Why GM Hasn't Repaid Taxpayers

GM headquarters in Detroit. Photo credit: General Motors Co.

It's a question that readers ask me all the time: When will General Motors (NYSE: GM  ) repay taxpayers?

The answer is that it depends on how you look at it.

Legally speaking, GM has already repaid the $49.5 billion loan it got from the U.S. government to fund its bankruptcy restructuring in 2009. GM gave the U.S. Treasury a mix of cash and stock, as agreed. There's nothing more that GM is required to do under the terms of those loans. It's a done deal.

But here's why some folks continue to complain: The amount that has been returned to the U.S. Treasury so far is much less than that $49.5 billion.

The government has been recovering more every month, as it sells off its holdings of GM stock. But as I'll explain, the government probably doesn't have enough stock left to fully pay off the debt.

The government has been selling off its stock ...
Here's the background: At this time last year, the U.S. Treasury Department held just over 500 million shares of GM's common stock. But last December, GM and the Treasury struck a deal: GM agreed to buy 200 million of those shares outright, for a price that was a bit above what the stock was trading for on the market at that time.

In turn, the Treasury agreed to start selling off the remaining 300 million shares on the open market -- gradually, so as not to disrupt the markets. It said that it would complete its sales by next spring.

The first of those sales happened early this year. Since then, the government has been releasing monthly updates on its progress. Last week, it said that it had sold nearly $2 billion worth of stock in June.

Here's how GM's "repayment" so far breaks down.

... but it's likely to come up short in the end
As I said, Treasury's loans to GM totaled $49.5 billion. Of that, the Treasury has since recovered around $33.4 billion.

A little over $6 billion of that came from the Treasury's stock sales since January, along with dividends and interest received since GM emerged from bankruptcy. The remainder breaks down like this:

  • $6.7 billion in cash, the last of which was paid in April 2010. That was when then-CEO Ed Whitacre declared that GM's debt had been "paid in full," which was not his best move.
  • $13 billion via GM's IPO, back in 2010. The government sold about 45% of its stock holdings at that time.
  • $2.1 billion recovered when GM bought back some preferred stock from the Treasury in late 2010.
  • $5.5 billion when GM bought back those 200 million shares from the Treasury last December, as I mentioned.

The upshot? The Treasury is still a little over $16 billion short – but it has about 160 million shares of GM stock left to sell.

That's not likely to be enough to make things whole.

So where will that leave taxpayers – and GM?
At current prices, those shares are worth a little less than $6 billion. Unless GM's stock goes way up, and soon, Treasury is going to be left with a shortfall after it sells the last of its stock. That shortfall is likely to be in the neighborhood of $10 billion.

Now, it's possible to argue that the U.S. government has received more than $10 billion in value from its decision to save General Motors. That decision kept the U.S. automotive supply chain alive in a time of deep crisis, which probably indirectly saved Ford as (NYSE: F  ) well -- along with thousands and thousands of American jobs. The recession would have been a lot worse had the U.S. auto industry collapsed.

But it's also possible to argue that GM, which is now a solidly profitable global company with more than $20 billion in cash on hand, might be obligated to make up some or all of that $10 billion shortfall -- morally, if not legally.

What do you think? Scroll down to leave a comment and let me know.

China is already the world's largest auto market -- and it's set to grow even bigger in coming years. A recent Motley Fool report, "2 Automakers to Buy for a Surging Chinese Market," names two global giants poised to reap big gains that could drive big rewards for investors. You can read this report right now for free -- just click here for instant access.



Read/Post Comments (73) | Recommend This Article (25)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On July 15, 2013, at 6:51 PM, BillD64 wrote:

    I think there are two reasons why this turned out the way it did. First, the government didn't hold onto it's shares long enough. You make that big of an investment into something and you wait it out until it is successful. Second, too many idiots ran around screaming government motors, and refusing to buy GM products that depressed sales below what they may have been. Since every citizen of the country is an investor in GM it seems smart to do what you can on a personal level to ensure your investment. As it turns out their products are pretty damned good and very competitive with products from other companies.

