105 billion in lost taxes and social services such as unemployment insurance and food stamps.

Neither company contributed to the study.

GM North America President Mark Reuss said the rescue was necessary.

“If you look at … what this did and what it prevented, those are the facts,” Reuss told reporters Monday. “I feel good about that. There’s been tens of thousands of people who can now put food on the table.”

Reuss said the government’s exit from GM stock is a boost to the “pride and morale” of the company’s employees.

“I think that’s a big deal,” he said. “I’m not talking about markets or stock price or anything else. I’m talking about internally. This has been a long, hard road with no repeat customers and the label of ‘Government Motors.’ ”

The government’s exit also removes restrictions on how much GM could pay its top 25 executives, limits that Akerson and Reuss said hurt the automaker’s ability to retain talented leaders and attract new ones from the outside.

But Michael LaFaive, director of fiscal policy for the conservative Mackinac Center for Public Policy, said the free market might have absorbed the impact of GM and Chrysler collapsing.

“Even under a Chapter 7 liquidation, the economy doesn’t necessarily lose in the long run,” LaFaive said. “Other companies, be they Ford or Honda, swoop in and pick up assets at a discount, which they re-employ elsewhere — and taxpayers aren’t on the hook, and cars get made more efficiently and inexpensively.”

The $10-billion loss should not be dismissed, LaFaive argued.

“Those people who are getting bailed out are not getting bailed out by Monopoly money,” he said. “It’s you and I.”

Recovery would have been faster down South
Sean McAlinden, CAR senior economist and co-author of the study, said that manufacturing jobs eventually would have returned, but they would have shifted to the South, while R&D jobs migrated overseas.

“Once again, the results for upper Midwest states such as Michigan, Ohio and Indiana of this relocation would have been severe in the long term,” the study concluded. “Double-digit unemployment rates would still exist in these states today.”

McAlinden said the failures of GM and Chrysler would have triggered a massive crisis in the automotive industry supply chain that, in turn, would have caused widespread layoffs at automakers that didn’t seek government aid.

In addition to GM and Chrysler jobs, the report estimates that 90% of U.S. employees at Ford, Toyota, Honda, Nissan, Mercedes and BMW would been laid off for at least a year.

“When people are not working, not only does the government not collect money, it must spend money,” McAlinden said, pointing to unemployment insurance and food stamps as examples. “Short-run losses are real losses. They don’t go away in the long term. Even if the industry does come back.”

The U.S. recovered about $39 billion on the GM bailout, Treasury officials said. That included cash from GM’s November 2010 IPO, a stock buyback and gradual share sales on the open market.

The $81 billion in aid to GM, Chrysler and their lending arms was dwarfed by a total of $421.8 billion disbursed to the automakers, banks and the insurance giant AIG under the Troubled Asset Relief Program (TARP). Treasury said in a statement that it has recovered $432.7 billion of that TARP outlay so far.

The Treasury Department has been selling GM stock throughout the year, reducing its stake gradually to avoid disrupting the market. After the government announced last month that it expected to completely exit GM stock by the end of the year, investors have been driving the share price up to an all-time high since the IPO.

GM stock rose 1.8% to close at $40.90 Monday, after reaching $41.17, its highest post-IPO price, earlier in the day.

http://www.freep.com/article/2013120...otive-Research
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Old 12-10-2013, 04:58 PM   #61
Bump Bump is offline
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It's pretty broken capitalism when the public eats losses but all profits stay private. But this is what should be expected to happen when the government can be purchased by lobbyists.
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Old 12-10-2013, 05:04 PM   #62
HonestChieffan HonestChieffan is offline
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Quote:
Originally Posted by cosmo20002 View Post
Many of them would have, yes. Plus all the businesses that are connected to the industry--parts manfuacturers and such.
So where would people buy cars? If gm and chrys just went poof. Gone. Demand for their stuff would also? You assume that gm would not have continued with private ownership?
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Old 12-11-2013, 01:41 AM   #63
BWillie BWillie is offline
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I saw a pretty funny bumper sticker the other day on a Ford.

Ford, Built without your tax dollars.

Shouldn't GM be ashamed of themselves? I don't think I will ever buy a car from them again. If you suck at your business, it should go under, regardless of how many jobs are lost. You don't put a god damn band aid on it and assume all will be well.
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