Obama Administration and GM

[Jenson71]

I rememeber hearing on this site that a huge concern with the auto bailout was that 'once government has their hands on something, the grip only gets tighter.' Taco John's analogy was of a roof burning -- inevitably, the whole house will come down.

Of course, Taco John, as usual, missed an obvious point -- we have firefighters and roofers. It's not necessary that a fire on the roof brings the whole house down or can not be fixed.

So perhaps its time for some to realize that the auto bailout was not, afterall, the work of an anti-market socialist. GM is starting to lose it's "Government Motors" status and return to the stock market, free from the government's ownership, and back into the place where we want business to primarily be.

Look at some of the benefits that came with the bailout: GM, thousands of jobs, and dozens of suppliers (and their jobs) don't become exitinct. In fact, GM is potentially a slicker, more efficient operation than before (and yes, some jobs were lost because of that). The costs? A blow to the integrity of the non-interventionist model.

[BigChiefFan]

Private enterprises, should be run by private entities. Federal government is their to insure our God Given, birth rights and protect our borders to insure our pursuit of happiness. Everything else they've over-stepped their boundries. No company is too big to fail. If they run their company like shit, they deserve to fail.

[Brock]

The rumor is their IPO will be 120 dollars a share. Ha ha.

[BigChiefFan]

Originally Posted by Brock

The rumor is their IPO will be 120 dollars a share. Ha ha.

You're kidding? Good Lord. The rich get richer and we foot the bill. Un****inbelievable.

[Brock]

Originally Posted by BigChiefFan

You're kidding? Good Lord. The rich get richer and we foot the bill. Un****inbelievable.

Just a rumor. But even if it's only 40 a share it's a freaking joke. I wouldn't give more than 10.

[FD]

A good article from The Economist on the GM takeover. I agree that in hindsight it was the right move.

Government Motors no more
An apology is due to Barack Obama: his takeover of GM could have gone horribly wrong, but it has not
Aug 19th 2010


AMERICANS expect much from their president, but they do not think he should run car companies. Fortunately, Barack Obama agrees. This week the American government moved closer to getting rid of its stake in General Motors (GM) when the recently ex-bankrupt firm filed to offer its shares once more to the public (see article).

Once a symbol of American prosperity, GM collapsed into the government’s arms last summer. Years of poor management and grabby unions had left it in wretched shape. Efforts to reform came too late. When the recession hit, demand for cars plummeted. GM was on the verge of running out of cash when Uncle Sam intervened, throwing the firm a lifeline of $50 billion in exchange for 61% of its shares.

Many people thought this bail-out (and a smaller one involving Chrysler, an even sicker firm) unwise. Governments have historically been lousy stewards of industry. Lovers of free markets (including The Economist) feared that Mr Obama might use GM as a political tool: perhaps favouring the unions who donate to Democrats or forcing the firm to build smaller, greener cars than consumers want to buy. The label “Government Motors” quickly stuck, evoking images of clunky committee-built cars that burned banknotes instead of petrol—all run by what Sarah Palin might call the socialist-in-chief.

Yet the doomsayers were wrong. Unlike, say, France’s President Nicolas Sarkozy, who used public funds to support Renault and Peugeot-Citroën on condition that they did not close factories in France, Mr Obama has been tough from the start. GM had to promise to slim down dramatically—cutting jobs, shuttering factories and shedding brands—to win its lifeline. The firm was forced to declare bankruptcy. Shareholders were wiped out. Top managers were swept aside. Unions did win some special favours: when Chrysler was divided among its creditors, for example, a union health fund did far better than secured bondholders whose claims should have been senior. Congress has put pressure on GM to build new models in America rather than Asia, and to keep open dealerships in certain electoral districts. But by and large Mr Obama has not used his stakes in GM and Chrysler for political ends. On the contrary, his goal has been to restore both firms to health and then get out as quickly as possible. GM is now profitable again and Chrysler, managed by Fiat, is making progress. Taxpayers might even turn a profit when GM is sold.

So was the auto bail-out a success? It is hard to be sure. Had the government not stepped in, GM might have restructured under normal bankruptcy procedures, without putting public money at risk. Many observers think this unlikely, however. Given the panic that gripped private purse-strings last year, it is more likely that GM would have been liquidated, sending a cascade of destruction through the supply chain on which its rivals, too, depended. As for moral hazard, the expectation of future bail-outs may prompt managers and unions in other industries to behave rashly. But all the stakeholders suffered during GM’s bankruptcy, so this effect may be small.


Socialists don’t privatise

That does not mean, however, that bail-outs are always or often justified. Straightforward bankruptcy is usually the most efficient way to allow floundering firms to restructure or fail. The state should step in only when a firm’s collapse poses a systemic risk. Propping up the financial system in 2008 clearly qualified. Saving GM was a harder call, but, with the benefit of hindsight, the right one. The lesson for governments is that for a bail-out to work, it must be brutal and temporary. The lesson for American voters is that their president, for all his flaws, has no desire to own the commanding heights of industry. A gambler, yes. An interventionist, yes. A socialist, no.

http://www.economist.com/node/168464...ry_id=16846494

[stevieray]

sales plummented 25%?

[Jenson71]

Originally Posted by stevieray

sales plummented 25%?

Compared to last year (when Cash for Clunkers was going on). The good news: "The decline in sales broke GM's 11-month streak of increasing monthly sales figures."

http://content.usatoday.com/communit...ers-hangover/1

[Dave]

Originally Posted by stevieray

sales plummented 25%?

Fords sales dropped 15%, I think. Oddly enough, Chrysler was up 7%.

[Amnorix]

There's a long way to go yet, but it seems with teh hindsight that we have today, the auto bailouts were a good thing. Certainly, given the overall economic situation at the time, letting 2 of the big 3 just implode into liquidation would have had devastating consequences.

[Taco John]

Originally Posted by Amnorix

There's a long way to go yet, but it seems with teh hindsight that we have today, the auto bailouts were a good thing. Certainly, given the overall economic situation at the time, letting 2 of the big 3 just implode into liquidation would have had devastating consequences.

It wouldn't have been devestating for the young upstarts who would have liked a foothold in the market. But leave it to liberals to preach against the rich getting richer and then giving them a hand up.

[Garcia Bronco]

if they do business in the same way they are done and it was stupid.

[Silock]

Originally Posted by Brock

The rumor is their IPO will be 120 dollars a share. Ha ha.

What's so bad about that? There's nothing wrong with that price, so long as the total shares at that price don't total more than the valuation of the company.

[Silock]

Originally Posted by Jenson71

Compared to last year (when Cash for Clunkers was going on). The good news: "The decline in sales broke GM's 11-month streak of increasing monthly sales figures."

http://content.usatoday.com/communit...ers-hangover/1

So... they created another bubble. Seems like a LOT of people were saying that's exactly what would happen.

[petegz28]

At this point in time they still owe us taxpayers $60 bil