How Much GM Truly Stole From American Taxpayers

General Motors (NYSE: GM  ) figures its re-entry into the S&P 500 club will be quite soon, even though the company is still in the early stages of its turnaround. There's no denying that the U.S. automotive recovery is going well for Detroit. It's only been a few years since the ugly recession, financial collapse, and ensuing bailouts for two of Detroit's Big Three, the exception being Ford (NYSE: F  ) . And all three companies have gained market share this year in the U.S. at the expense of Japanese rivals Toyota (NYSE: TM  ) and Honda (NYSE: HMC  ) . GM just recorded its 13th consecutive profitable quarter, so the nearly $50 billion that taxpayers like you and I funded to save GM was a huge success. Right?

Wrong.

Most people don't realize how much GM actually took from taxpayers, and how little it's given back. If I told you GM has repaid only $6.7 billion out of the $49.5 billion in loans it was given, would you be surprised? If I told you the expected loss to the U.S. Treasury of roughly $12 billion isn't even a fraction of the real cost, would you believe me? If not, you might be in for a nasty surprise.

Bailout by the numbers
The Treasury plans to exit its entire holdings of GM by next April. By the end of this past March, the government had reclaimed just over $30 billion of its investment, leaving a substantial loss. While the government says it didn't anticipate making a profit from saving the auto industry, the other $419 billion in TARP funds were 94% recovered -- making GM a big loser. At today's GM stock price, the Treasury looks to lose between $11 billion and $12 billion, unless the stock price changes drastically.

Yet that number doesn't tell the whole story.

Consider that the only true loan GM received from the U.S. government was for $6.7 billion at 7% interest, which it has since repaid. The majority of the nearly $50 billion was in stock purchases by the U.S. Treasury at a price that GM didn't lose money when recently rebuying shares.

Also consider that GM was "gifted" tax losses from the "Old GM" corporation in amounts of $45 billion. What that really means is the "New GM" can write off current profits up to that amount and not pay taxes on it. That's a complete joke, in my opinion.

Think of it like this: GM took our tax dollars to save its company, and then after turning 13 quarters of profit, it still isn't paying a single income-tax dollar. Are you kidding me? News flash: My recent taxes cost me and my wallet a bundle, and I didn't turn billions in profit.

Too often, people assume that since GM received nearly $50 billion in taxpayer funding, and when people hear that GM has fully repaid its obligations, we assume that means it repaid the said $50 billion. That couldn't be further from the truth. GM has merely paid its initial pure loan of $6.7 billion with interest, and rebought some of its own shares from the Treasury -- often at a cheaper price. Most of us taxpayers don't even realize Ford paid an effective tax rate of 26% in 2012, compared with 0% for GM -- a complete joke to Ford, which didn't take any of our taxpayer dollars.

Bottom line
You'll see in my disclosure that I own stock in both Ford and GM. But I own stock in both for completely different reasons. I believe Ford has excellent management and is way ahead of GM in operating efficiency and global consolidation of platforms -- helping it create net income off lower revenue. It's also way ahead in creating value and quality in segment trends dominated by fuel efficiency -- not to mention that its F-Series has been the best-selling truck for 36 years.

Meanwhile, I own GM because my taxpayer dollars helped fund its lifeline -- which the company is clearly taking advantage of. If it gains a competitive advantage from wiping billions of debt from its balance sheet and will undoubtedly profit from it, I will as well -- but only as long as I hold shares of GM before its stock price increases from using this advantage.

I'm not advocating that you buy into GM. I'm just recognizing what GM has truly taken from us taxpayers, and explaining the only way you'll personally get any money back from the company. Don't expect a thank-you note from GM anytime soon -- even though every single American taxpayer deserves one.

Should American taxpayers invest In GM?
Few companies lead to such strong feelings as General Motors. But ignoring emotions to make good investing decisions is hard. The Fool's premium GM research service can help, by telling you the truth about GM's growth potential in coming years. (Hint: It's even bigger than you might think. But it's not a sure thing, and we'll help you understand why.) It might help give you the courage to be greedy while others are still fearful, as well as a better understanding of the real risks facing General Motors. Just click here to get started now.


