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Old 12-09-2013, 06:03 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, 09:57 AM   #46
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sure they do.........don't repay 10 billion...tax payers have money
Socialists are supposed to take over ownership of private industry, not give it back.

But as for the $10B--there's a million jobs connected to the auto industry. Those folks kept their jobs and salaries. So instead of many of them needing government assistance, they continued to pay their bills, buy things, keep the economy going, and pay taxes--which is govt revenue that otherwise wouldn't have been realized. It more than makes up for the $10B.
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Old 12-10-2013, 09:58 AM   #47
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Two entirely different situations. One was the goal of saving many jobs and keeping it a float. The other was so that they would have more money to invest in jobs while they were doing just fine (sounds an awful lot like trickle down to me).
I assume you know that EVERYONE’S tax rates went down except those that were already deemed poor enough that they paid no taxes at all, right? And that EVERYON’S Lower Tax rates were extended under Obama and then everyone’s except “the Rich” had them extended again.
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Old 12-10-2013, 09:59 AM   #48
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Two entirely different situations. One was the goal of saving many jobs and keeping it a float. The other was so that they would have more money to invest in jobs while they were doing just fine (sounds an awful lot like trickle down to me).
They were both tax cuts but only one was claimed to “cost” anything.
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Old 12-10-2013, 10:02 AM   #49
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Originally Posted by cosmo20002 View Post
Socialists are supposed to take over ownership of private industry, not give it back.

But as for the $10B--there's a million jobs connected to the auto industry. Those folks kept their jobs and salaries. So instead of many of them needing government assistance, they continued to pay their bills, buy things, keep the economy going, and pay taxes--which is govt revenue that otherwise wouldn't have been realized. It more than makes up for the $10B.

Why wouldn't it have been realized. Do you assume had Govt not gone in that all the business and all the jobs at both Chrys and GM would have evaporated?
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Old 12-10-2013, 11:20 AM   #50
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Originally Posted by HonestChieffan View Post
Why wouldn't it have been realized. Do you assume had Govt not gone in that all the business and all the jobs at both Chrys and GM would have evaporated?
Many of them would have, yes. Plus all the businesses that are connected to the industry--parts manfuacturers and such.
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Old 12-10-2013, 12:18 PM   #51
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Old 12-10-2013, 02:02 PM   #52
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Many of them would have, yes. Plus all the businesses that are connected to the industry--parts manfuacturers and such.
I would argue that if a vacuum of jobs and services were created, then it would be backfilled pretty quickly to accomodate the demand from consumers, likely from competitors who could have re-tooled and kept most of those operations intact.

If the customer base isn't there, then all they've done is prolong it for a few years until it happens again.

The fallacy here is the assumption that ALL those jobs are neccesary. Perhaps one reason GM went bankrupt was that it overextended itself relative to it's customer base.
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Old 12-10-2013, 02:07 PM   #53
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I would argue that if a vacuum of jobs and services were created, then it would be backfilled pretty quickly to accomodate the demand from consumers, likely from competitors who could have re-tooled and kept most of those operations intact.

If the customer base isn't there, then all they've done is prolong it for a few years until it happens again.

The fallacy here is the assumption that ALL those jobs are neccesary. Perhaps one reason GM went bankrupt was that it overextended itself relative to it's customer base.
GM trades off with Toyota (and now Volkswagen too) for largest automaker on the planet all the time. GM didn't go bankrupt from overextending itself relative to it's customer base.

GM went bankrupt due to health care and pensions costs, tremendous cost redundancies (too many brands), and just piss poor executive level management.
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Old 12-10-2013, 02:22 PM   #54
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...GM went bankrupt due to health care and pensions costs, tremendous cost redundancies (too many brands), and just piss poor executive level management.
Don't forget shitty car making.
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Old 12-10-2013, 02:30 PM   #55
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Don't forget shitty car making.
They still sold a **** ton of those shitty cars.
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Old 12-10-2013, 03:24 PM   #56
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GM trades off with Toyota (and now Volkswagen too) for largest automaker on the planet all the time. GM didn't go bankrupt from overextending itself relative to it's customer base.

GM went bankrupt due to health care and pensions costs, tremendous cost redundancies (too many brands), and just piss poor executive level management.
And the bailout changed that how? What prevents then from asking for another bailout if they revert back to prior practices?
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Old 12-10-2013, 03:31 PM   #57
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Old 12-10-2013, 04:22 PM   #58
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And the bailout changed that how? What prevents then from asking for another bailout if they revert back to prior practices?
GM off loaded a metric **** ton of health care and pension costs in the bailouts. They've also learned that they can't just make blah piece of shit cars and be competitive on the global landscape anymore. GM's quality has shot up tremendously in the last 10 years and just look to the rebirth of Caddy as an example of how they've changed their approach to making cars.
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Old 12-10-2013, 05:44 PM   #59
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It is too bad that a well-run, up and coming auto company didn't get the opportunity grow into GMs spot.

Instead we spend billions on a failing company that should have gone out of business.
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Old 12-10-2013, 05:52 PM   #60
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It is too bad that a well-run, up and coming auto company didn't get the opportunity grow into GMs spot.
Exactly! It's always the "unseen" or what would have filled that void -- if the demand for it was there.
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