Let GM go Bankrupt

Cycloptichorn wrote:

I'm begging you to look facts like this up before posting, Okie. Please.
Cycloptichorn

Beg all you want. I could not care less about your slanted facts, also known as "spin."

I could not care less about your slanted facts, also known as "spin."

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I could not care less about your slanted facts, also known as "spin."

1.) Cyclo offered you mathematics.
2.) If you could care less, leave.

Cite the political pay off that you think the unions got

they got, for the time being, all of their pension left in tack, and over 65% still have a union job, neither of which would have happened if GM had gone through bankruptcy court as it should have.

. How much less pay and compensation from what they have right now the guys on the floor would have needed to settle for with a Judge and then a new owner in charge we dont know,

Who got the other 57.5%

DETROIT — General Motors, which nearly collapsed from the weight of its debts two years ago before reorganizing in a government-sponsored bankruptcy, said Thursday that it earned $4.7 billion in 2010, the most in more than a decade.

It was the first profitable year since 2004 for G.M., which became publicly traded in November, ending a streak of losses totaling about $90 billion.

In addition, G.M. said 45,000 union workers would receive profit-sharing checks averaging $4,300, the most in the company’s history.

Does anyone really believe that politicians and bureaucrats in Washington can successfully steer a multi-national corporation to economic viability?

Chrysler Pays Back Loans From the U.S. and Canada
By BILL VLASIC
Published: May 24, 2011

DETROIT — Chrysler said Tuesday that it had paid back $7.6 billion in loans from the American and Canadian governments, marking another significant step in the revival of the company, the smallest of the Detroit automakers.

Those who opposed the gov't bailout of Chrysler and GM were totally wrong. Couldn't have been more wrong.

On the surface, GM had a fairly passable 2010, as the newly-public automaker posted a 21.3% volume increase for its four core brands. In contrast to Toyota’s humbly grateful tone, GM’s VP of US Sales Don Johnson sounded a distinctly triumphal note, arguing

Our sales this year reflect the impact of GM’s new business model. The consistency of results that we achieved demonstrates the focus on our brands, dealers and customers, and how we compete aggressively for every sale, every day.

And on a superficial level, the argument certainly seems to ring true, as Buick (+51.9%), Cadillac (+34.7%), and GMC (+31.7%) were the three most-improved brands in the business last year in terms of volume. GM also delivered more vehicles than any other automaker last year, with 2,215,227 vehicles sold. Great success, end of story… right?

Wrong.
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Those who opposed the gov't bailout of Chrysler and GM were totally wrong. Couldn't have been more wrong.

All that has happened with Chrysler is that they are swapping public debt for private debt. Yes, it is a good sign that they find private interests who are willing to finance some of the company, but the company is a long way from being successful by any measure of capitalism. Making money would be a good place to start.

GM is currently enjoying a financial windfall created by the ability to shed debt and liabilities, but they have yet to show that they have shed their inability to bring to market vehicles that the American people want to buy, have yet to show that the problem with old GM has been fixed.

Nevertheless, opponents of the bailout said that the government would NEVER get that money back, and the market would be forever corrupted by the interference. That was totally wrong.

The Obama administration, and its media backers, have seized upon news that General Motors made a $3.2 billion profit in the first quarter of 2011 as proof positive that its auto bailout is a success. President Obama is so buoyed that he is reportedly planning to make the bailout a major part of his reelection campaign.

But by this standard, Charlie Sheen’s comedy tour ought to be declared a smash hit. Sheen’s backers will lose relatively less money on him than taxpayers will on the bailout.

No sooner had GM made its announcement than Washington Post columnist E.J. Dionne dashed off a stinging rebuke to naysayers (like me) who had dared doubt the wisdom of the bailout. Likewise, the auto czar Ron Bloom credited the turnaround to the president’s “tough love” approach.

No doubt, $3.2 billion is a big number. But an even bigger number is $60 billion. That’s what this administration and the last one together sank into GM (not to mention another $20 billion or so they dumped into Chrysler). When President Obama gave GM this money, he insisted that it was not a handout but an “investment” that would cost taxpayers “not a dime.”

But if there was ever any doubt that this wasn’t going to happen, this earning report dispels it.

For starters, included in the $3.2 billion figure is the net $1.5 billion that the company generated from the one-time sale of Delphi, its auto parts supplier, and Ally Financial, its financial arm. Subtract that, and its performance looks much less impressive, especially compared to its rival Ford that really didn’t receive a dime from taxpayers yet made $2.6 billion last quarter—or nearly a billion more than GM.