    Bill

  • Report this Comment On July 15, 2013, at 7:53 PM, AmericanFirst wrote:

    John,

    As you might expect, I disagree with you on several fronts:

    1) GM, at a minimum receive $49.5B cash bailout, many argue more, see the below (attachments). For this funding GM gave stock (paper) to the gov. Thus far, GM's actual "out of pocket" cost ($2.1, $5.5B) = $7.6B. The April 10, $6.7B Ed Whitaker (little smoke & mirrors) payback came from another gov. escrow account, (see attachment). I'd say that's a pretty good deal for GM, ultimately not so good for the taxpayers (est. $10-$12B loss for taxpayers).

    2) Your comments regarding the GM Bailout saving the auto industry, jobs, Ford from going under, etc. is pure speculation on your part. You are assuming GM would be completely dismanteled, which you have no proof to support your comments. There are an equal number in the financial community that would disagree with you. Other options would have been revealed if GM had been allowed to go through the bankruptcy process. The GM Bailout was political wet kiss to the UAW, which Obamrutpcy awarded 17% of the new GM, money that would have gone to the secured bondholders via bankruptcy court.

    3) You didn't mention the $45B in tax benefits that GM was awarded per TARP Bailout participants, which will cost the gov. $B's in tax revenue. I thought the gov. needed more tax revenue from those "greedy corporations."

    4) Can't resist mentioning the fleecing of bondholders of approx. $30B and the $B's in interest expense GM will not be paying as a result.

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

    http://news.investors.com/ibd-editorials/121912-637759-gm-ba...

  • Report this Comment On July 16, 2013, at 1:27 PM, TMFMarlowe wrote:

    @AmericanFirst: And yet GM's stock is up about 25% so far this year anyway. It's almost as if nobody cares.

    John Rosevear

  • Report this Comment On July 16, 2013, at 2:10 PM, SkepikI wrote:

    ^ John- I thank you profusely for this masterful article. This is the FIRST time I've read such a succinct, fact-packed and fairly complete review of events. I predict dedicated readers of this and thoughtful consumers of the information will greatly benefit from your observations.

    I predict you will be roundly thrashed undeservedly by those who could benefit most, but choose to sharpen their axes for GM, Ford, or whoever they think the worst of.

    I also predict the comments that this will generate, such as AmericanFirst will be equally illuminating if readers can wade through the preconceived notions disguising real facts to get at the nuggets of truth. For instance, many forget that the combination of US Govt, GM, UAW ensured US Bankruptcy law was "massaged" or detoured to make bonds worthless and UAW, GM employees "saved". I won't clutter that observation with loaded words like "fleeced, or screwed" though I understand where they come from. Speaking as one of the "fleeced" naturally.

    @AmericanFirst - While you cite some significant actual data points they are not as clear as they might be. One of the fuzzy ones I happen to agree with but there is no way to prove it. Its not actual data that the supplier chain was "saved" by the GM bailout. NOR is it obvious that the supplier chain and Ford would have been toast if GM had been allowed to follow established bankruptcy law. Nobody will ever know what would have happened because it wasn't allowed to happen. Thus speculators on either end of the speculation can say whatever they want without being (snicker) "wrong".

    I am one who holds grudges accumulated with reason a long time. I therefore believe GM will be dealing with grudges for a very long time. Unless they bite the bullet and make a very strong run at making US taxpayers whole AT LEAST ON THE STOCK transactions. The rest of US Taxpayer largesse while maybe solid is just too hard to dispassionately account for. The stock loss and loan is pretty easy and pretty clear.

    If there were any justice in the world, the execs, employees and UAW would all make big contributions as well. Ah, well...TANJ

    So I for one expect the big beneficiaries of this whole mess and its unsatisfactory "accounting" for the Taxpayers to be Ford and its shareholders. Which is why I am Long F.

  • Report this Comment On July 16, 2013, at 5:20 PM, jimmue1 wrote:

    If you run the math, we (the taxpayers) forked over $35,000 or so per job to save GM. Logically, it was a good investment but I cant help but wonder who is going to pay me $35,000 to "save" my job.