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Comments from our Foolish Readers

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  • Report this Comment On May 19, 2013, at 10:13 AM, AmericanFirst wrote:

    Daniel,

    I agree with you, with the exception of your comment stating GM had paid back $6.7B. At the the time Ed Whitaker (ex GM CEO) made that ridiculous comment, GM had not made enough in protits to make such a payment! Please see the below link.

    http://www.outsidethebeltway.com/gm_bailout_payback_lie/

  • Report this Comment On May 19, 2013, at 10:32 AM, TMFTwoCoins wrote:

    Yes, a fair point for sure.

    The reason I stay away from speculating about how and why GM paid the 6.7 billion is having to acknowledge that Ford also took the 5.9 billion dollar loan for the same government incentive. Bringing that into play also shows that Ford still owes the most of any automaker from that, and some confuse that with bailout money. Especially now, at a time when Tesla is a hot topic, it isn't fair to Ford -- in my opinion. Although that might be a great topic for me to cover as well.

  • Report this Comment On May 19, 2013, at 10:45 AM, AmericanFirst wrote:

    Daniel,

    To clarify my previous comment, GM basically received approx. $100B in bailout funding / tax benefits fom the U.S taxpayers for apprx. $5.5B "out of pocket" (recent GM purchase of their stock from the Treasury). In addition, GM also benefited from $B's in future interest expense on the $30B fleecing of bondholders / creditors per Obamaruptcy. GM has been incredibly advantaged over Ford by our own government! With that said, how can anyone fairly compare the financial/sales performance of GM vs Ford?

  • Report this Comment On May 19, 2013, at 10:53 AM, AmericanFirst wrote:

    TWO COINS,

    I vehmently disagree with you, I can back up my facts with you. I challenge your comments, prove your comment "Ford also took the $5.9 billion dollar loan for the same government incentive. Bringing that into play also shows that Ford still owes the most of any automaker." FORD DID NOT TAKE ANY TARP MONEY!

  • Report this Comment On May 19, 2013, at 11:11 AM, TMFTwoCoins wrote:

    I agree that Ford is at a disadvantage. That was my exact point, that I didn't bring it up because it would confuse that Ford "took" bailout money -- which it didn't.

    To try and clarify what I meant.

    GM supposedly paid back its 6.7 billion with money in escrow from the U.S. govt for the sole purpose to be able to receive grant money for fuel efficient and electric vehicles that Obama wanted to emphasize in Detroit automakers' future.

    Ford did receive this grant, and bringing into "why" GM repaid its 6.7 billion loan, and how it did so, would force the mention of Ford and others who took the grant money for electric/fuel efficient vehicles. Which as I stated, isn't fair to Ford... That's why I didn't bring up your point of why and how GM paid back its 6.7 billion, even though it's a fair point -- it could shine unfair and confused light on Ford's grant that has nothing to do with bailouts.

    http://www.forbes.com/sites/joannmuller/2012/08/29/automaker...

  • Report this Comment On May 19, 2013, at 11:42 AM, wmslave wrote:

    "Don't expect a thank-you note from GM anytime soon -- even though every single American taxpayer deserves one."

    It infuriates me that GM continues to offer huge purchase incentives exclusively to employees as they did before the bailout. The least they could do is offer all of us the same deal. We certainly don't owe well paid employees, who gave up virtually nothing in the bankruptcy, a special subsidy funded by higher prices to the very people who bailed them out.

  • Report this Comment On May 19, 2013, at 12:32 PM, Rafthand wrote:

    Union employees of GM would disagree with those who assert that unions gave up "virtually nothing" in the bankruptcy. The role of government in the whole economic mess of 1908-09 can be debated, but in truth we are better off with a healthy and innovative GM than we would have been otherwise. To believe that GM is important to the economy takes nothing away from Ford, and we don't have to compare the means and methods of Ford's use of government support of the electric car. The USA needs strong American auto companies competing in the global marketplace. As long as there are two, there is no monopoly.

  • Report this Comment On May 19, 2013, at 12:39 PM, danielleaders wrote:

    DEATH to GOVERMENT MOTORS . Keep buying those CHEAP made in MEXICO pick-ups

  • Report this Comment On May 19, 2013, at 1:17 PM, Greerboy78 wrote:

    What alot of you are failing to realize is that Ford may or may not of taken BAILOUT money or TARP funds, But if you go to ANY Government facility or Military post they are covered in FORD vehicle's. Which WAS paid for by our TAX DOLLARS.

