Next Time You Hear "We Saved GM"

[onmyknees]

I've heard the line a thousand Times..."We saved GM" and read it nearly as much on these boards. But at what cost....? You all stick your proverbial fingers in your ears and refused to hear anything other than what you were fed by your dear leader....well like it or not, just like everything else from the Stimulus to ObamaCare, it's a mirage....smoke and mirrors. A goody bag for the politically connected FOB ( Friends of Barry)If you care to know the facts behind the bailout. For people who fancy themselves smarter than their political counterparts, I must say your knowledge of finance and economics are sophomoric which is more than likely why the economy remains flat lined and business are sitting on stockpiles of cash while incomes go down, and unemployment increases.. I suppose for people who somehow found a way to reconcile the continuation of all the Bush terror polices from Guantanamo to The Patriot Act, to the Drone strikes simply because the occupant of the Oval Office was more to your liking, it's not such a hard swallow for you to buy all the bullshit you're being fed. The emotion behind your enthusiasm for "Saving GM" has to be mitigated by the facts....remember facts? And remember, the man who put this bailout together never ran a bussiness, never met a payroll, never sat in a board meeting, never brought a product to market, never paid a dime in corporate income tax, never even had a secratary , but why shoud that matter ? But don't take my, or Peter Schweitzer's word for any of this. Google the CBO report on the auto bailout.


SCHWEIZER: Auto bailouts bleeding more taxpayer cash



Reports that the auto bailouts will cost taxpayers $25 billion more than previously projected have sparked the predictable political squabbles that attend an election year. Liberals claim the cost to taxpayers was worth the price of saving American car companies, while conservatives grouse about what they see as government wasting more taxpayer money.

The reality, however, is uglier than either side realizes. Those behind the wheel of the automobile bailout were not folks who build cars but cronies who successfully leveraged their highly placed connections. Indeed, lift the hood, and what you find is that the auto bailout was a classic tale of cronyism, in which the well-connected sped away with big bucks.
Let’s start with the players involved. General Motors (GM) was by far the biggest recipient of auto bailout funds ($50.2 billion for GM and $17.2 billion for GMAC). When combined with Ally Financial (formerly GMAC), taxpayers are still on the hook for $41.7 billion. Chrysler and Chrysler Financial received a total of $12.4 billion and repaid $9.5 billion, resulting in a net loss of $2.9 billion.
GM continues to hemorrhage market share and controls just 17.7 percent of the auto market, a 90-year low. When GM made a public offering in November 2010, the share price was $33 a share. It’s now trading at around $25 a share. The federal government owns 500 million shares of GM, or about 32 percent of the company. The stock price would need to get to $53 a share to break even. At its current market price, the government is sitting on a $14.5 billion loss.
Despite claims that GM is selling a lot of cars, a lawsuit filed by investors who bought into GM’s initial public offering in June alleges that the books are being cooked. The investors feel hoodwinked because GM was “predicting revenue based on production rather than actual sales.” (What business does that?) The lawsuit references a Bloomberg article that states, “GM may have been unloading excessive inventory on dealers, a practice known as ‘channel stuffing,’ in order to create the false impression that GM was recovering and sales and revenues were rising.” The problem is that although GM is stocking more and more cars in its dealers’ lots, few cars roll out of the showroom. So while GM is being touted as a successful turnaround story, the all-American car company is incentivizing its dealerships to take more product and counting that as sales.
General Motors is selling more vehicles in China, not creating jobs in this country. GM is planning hundreds of new dealerships in China and also expanding production there.
In short, the bailout has merely kicked the GM can down the road and left taxpayers to pick up the tens of billions in bills.
Still, some people made out like bandits on the auto bailout.
In his recent book “Bailout,” the former special inspector general for the Troubled Asset Relief Program, Neil Barofsky, points out that when it came to the bailout of GM, no one with auto-industry background was involved in the decision-making process. “Led by Steven Rattner, the head of a Wall Street private equity firm, and Ron Bloom, a former investment banker and head of collective bargaining for the United Steelworkers Union, the auto team had plenty of Wall Street firepower but did not include in its ranks anyone with experience in the automobile industry.” Likewise, when it debated the question of closing auto dealerships, the task force consulted “a bevy of Wall Street analysts.” Little surprise then that the winners are largely relegated to the world of Big Finance.
The GM bailout was handled by Evercore Partners, an investment firm in New York headed up by former Assistant Treasury Secretary Roger Altman. Before the bankruptcy, GM paid Evercore $46 million in advising fees to help GM find a buyer. Then, when the government came in and bailed out GM, Evercore turned around and asked for an additional $17.9 million “success fee.” Never mind that Evercore never found a purchaser or a funder — the company still called it a “Government Funded Sale Fee” in court documents.
Indeed, Evercore also took over the lucrative position of handling the General Motors Special Hourly-Rate Employees Pension Trust and the General Motors Special Salaried Employees Pension Trust. Those new pension funds were financed courtesy of more than 60 million shares of common stock, diluting the taxpayer stake in the company. The trustee for both of those new pension funds is Evercore Trust Co., a subsidiary of Evercore Partners.
Mr. Altman is also an Obama bundler, bringing in up to $500,000 so far. Evercore Partners CEO Ralph Schlosstein hosted a $38,500 per plate fundraiser at his home, raising a total of $2.1 million for President Obama and the Democratic National Committee.
The other big winners were the lawyers and government bureaucrats who handled the bailout. Mr. Bloom has returned to the investment house of Lazard Freres as vice chairman of U.S. investment banking, where he worked from 1985 to 1990. “I do think that my time in government can help to open that door a little bit,” he told Bloomberg Businessweek. He’s now advising mail carriers as the U.S. Postal Service undergoes restructuring.
When it came to making financial decisions affecting the automotive bailout, insiders and favorites made out well and outsiders were left outside. Nonunion workers saw their pensions go bust. The financiers on the Auto Task Force in Washington shafted 22,000 salaried retirees out of their pensions. Why? Those salaried retirees of the former Delphi Corp. (a longtime GM parts supplier) had a fairly solid pension fund, which was 85 percent funded. What they didn’t have was the political clout of the United Auto Workers. The Treasury Department urged the Pension Benefit Guaranty Corp. to seize the Delphi pension plan. This was not a financial decision — it was a political decision.
The same calculus lies behind other decisions as well, like cutting costs. As Steve Rattner, head of the Auto Task Force, explained in his book “Overhaul: An Insider’s Account of the Obama Administration’s Emergency Rescue of the Auto Industry,” General Motors wanted to move out of its Renaissance Center headquarters and relocate to GM’s Tech Center in suburban Warren, Mich. “The move would cut costs,” he said, “as well as symbolize the leadership’s determination to become more down-to-earth and hands-on. I thought the idea was great, just the kind of action I was hoping to see from [GM Chief Operations Officer Fritz Henderson].” But this common-sense idea was killed by the White House aides (including then-Chief of Staff Rahm Emanuel) Mr. Rattner says, because it would be bad politics and hurt the Detroit real estate market.