    If you are dumb enough or unlucky enough to work for a smaller company, you get to foot the bill for someone else to keep their job AND have to find a way to preserve your own.

    GM should pay back the $10B just to avoid this inequality of big business subsidies vs. small business nothingness.

  • Report this Comment On July 16, 2013, at 5:27 PM, AmericanFirst wrote:

    John,

    Per THE STREET, Ytd. Ford up 33%, GM 27%. So what's your point?

  • Report this Comment On July 16, 2013, at 5:32 PM, wfinger111 wrote:

    I live in SW Florida. The governments here are subsidizing the Hertz Corp's headquarters move here with $68,000,000. in credits and abatements for the transfer of 700 jobs (that are presently in NJ) That's $97,124. each for a fully solvent enterprise. No new jobs for America, just a shift in where they are. Happens every day. Makes the $35,000. seem like a bargain.

  • Report this Comment On July 16, 2013, at 5:36 PM, FoolKMP wrote:

    O Fools, corporations are NOT people. They are pieces of paper usually filed in a drawer somewhere in the state of Delaware. Which means they have NO morals to speak of, and never will. They exist solely to make their shareholders money, and if they don't, will soon go bankrupt. Besides, the actual people at the top of the food chain don't give a **** about their line workers, never have, never will. They are too busy lining their pockets with gold.

  • Report this Comment On July 16, 2013, at 5:37 PM, TOM48 wrote:

    As a GM retiree & having been screwed dozens of times over a 30 year career & 10 year retirement, GM will never pay a dime extra. When they went bankrupt, we lost medical coverage, dental & vision. Pensions were reduced & eventually eliminated. They owe their former employees much more than $10 billion & we do not expect to see a dime. No I was not a UAW member, I worked in the financial arm of GM. If it had been up to me those bloodsuckers at GM would have had to figure it out themselves or go out of business. Most of management now is just the same old guys, playing the good old boy network. I saw thousands of dollars wasted on a daily basis & I am sure it still goes on. If you said anything about how GM could save money, you were ignored at best, rebuked at worse.

  • Report this Comment On July 16, 2013, at 5:59 PM, Johnnyrz wrote:

    Legally speaking fully repaid, BUT shortfall will likely be $10 billion????????

    Sounds like a flim flam. What was that stock value/share included in the payback calculation?

  • Report this Comment On July 16, 2013, at 6:02 PM, igorzak wrote:

    GM is not obligated to anything that was not in the agreements with the government.......and they will not pay out anything that they do not have to pay out.

    I think the bigger problem long term is that bond holders that got burned, or fleeced, as 'AmericaFirst' eloquently noted above, will never buy a GM product again. That resentment will last for generations. I used to buy GM products, but never will again. When I buy cars for my kids or grandkids, those vehicles will not come from GM factories, or anyone they associate with or partner. Period! I am always surprised this fact does not get more press. Then again, we were judged not to be that important.

  • Report this Comment On July 16, 2013, at 6:02 PM, fredbee wrote:

    John:

    I agree with others that it was a concise article. Have you seen similar data for the other funders, Canada & Ontario?

    Is each getting paid off equally?

    thanks

  • Report this Comment On July 16, 2013, at 6:07 PM, tjBoston wrote:

    If GM HAD gone bankrupt, they would have gotten out of the benefits business and back into the auto business, and would be far better off today. Ford would have BENEFITTED sharply from the reorganization as well. In ANY bailout, We The People are the losers; Big Brother the power-hungry winner.

  • Report this Comment On July 16, 2013, at 6:13 PM, SkepikI wrote:

    Holy smokes John, there is FIRE coming out of the commentary on this blog...... I will be fascinated to see what else pops out of this... well, grudge fest. And to you GM investors, this may be anecdotal, but I recommend you pay attention to the commentary like igorzak.

  • Report this Comment On July 16, 2013, at 6:13 PM, luchando wrote:

    The government should not be in the business of bailing out companies. You forgot to mention all those bondholders that lost their investment and it looks like the taxpayers are still the biggest loosers.