  • Report this Comment On May 19, 2013, at 1:42 PM, FZar wrote:

    “The Bahá'í International Community regards the current world confusion and the calamitous condition of human affairs as a natural phase in an organic process leading ultimately and irresistibly to the unification of the human race in a single social order whose boundaries are those of the planet.

    The human race, as a distinct, organic unit, has passed through evolutionary stages analogous to the stages of infancy and childhood in the lives of its individual members, and is now in the culminating period of its turbulent adolescence approaching its long-awaited coming of age. The process of global integration, already a reality in the realms of business, finance, and communications, is beginning to materialize in the political arena.

    Historically, this process has been accelerated by sudden and catastrophic events. It was the devastation of World Wars I and II that gave birth to the League of Nations and the United Nations, respectively. Whether future accomplishments are also to be reached after similarly unimaginable horrors or embraced through an act of consultative will, is the choice before all who inhabit the earth. Failure to take decisive action would be unconscionably irresponsible.”

    (Baha'i International Community, 1995 Oct, Turning Point For All Nations)

  • Report this Comment On May 19, 2013, at 1:59 PM, grampakrapsicher wrote:

    Figures. Wish everyone in debt that couldn't pay their mortgages could have gotten a bailout -same as GM, too. -Instead of the banks that held the mortgages. -Then lots of the people would still have their houses, -And the banks would still have had their business going strong all the while, too

    Those bailouts went the wrong place. They short-circuited the system.

  • Report this Comment On May 19, 2013, at 3:06 PM, AmericanFirst wrote:

    TWOCOINS,

    Your comments below are factually incorrect.

    "The reason I stay away from speculating about how and why GM paid the 6.7 billion is having to acknowledge that Ford also took the 5.9 billion dollar loan for the same government incentive"

    Ford DID NOT take a loan from from the same gov. incentive where GM received $6.7B. Ford's LOAN came from the DOE, the same fund Nissan, Tesla, Fisker and others for green technology development, unlike the $6.7B loan GM received to support daily operations, which was paid back from funds from another escrow bailout account

    http://gaanderson.hubpages.com/hub/Obama-General-Motors-GM-T...

  • Report this Comment On May 19, 2013, at 3:54 PM, Jazzenjohn1 wrote:

    What about the bailout /bankruptcy of GMAC / Ally bank too? Is that being factored in?

  • Report this Comment On May 19, 2013, at 4:59 PM, dwduke wrote:

    I just don't trust GM anymore. GM does not have many great looking vehicles for sale and lost my loyalty after the bailout. GM's arrogance along with the unions arrogance equaled an arrogant combination that couldn't stop the train wreck and wouldn't. GM still has a soft bottom line, and the imports are still favored by the kids now days because there are no American car companies that have the tuner car appeal that the kids want now days. They are the future, not the Baby Boomers. The kids now days will not invest in GM and don't really care for any of GM's offerings. This is not good for GM's bottom line in the future.

  • Report this Comment On May 19, 2013, at 5:32 PM, AmericanFirst wrote:

    jazzenjohn1,

    Good point, no the numbers discussed above DO NOT include the below.

    GMAC/Ally received a total of $17.2 billion from the Treasury's TARP bailout, but has paid some of that back over the last four years. Still owes approx. Still owes approx. $14.6B

    Read more at http://www.leftlanenews.com/ally-to-pay-back-government-loan...

  • Report this Comment On May 19, 2013, at 9:45 PM, luckyagain wrote:

    Using the word "stole" to describe this transaction is wrong. Maybe it was a terrible deal but GM did not "steal" any money. A decision was made by the US Government that GM could not be sent into liquidation which would have caused the bankruptcy of thousands of other automobile suppliers and the lost of millions of jobs. It was decided that having a domestic auto industry was in the national interest. If GM and Chrysler were liquidated, there would be no US national auto industry. All of those thousands of auto part suppliers would have gone bankrupt too. All of the foreign auto companies that manufacture in the US would have no choice but to close their US plants because they could not build cars without those auto parts suppliers.