Despite all this, the politicians continue to squabble over the wisdom or folly of bailing out the big car companies.
Call it what it was: a boon to well-connected cronies who knew nothing about the automobile industry or its workers but were more than happy to send the invoice to taxpayers for shoddy repairs.

[hippifried]

Still trying to spin success into failure I see.

Yawn...

[Odelay]

You know what's funny about your obsessions is that when it comes to facts relative to Obamacare and the auto bailout, is that you conveniently forget the most important ones. You see, Obamacare and the auto bailout were 100% designed by Republicans. Romney and his friends in Massachusetts dusted off the Republican thinktank (AEI) version of healthcare law which became Romneycare and subsequently Obamacare. The auto bailout was 100% designed by Paulson and Bush. Republicans, all. So if you're still tearing the beard hair out of your face in frustration over these 2 things and you're ready to lock and load on your rifle just prior to going on the hunt for those responsible, you might want to look for the Republican architects of these 2 legislative achievements.

[Odelay]

One more thing.... concerning the Obama administration's predilection with issues that go against civil liberties, such as warrantless electronic spying, killing US citizens abroad designated as terrorists, supporting various patriot act provisions, etc., and other national security policies such as drone strikes and Guantanomo, I am very much concerned with these things. And knowing some of the commenters on this boards such as hippi and trish, my guess is that they're concerned too.

However, you're the last person we're going to listen to about this topic. You have no standing, pal, as you supported your guy through all of the generation of these odious policies not to mention stuff like torture, extradition, the atrocities of Abu Ghraib and other things that even Obama won't touch.

I read people like Greenwald, Stoller and others on this. They speak to these issues far more intelligibly than you. For many of us, this election comes down to selecting the lesser of two evils, as it seems almost all elections come down to.

[Prospero]

He also tinkers with published material to suit his own fallacies.

See the way he clumsily edited the report he posted yesterday in the register to vote thread - on which i caught him out. It is there in plain view.

This mant is a loser, a crook and a liar.

Trust NOTHING he ever posts.

[Stavros]

The emotion behind your enthusiasm for "Saving GM" has to be mitigated by the facts....remember facts? And remember, the man who put this bailout together never ran a bussiness, never met a payroll, never sat in a board meeting, never brought a product to market, never paid a dime in corporate income tax, never even had a secratary , but why shoud that matter ? But don't take my, or Peter Schweitzer's word for any of this. Google the CBO report on the auto bailout.

I wonder how many US Presidents have never run a bussiness (or indeed, a business), never met a payroll, never sat in a board meeting, never brought a product to market, never paid a dime in corporate income tax, never even had a secratary but do have law degrees. If running a business was the criterion you use to run the USA, most of the country's elected offcials would not be in office; no different from the UK, for what that's worth.