  • Report this Comment On July 16, 2013, at 6:14 PM, duckdave wrote:

    It seems to me the real losers in this mess is the original stockholders (GM stockholders over years and years before they went bankrupt) who got zip when GM went belly up. GM got bailed out, but they didn't.

  • Report this Comment On July 16, 2013, at 6:21 PM, desperry wrote:

    All that is needed to fairly balance the books is for GM to agree to purchase the remaining 160 million shares from the government for $1000 per share.

    Simple solution, right?

  • Report this Comment On July 16, 2013, at 6:25 PM, Wills61 wrote:

    I am glad for GM and America....but I have much more respect and trust in Ford.

    Would never buy GM Stock or Car...

    Not into Fannie Mae or Freddie Mac either!

    I think it's a non-socialist ideology that governs me.

    Let the markets take care of themselves!

  • Report this Comment On July 16, 2013, at 6:28 PM, toddsw wrote:

    I'm sure the agreements were sufficiently beneficial to GM and the UAW, hence their rapid acceptance by the government, and GM. Whay i want to know is how did the bondholders get screwed and not be able to get their money that THEY had a valid contract for as well?

    Bonus point if you can justify gifting a chunck of the company to the UAW (Also the chrysler fiasco).

    Fact: If a viable business concern goes bankrupt due to poor management, higher than sustainable costs, etc... it will get aquired and relaunched as a profitable venture. it is insulting to think if GM went belly up, that some group wouldn't have purchased and relaunched w/in a year. To say otherwise is folly as there is no suitable alternative to cars currently, or in the not so near future.

    All of this was SOLELY to benefit the UAW and unions in general (as well as select crony capatilists). Don't say it wasn't otherwise. An Obama reelection required this solution, vs. a hostess type solution (aka jettison all union obligations). What steams me is I have to foot the bill for this nonsense, and reap zero benefit.

  • Report this Comment On July 16, 2013, at 6:33 PM, Wills61 wrote:

    In addition I would like to say how much heart I have for the GM folks who put in the years and got robbed by GM. Especially(because there was a bailout) they should have been included in the equation.

    People should be on the doorsteps of the CEO at 1600 PA Ave. protesting the greedy not burning down LA!

  • Report this Comment On July 16, 2013, at 6:34 PM, wwc76c wrote:

    Would somebody please explain the tax benefits received by the new GM. I'm also interested in learning more about the deals struck with GM Canada.

  • Report this Comment On July 16, 2013, at 6:47 PM, eharbridge wrote:

    I owned GM bonds and can twill you, lost my $ while the lovely union members seemed to fare well. Never did like unins, protect the incompetent and lazy.

  • Report this Comment On July 16, 2013, at 7:03 PM, Menogynjim wrote:

    Since GM will never pay their employees for the loss of pensions and medical benefits, I believe it would only be fair for GM to eventually payoff whatever balance is left after the last batch of stock is sold.

  • Report this Comment On July 16, 2013, at 7:04 PM, DACircles wrote:

    As a taxpayer I would rather they had gone bankrupt. I feel no obligation to take care of the autoworkers. Obama bought their votes, plain and simple a d we are paying for it.

  • Report this Comment On July 16, 2013, at 7:05 PM, Michaeljperry wrote:

    In the first place, the terms should have been that the debt will be repaid regardless of what happens. The banks also came out smelling like a rose after their bail out. None of this is surprising, considering the financial immorality of our country's leaders from the top to the bottom! And we trust them with our taxes? We have a good opportunity to do some serious house cleaning in the 2014 election!

    Mike

  • Report this Comment On July 16, 2013, at 7:06 PM, hrkimmel wrote:

    I think that GM should be willing and happy to repay the loan that the taxpayers gave them. That would be the American thing to do, or does GM believe it does not need to uphold American principles? If GM is unwilling to repay, in FULL, the loan, then the taxpayers will probably not bail the corporation out again in the future.

  • Report this Comment On July 16, 2013, at 7:10 PM, monkeyfoo wrote:

    GM should have never been bailed out in the first place. In business we let the strong survive, the others fall by the wayside.