    When most people thinks of an auto company like GM or Toyota is that they make all or most of the parts in the car. That is far from the the truth. GM or Toyota only make a few of the parts of the car, most are made by second and third auto parts company that almost no has ever heard about. If GM and Chrysler had gone into liquidation, these second and third tier auto parts companies would have gone broke and disappeared. Once the technical expertise has disappeared in the US, it cannot be recreated except at huge cost. Look at how long it has taken other countries to start an automobile industry? Decades. This is a fact of life.

  • Report this Comment On May 19, 2013, at 10:36 PM, Melaschasm wrote:

    GM management and unions both knew the company was heading towards bankruptcy for years and refused to make the changes needed to avoid disaster. They both chose to ignore the problem because of confidence the government would bail them out.

    That confidence was mostly accurate, although the government favored the unions over the stockholders to a greater degree than management expected.

    The management, ownership, and unions at GM stole from the american people.

  • Report this Comment On May 20, 2013, at 12:20 AM, AmericanFirst wrote:

    luckyagain,

    I'm sorry, you don't have the facts to support GM's complete liquidation or the collapse of the U.S. Auto industry if GM had not been "bailed out by the gov. Your points are only speculative or Obama talking points. The "bailout funding, tax benefits, monies received by bondholders/creditors, UAW receiving of approx. 17% of the "new GM" was determined by Obama and his cronies, not bankruptcy court. Also, GM/Chrysler together at the time of the "bailouts" only represented approx. 30% of the automotive industry. Again your points are only speculative, w/o the results of a court ordered bankruptcy hearing to determine options available to GM rather than total liquidation. See the link below

    http://www.heritage.org/research/reports/2012/06/auto-bailou...

  • Report this Comment On May 20, 2013, at 12:23 AM, TMFTwoCoins wrote:

    @luckyagain

    I guess its a matter of opinion. I feel like it was stolen, since it was taken and not truly given back. Definitely could use a different word though.

    @Americanfirst

    I don't know how to spell this out any better for you. Re-read what I wrote. I didn't say Ford took the same loan that GM did for the 6.7 billion. I said I didn't bring up WHY AND HOW GM paid back the 6.7 billion early ( because they wanted the DOE loan that Ford received ) because by bringing that up, it would confuse folks that Ford took bailout money - - which isn't the case. That's why I didn't explain that, because I would have been forced to mention Ford and that would have confused people. I don't know how to explain this any clearer for you.

  • Report this Comment On May 20, 2013, at 12:46 AM, roboto17200 wrote:

    G M got themselves in trouble with their years of poor quality. I got tired of the junk they building. After the bail out I went to Ford cars and trucks. I should have done that years ago. Ford makes great cars and trucks and GM is still building junk but not as bad. Way to go FoMoCo !

  • Report this Comment On May 20, 2013, at 12:59 AM, pfryd wrote:

    Hey Fools,

    You need to add a Google+ link to your pages. There are still some of us who aren't addicted to Facebook or Twitter.

  • Report this Comment On May 20, 2013, at 1:43 AM, traveller94 wrote:

    People act as if GM were the culprit in the fleecing of the taxpayer. Well, GM is just a company made up of people. The real culprit here is Barack Obama and the Democrat regime in Washington. They took taxpayer money and bought union votes, pure and simple. Does Obama care about $50 Billion to the treasury when we have a Federal Deficit of $16 trillion? No. Does he care about the votes he can buy with $50 billion of your money? Yes.

  • Report this Comment On May 20, 2013, at 6:15 AM, luckyagain wrote:

    AmericanFirst - if GM had entered into liquidation, no one knows what would have happened. So the choice was to save GM and Chrysler and all of the other automotive parts companies or risk having them go into bankruptcy. From what I was able to read at the time, it appeared that most or all of the second and third tier auto parts companies would have gone broke. Without these companies, every other auto company could not build cars. That includes Ford, Toyota, Honda, Nissan, etc. The auto industry might have disappeared in the US. Once it was gone, it would not come back for years if ever.