But yes, let's google the GM 'bailout' -and come up with an article based on FACTS, that show GM is not about to go bust; it has a strong asset base; that it does have under-performing markets but that the problems it faces can be dealt with and, having received a life-line from the US taxpayer, can be returned to profitability across its businesses. Just because the Obama Presidency offered GM some short term cash doesn't make it the kiss of death. Enjoy:

From:
http://www.forbes.com/sites/joannmul...eneral-motors/


Joann Muller, Forbes Staff
8/16/2012 @ 2:44PM

Leadership, Not Another Bailout, Will Fix GM (And No, It Is Not Going Bankrupt)

The U.S. Treasury Department’s tally of what the government might lose on its $85 billion auto bailout keeps rising as GM’s stock price sinks. Earlier this week, it put the number at $25 billion, about 15 percent higher than its previous forecast.
Somehow, Forbes contributor Louis Woodhill uses this fact as proof that GM is headed for bankruptcy again. His self-described “unconventional logic” escapes me (“uninformed” might be a better word). But the basis of his argument seems to be that he doesn’t like GM’s Chevrolet Malibu as much as the Volkswagen Passat.
Far be it from me to defend General Motors, which is a company still in need of serious work, but let’s not toss around such incendiary words as “bankruptcy” without putting a little effort into understanding the situation, OK? GM is a global company with a strong balance sheet, and not in any danger of going bankrupt again. It has $33 billion in cash and $5 billion in debt on its balance sheet; posted $2.5 billion in net income so far this year, and generated $1.7 billion in automotive free cash flow in the second quarter.
summary slide GM provided to investors during its second quarter earnings call can see this is not a company headed in the right direction. GM sold more cars, but revenue, profits and cash are down across the globe. GM has serious problems, but they are fixable, with strong leadership. Chief Executive Daniel Akerson is trying hard, but so far he hasn’t produced convincing results.
Let’s review the problem areas:

• Europe: GM lost $400 million in the second quarter, $1.6 billion in the past four quarters. European auto sales have shriveled up amid economic uncertainty and the sovereign debt crisis. Like Ford, which recently said it will lose $1 billion this year in Europe, GM needs a massive restructuring to reduce factory capacity and eliminate jobs to meet the new realities there. GM is no doubt kicking itself for hanging on to its Opel unit back in 2009 when it had a chance to sell controlling interest to Canada’s Magna International. Back then, the board feared GM would lose critical engineering expertise in passenger cars, but lately it’s relying more and more on its Korean subsidiary for that. That’s all water under the bridge now, of course, so Akerson has to do what he can to fix it. Frustrated with the pace of change, he recently ousted GM’s European boss. It’s fitting, perhaps, that the man who convinced the board to keep Opel, Vice Chairman Steve Girsky, is now assigned to fix it. GM says a plan is coming this fall.
• North America: GM lost 1.7 points of market share in the second quarter, but that’s largely due to the recovery of Toyota and other Japanese makers from the disasters in 2011. Its market share in 2010 and 2011 was artificially inflated because its competitors were on the ropes. Remember, after bankruptcy, GM got rid of four brands so comparing its pre-bankruptcy share to current share is unfair. Basing an argument for bankruptcy on U.S. market share trends is not logical anyway. Ford Motor has lost market share, too. What matters in both cases is whether the companies can match their production to current demand and generate solid profits while doing it. GM’s EBIT margin in North America for the second quarter was 8.6%. Ford’s was 10.2%. Clearly, it still has some room for improvement.
• Pensions: This has been a noose around GM’s neck for years, but the company is finally taking real steps to address it. In June, GM said it will offer 42,000 white-collar retirees in the U.S. a lump-sum payment in lieu of their monthly pension check and will transfer pension responsibility for 76,000 others to a group annuity plan managed by Prudential Insurance. The company has yet to announce the results of the offer, but this is at least a step in the right direction.
• Global costs: GM has been trying for years to knit together its vast, disjointed engineering operations into an efficient global operation so that it can become more efficient. Akerson named a relative unknown, Mary Barra, as senior vice president of global vehicle development, to tackle that bureaucracy. She believes there’s still at least $1 billion worth of waste that can be squeezed out of GM’s global engineering operations.

But there’s also a lot going right at GM, and that’s worth acknowledging.

• GM is in an enviable position in China, where it has 13.8 percent market share and continues to invest for a market that is expected to sell 30 million cars and trucks a year, twice what the U.S. sells.
• In the U.S., GM and the UAW have a strong relationship where they tackle problems together rather than butting heads as in the past. Today, GM’s labor costs are just about on par with its Japanese competitors in America.
• GM’s vehicles are more competitive than in the past. Cadillac, GMC and Chevrolet quality all ranked above average on the recent J.D. Power Initial Quality Study.

Clearly, Akerson still has a lot of work to do in turning GM around. But I get angry when people use the GM bailout as a political football and ignore the facts.

[Prospero]

Excellent Stavros. Some good solid information.

The Washington Times, from which OMK extracted his article, is owned largely by the Moonies (The Unification Church) and is well known for its very right-of-centre views.

[giovanni_hotel]

+ 100, Stavros.