    GM should pay back every red cent of the bailout. if this is not done, other companies will be first in line at the first sign of trouble.

    I am myself a CEO of a medium sized company , and I can tell you that any company can behave like a spoiled child if they think they are leaving some candy on the table.

    Think I am not a GM fan? Really? I drive a 2013 3/4 ton GMC sierra with a duramax/allison combination. A very fine machine. But if it had not been available due to the lack of a bailout?? I'm sure I would have found something to drive.

    Let's not ruin the finest capitalist system in the world by providing corporate welfare. I believe such government behaviour only encourages an anti-business and entitlement attitude among the general population, and who can blame them? They feel the system is rigged!

  • Report this Comment On July 16, 2013, at 7:21 PM, EatMorChikn wrote:

    Well if you want to retrace the demise of GM? You have to go back to the fact when they were they were #1! If you follow their timeline they simply made the decision that they would finance it and you would buy it! (GMAC was the most profitable part of GM. Do you see a correlation with the same thinking as the Big Banks who got bailed out?) But people were not happy with the end product which proved to be unreliable and Toyota soon took #1. Now the promises you make and keep when you are #1 aren't the same as when you are number 2 or lower! The whole thing was the result of misguided management and honest to goodness Capitalism where competition and the win goes to best managed companies! (So why did they get bailed out???)

  • Report this Comment On July 16, 2013, at 7:21 PM, 200flyer wrote:

    Do you notice how the Chrysler bail out is not mentioned. Chrysler took loans from the Canadian and the US government at a rate of interest that was criminal considering where the prime rate was at the time. Reorganized under the direction of Marchionne and paid off the loans early and in full. Not the sweet deal that GM got but kept many people employed and paid off the debt that was borrowed to reorganize under the bankruptcy laws.

  • Report this Comment On July 16, 2013, at 7:24 PM, LouDes wrote:

    I'm not an authority on any of this but if GM had not been rescued, think of the number of workers that would have been laid off: GM's, auto supplier's (metals, plastics,etc), truck drivers that haul cars, raw materials, and assembled products. Restaurant and supermarket workers, etc that these assorted workers patronize and more in a true trickle down affect. How much would these tens of thousands of people be collecting in state and federal unemployment compensation, food stamps and other aid? And for how long? How many billions would that cost? And the state and federal governments would have to do that without the large payroll taxes that good manufacturing jobs create.There is also a good chance the auto workers would never be called back to these good paying jobs because many people have said they would never buy a car from a company that is immersed in a questionable bankruptcy. I think the government did better by saving these blue collar jobs than the white collar financial ones that gave themselves millions of dollars in bonus afterwards, even if they did pay back the money. Again, just my opinion.

  • Report this Comment On July 16, 2013, at 7:32 PM, Impulsvlou wrote:

    John

    I read with great interest your comments on how GM has repaid "we taxpayers" Its a wonderful piece of recent folklore...The auto industry "saved" by the government...Yay...of course it was on the backs of the taxpayers but how about those of us who were shareholders in the "old GM" whose shares were declared worthless as part of the "Deal"...When do we get our payback from the Government???

    How much of our wealth was plundered by the US Government ? What was the dollar value of those shares which a great many of us lost to the cause? Somehow I don't feel like this rescue exercise was a success, some of us gave disproportionately more than most.

  • Report this Comment On July 16, 2013, at 7:40 PM, TMFMarlowe wrote:

    Re the suppliers being saved or not: Alan Mulally felt it necessary to testify before Congress in favor of the bailout in order to protect key Ford suppliers, who were in very serious danger in early 2009 (as I wrote at the time). I know that because he told me so, but he's surely on the record saying that elsewhere. Would supplier failures have crippled Ford if GM went bust? I can't say for sure, but he was very worried about it at the time, and that's good enough for me.

    @Skepikl: Thank you for the kind words. Smart feedback (good, bad, or otherwise) is always appreciated.