    The auto industry has many thousands of auto parts company. A company like GM only builds a few of the parts in their car like the motor and the transmission. A single missing part brings the whole car assembly process to a halt. Recently I read an article that a single company in Korea produces parts for heating and cooling fans in almost every car in the world. Without that one part, no car can be built. The days when a car manufacturing company built everything in their cars is gone. The number of auto workers at the Big Three has plummeted. It takes less than 10 man hours to assemble a car at the auto plants. This is only possible due to so much of the work being done by the second and third tier auto parts companies. That is the auto industry that exist today.

  • Report this Comment On May 20, 2013, at 7:33 AM, CaptAnhyzer wrote:

    .......and if we didn't bail out GM and Chrysler?

    NEWS FLASH! Several MILLION taxpayers would still be out of work. Several million people would not be paying several billion dollars in taxes.

    What a bitter person this "writer" is........

  • Report this Comment On May 20, 2013, at 7:42 AM, TMFTwoCoins wrote:

    @CaptAnhyzer

    I wouldn't say bitter, I've defended the bailout for the same reason you stated. The only difference is I think GM could have saved itself through a typical bankruptcy, although we'll never know.

  • Report this Comment On May 20, 2013, at 7:55 AM, CluckChicken wrote:

    So why was this article only half done? Why wasn't there even a hint of the estimated loss if GM were to have gone under? How many suppliers would we have lost? How many support businesses would have been lost? How much would it have cost to fully bail out the city of Detroit and probably much of Michigan?

    Why is it that nobody here ever writes that it is always "GM is evil and you should hate them and never buy their stuff because of the bailout."

  • Report this Comment On May 20, 2013, at 8:02 AM, CluckChicken wrote:

    @ AmericanFirst

    Yes Ford didn't take any TARP funds but getting 90% of the DOE funds for alternative research at the same time others were getting bailed out kind of makes it feel like a bailout.

    If you can find a good reason why Ford got that much and Tesla got so little, I would love to hear it.

  • Report this Comment On May 20, 2013, at 8:03 AM, Jazzenjohn1 wrote:

    I don't think GM or Chrysler could have saved themselves through normal bankruptcy because there wasn't anyone who had the money for DIP financing at that time. The government did what any DIP company would do at that time, which was basically to run things as they saw fit. A normal company wouldn't have had any problem dumping everyones pension on the PBGC. The government essentially IS the PBGC and they knew it would have bankrupted the PBGC so why would they do that? I think they should have liquidated Chrysler instead of giving it to Fiat, but from their perspective, why put thousands more people on the unemployment line during the great recession?

  • Report this Comment On May 20, 2013, at 8:05 AM, benjonson wrote:

    This article is absurd. If GM had gone out of business, the US's recessions would have turned into a true depression with triple digit unemployment. Not to mention that fact that companies like GM made the US what it and the world has become with its automobile innovation. The comments from captanhyzer and luckyagain are right on point.

  • Report this Comment On May 20, 2013, at 8:20 AM, TMFTwoCoins wrote:

    @CluckChicken

    The article isn't half done, it just takes one side. Here's the other side I wrote last weekend.

    http://www.fool.com/investing/general/2013/05/04/how-much-gm...

    @Benjonson

    If you want the numbers, see above link as well. I still say that a regular bankruptcy would have saved GM had it been done properly. Credit markets dried up, but maybe GM should have had the foresight Ford did by securing loans before hand "just in case".

  • Report this Comment On May 20, 2013, at 9:22 AM, AmericanFirst wrote:

    TWOCOINS,

    It would help to be factual, with out hiding the truth per your below comment. If so confusing, why did I see your initial comments were in error so easily?

    "That's why I didn't explain that, because I would have been forced to mention Ford and that would have confused people. I don't know how to explain this any clearer for you"

  • Report this Comment On May 20, 2013, at 9:43 AM, AmericanFirst wrote:

    CluckChicken,

    Could it be that Ford had far superior resources and infrastucture to support "green technology" than Tesla?

  • Report this Comment On May 20, 2013, at 3:17 PM, NoFoolHereAlso wrote:

    "How Much GM Truly Stole From American Taxpayers"

    That is irresponsible news reporting.

    To steal something it must be taken without the consent of the owner or their designated executor.

    The government is your elected 'designated executor' of taxpayer money, and the government gave GM the money, it wasn't stolen.

    What a bunch of exaggerating drama queens these news media have turned out to be.

    The name of this news media is aptly named as 'The Motley Fool' because their reporters are fools.

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