But cold, hard cash is not the only help that GM got. Usually when companies declare bankruptcy, their tax liabilities increase since they have no more losses to write off. But GM got Uncle Sam’s special bankruptcy package that allows it write off up to $45 billion of old losses going forward. That puts its total bailout at $105 billion. Even that’s not all. The Treasury gave GM $10 billion of the $60 billion as a loan; the rest was through the purchase of equity. (It has more or less paid back the loan.)

The equity means two things: One, GM has zero interest payments, something that gives it a distinct advantage over competitors. Ford, by contrast, had to pay $251 million in debt-service costs. Despite this, GM’s real per vehicle margin was over $1,000 less than Ford’s, thanks to the heavy incentives it was forced to give buyers. (If the administration can call this success, can it please call me the next American Idol?)

And two, taxpayers have no guaranteed return as they would have with a loan. Therefore, market valuation of GM’s stock will determine what they will recover. They got back $20 billion when the Treasury sold half of its equity when GM floated its first post-bankruptcy IPO in December. But that still leaves a $30 billion shortfall (excluding the $45 billion tax break). To get this back, the federal government would have to sell its remaining 365 million shares—about 26.5 percent of company equity—for about $55 per share. But after GM posted its latest earnings report, its stock price dropped to $31, a few dollars below even its IPO price of $33.

Nor are things going to look up for taxpayers going forward. One reason GM’s first-quarter profits were even as high as they were was that low gas prices boosted the sale of SUVs and trucks, GM’s (as Ford’s) most profitable products. But with gas prices rising, customer demand is expected to shift to smaller, more fuel-efficient cars. GM’s small cars such as Chevy Cruz and Malibu have certainly done well in recent months, but their profit margins are small because GM’s labor costs are still too high.

GM slashed these costs during bankruptcy to $58 per hour, comparable to Toyota’s $56. But the problem, notes Henry Payne, editor of Michigan View, is that Toyota is not the industry cost leader anymore; smaller Asian transplants such as Hyundai and Kia with $40-per-hour labor costs are. To compete with them, GM needs to extract more concessions from its labor unions during contract negotiations this September. But United Auto Workers President Bob King has declared that workers have already sacrificed enough to keep GM solvent and now expect givebacks.

Given such realities, Bloomberg’s survey of 21 auto analysts put the average projected price for GM at $42.85 per share a year from now. This means that, outside of miracle, taxpayers will lose anywhere from $13 to $19 billion on their principal and another $45 billion on taxes for a grand total of $58 to $64 billion in losses. And that’s just for GM. Chrysler is whole different—and equally sordid—story. Even Treasury Secretary Timothy Geithner acknowledged last month: “We’re going to lose money in the auto industry.”

I just wanted to remind you that you were wrong; the bailouts have not been a failure. They have been a success. And those who predicted that they WOULD be a failure, such as yourself, were wrong on all counts. The loss of jobs due to the failure of these companies (during a time when we were already severely hurting due to the recession) would have cost us far more in lost tax revenues than we ended up spending on this bailout.

STERLING HEIGHTS, Mich. — With a few computer keystrokes in an office at its headquarters, Chrysler Group LLC sent $7.6 billion to the U.S. and Canadian governments on Tuesday, paying off most of the bailout money that saved the company from financial disaster just two years ago.

The repayment — expected for weeks — is a huge step in the automaker's unlikely comeback. Chrysler went from a company that almost ran out of cash and survived a 2009 bankruptcy to one that is revamping its aging lineup and last quarter posted its first net profit in five years.

There were a bunch of reasons why me and others were against the bailouts, the cost to the taxpayers was just one, and as it turns out one that we were correct about. Nothing has happened between then and now to change my mind that this was a colossally bad idea.

As you can see, a few manufacturers have even reached and surpassed their numbers from back in February 2007 and 2008.

Hyundai-Kia had a negligible gain compared with 2/07, but a 9 percent gain compared with 2/08 sales figures.
Subaru saw gains of 42 percent compared with 2/07 and 40 percent improvement over 2/08.
Volkswagen Group increased sales by 4 percent over 2/07 and 6 percent over 2/08.
Despite its challenges, Chrysler appears to have held its own. However, Automotive News reports that 58 percent of Chrysler sales this February went to fleets, rather than consumers. These are low-margin sales that are not sustainable.
In contrast, the major manufacturers with hyped February 2010 sales figures are still down significantly compared with February 2007 and 2008 sales:

Chrysler--down 52 percent and 44 percent, respectivelty
Ford--down 32 percent and 28 percent
General Motors--down 54 percent and 47 percent
Honda--down 27 percent and 30 percent
Toyota--down 47 percent and 45 percent
As a whole, the industry is down 38 percent compared with 2/07, and down 34 percent compared with 2/08.