    @AmericaFirst: I don't understand the point of your GM vs F comparisons, but this article may be of interest. Note the date and the byline, and the fact that F stock had taken a big hit earlier that week. If you want I can dig up others going all the way back to January of 2009.

    http://www.fool.com/investing/general/2013/01/30/why-ford-is...

    I am pleased to own both F and GM stock and believe that both still have considerable room to run as long as the US economy stays on the upswing.

    To all, thanks for reading.

    John Rosevear

  • Report this Comment On July 16, 2013, at 7:42 PM, TMFMarlowe wrote:

    @Impulsvlou: As an investor who has bought and sold auto stocks for over 20 years now, I'd ask you this in response: Why did you hold the stock all the way to zero, when it was obvious for months beforehand that GM was headed for a grim reckoning?

    John Rosevear

  • Report this Comment On July 16, 2013, at 8:25 PM, EatMorChikn wrote:

    Now wait! You can't write an article about GM without going back and retracing Delphi! (I know you have limited space) But, I didn't invest in GM or Ford because I wanted to invest in the two largest parts suppliers in the World #1 Delphi (GM) #2 Visteon (Ford) how could you go wrong?? Well GM spun off Delphi well in advance of their Melt Down. Delphi was saddled with the contracts and benefits of their GM Union employees! So, slowly but surely Delphi moved their operations abroad then filed BK on the North American Assets! My stock went to Zero!!!!!!! (I simply didn't think it would disappear - Not #1).

  • Report this Comment On July 16, 2013, at 8:44 PM, tbarbar90 wrote:

    I know I had a very crappy car made by GM. I chose to never support them again when they would not fix a KNOWN problem. As far as I was concerned, they could go bankrupt and should as a free market dictates that companies that provide inferior products will go out of business. That was supposed to be the American way.

    Then the US gov't steps in to decide they are going to save an inferior company. I find that Highly insulting and against they very principles of this country. Same goes for screwing the bond holders.

  • Report this Comment On July 16, 2013, at 9:02 PM, anitalouise777 wrote:

    Nobody has mentioned the deal the UAW got. Also, wouldn't it have been better for GM to go into a regular Bankruptcy procedure? The taxpayers have been bilked and so have the bondholders, stockholders and ees ,

  • Report this Comment On July 16, 2013, at 9:40 PM, LAVol wrote:

    Wait a minute. Didn't the Obama administration clearly state, as they began unwinding the GM stock position, that the government would actually make money on the GM bailout?

    Geithner said the auto bailouts were "investments," which "will show a positive return, not a negative return."

  • Report this Comment On July 16, 2013, at 10:04 PM, jandjsfather wrote:

    Let us not forget how GM bellied up and left its shareholders who invested in this "safe" stock stranded by GM's executives and left with worthless GM shares. Many of the same top executives are still in place and it's still the same old company with the same old products. If GM can turn a profit then it should be returned to those sacrificial shareholders and retired employees who lost their savings and pensions. You won't see me owning any of their fleet!

  • Report this Comment On July 16, 2013, at 10:16 PM, cdrhi wrote:

    A deals a deal. If the govt agreed to accept the package including the stock to meet the debt owed than it is our fault it is not the total up to the actual amount owed. We might have had a higher GM price and made a profit. We wouldn't give that back to GM. So move on to other stuff, we got it back. AIG you suck...

  • Report this Comment On July 16, 2013, at 10:27 PM, oxboro wrote:

    Now you know obumma economics model. As long as we spend and borrow we never have to pay back the full amount.

  • Report this Comment On July 16, 2013, at 10:30 PM, TMillerFin wrote:

    If GM would have been allowed to go bankrupt, another auto company would have bought their assets and many jobs would have been saved. Some jobs still lost, maybe not full pensions for retirees, maybe a loss on the stocks and bonds , but it wouldnt have gone to zero and taxpayers would not have had to foot the bill.

  • Report this Comment On July 16, 2013, at 10:32 PM, immysimon wrote:

    Repay Debt is Debt

  • Report this Comment On July 16, 2013, at 10:37 PM, fmandy wrote:

    Count me as another person who will NEVER buy another car from GM again. I had previously bought several Pontiacs in my younger days and two Chevys. Thanks to Obama, the UAW got billions and the taxpayers got hosed. I now drive cars made in the American south by nonunion members. Currently drive a Nissan and it rides great and has been mechanically sound. I am subtly teaching my daughter the same lesson so my family will be generations supporting only nonunion automakers!

  • Report this Comment On July 16, 2013, at 10:38 PM, szcz wrote:

    If Republicans had done this, the leftists at The Fool would be outraged. Obama took care of the Auto Workers Labor Union. Working people like me paid for this.

  • Report this Comment On July 16, 2013, at 10:46 PM, borneofan wrote:

    Put me in the grudge department. I look forward to dumping my bank of america credit card soon, and I hope never to buy a GM car, except as a well used beater. Given a choice, I will avoid those too big to fail entities.

    The GM bailout was classic politics. POTUS broke bankruptcy law, subverted bondholders to support the unions, and was rewarded with a second election. I hope that this was the last major election swung by such transparent corruption and thuggery.

    Since law and contracts are only conditionally valid until revoked by public opinion or political power, why not change the terms? That's how the game is played in the USSA.

  • Report this Comment On July 16, 2013, at 11:44 PM, James7Cunningham wrote:

    John,

    Correct me if I am mistaken, but did not Chrysler take out Government loans from more than just our government at obscene interest rates and repay them in full. Hurrah for Lee Iacocca I would appreciate knowing what he thinks about all of this?

    Jim

  • Report this Comment On July 17, 2013, at 12:33 AM, Teako3 wrote:

    Hardly a rationale comment by anyone. Can't say that the readership is very well informed, but sure do like to rant..

  • Report this Comment On July 17, 2013, at 12:57 AM, ssx1 wrote:

    GM seems to be doing fairly well recently which I appreciate, living in Detroit. That said, I will never drive a GM car after the bailout fiasco and the billion dollar gift to the UAW, which in large part caused much of the company's problems to begin with.

    As much as I dislike the UAW, I drive a Ford. I can't completely turn my back on the companies which call my city home. Besides, compared to my girlfriend's GM vehicle my Ford is a much higher quality product. I absolutely love my Ford and plan on buying more in the future for as long as they keep putting out quality cars. Imagine, the one America auto company that didn't sell its soul to the devil, err government, is the one that, in my opinion, makes the best cars and has had the best turn around.

  • Report this Comment On July 17, 2013, at 1:46 AM, ahochau wrote:

    Didn't the $6.7B in cash come from GMAC becoming Ally Bank and thus being eligible for the bailout money?

  • Report this Comment On July 17, 2013, at 5:51 AM, hansendozen wrote:

    I confess, I work for GM. One can argue either side as to whether or not the government should have become involved at all. I guess my question is, if GM stock had advanced more quickly, and the government/taxpayer was money ahead on the deal, would you think the taxpayer should "make GM whole" buy refunding the difference. The deal they negotiated is what both sides have to live with.

  • Report this Comment On July 17, 2013, at 8:44 AM, 1ted2beth wrote:

    I disagreed with the bailout because the investors were ripped off by the government. However, I would hope the discussion here would be is it time to buy GM. I bought GM warrants back in March for around $13 and they are now around $18. As the government sells off their shares they have market that has to buy them. I am hoping they go to $30+.

    I have always loved GM products. I have not bought one since 2007. Will I again? Probably. My friend owns the local Chevy dealer. I will probably live with a bad taste in my mouth for a little while. Fact is they have a nice product if you can get past the politics.

    Most Americans won't even notice so that is why I continue to buy GM stock because I think it will go up in value.

  • Report this Comment On July 17, 2013, at 9:02 AM, Jamesband wrote:

    GM cannot compete with the fit and finish of any competitor. The cars are designed to self-destruct in 5 to 6 years now. I was helping a friend out with their 2011 Chevy Malibu. I opened the hood to see a giant heat shield over the engine. Under it was two wiring harnesses, the casings disintegrated in my hands. This kind of engineering and manufacturing should not have been saved under any circumstances, I'm sorry.

  • Report this Comment On July 17, 2013, at 10:06 AM, TMFMarlowe wrote:

    @EatMorChikn: Delphi (like GMAC/Ally) is a whole 'nother can of worms. I've written about it a bit in the past, but not recently. Maybe I'll revisit it one of these days.

    @James7Cunningham: I don't remember the rates being obscene, but yes. Of course, that was a long time ago, and what happened to Chrysler in 2009 is a whole different story. (For what it's worth, Chrysler has paid back its 2009 Treasury loan -- they actually floated a bond issue in order to do it early.)

    @fredbee: I don't have current numbers for Canada and Ontario at hand. I'll look into it and do an article if warranted, maybe next week.

    @Jamesband: I've been looking at new Cadillacs recently and I disagree. The ATS is very close to Audi and BMW standards. The interior might even be a little nicer. Things have improved dramatically just in the last few years.

    Thanks to all for reading.

    John Rosevear

  • Report this Comment On July 17, 2013, at 10:11 AM, kyleaspop wrote:

    When I take out a loan, I'm expected to pay it all back including interest!

  • Report this Comment On July 17, 2013, at 10:58 AM, richmacmf wrote:

    Travesty really. Stealing the company from shareholdes and bondholders in favor of union, then slowly paying back principal and falling short. I will never purchase a GM product and will tell everyone I know for as long as I live not to buy GM products. Socialism theft.

  • Report this Comment On July 17, 2013, at 11:15 AM, garcar88 wrote:

    The part of the issue not discussed in your article is the political smuggery that our politicians think we are so stupid that we can't see the truth. GM was "given" to the unions to buy their support. The people that work for GM are now slaves to the Unions, which despite what they espouse, they are still using pension money to enrich themselves.

  • Report this Comment On July 17, 2013, at 11:29 AM, lanehome wrote:

    Many good comments above.

    .....But what of the interest owed to the taxpayer, and more importantly, what about the

    presedent this has set?

  • Report this Comment On July 17, 2013, at 11:39 AM, motleyflyer wrote:

    Since more sales and manufacturing of GM cars is now done overseas, they should be made to repay all of the debt. They have shifted a great deal of their operations overseas since the bailout, so that sure did not help American jobs, but the cozy deal with the government has largely gone unnoticed, so what can we expect.

  • Report this Comment On July 17, 2013, at 12:11 PM, DanMona wrote:

    Stop blaming GM. Yes, they're greedy. Yes, they don't care about their employees. Yes, they don't care about the taxpayers. But, their business is making money (and a few cars on the side).

    You want someone to blame, ask yourself "Who was the moron that said 'Here, take $49.5 billion and just pay us back with (near) worthless paper'? How does that encourage GM to (1) pay back the loan and (2) improve their product/management/industry so the paper they're paying it back is worth something to the shareholders and the taxpayers.

    You lend a person a chicken, you agree to get back a chicken and maybe a few eggs, not magic beans.

    When you bail someone out, you should stipulate that they have to fix things, not just proceed with business as usual.

  • Report this Comment On July 17, 2013, at 12:14 PM, EdSanto913 wrote:

    What was the value of the special tax breaks GM received?

    Have taxpayers been repaid for that part of the bailout?

  • Report this Comment On July 17, 2013, at 1:35 PM, Philwevans wrote:

    The government should NOT have bailed out GM.

    I just brought a new Ford product last month because they did the right thing in not taking any fed funds. There are many folks that I know who feel this same way. I will never buy another "Govn't Motors" or Chrysler product because they ran to DC to get $$ when they got in trouble instead of working out their problems themselves !

    Expecting someone else to " bail you out today" is what is wrong with the USA today. Ie, food stamps, unemployment pay for doing nothing, gov't welfare, etc !

    There are plenty of jobs listed in every newspaper in the USA. People have just gotten lazy and don't want to work anymore.

  • Report this Comment On July 17, 2013, at 3:40 PM, DPM1945 wrote:

    BLAH, BLAH, BLAH....they borrowed $49.5 billion GM should pay back every penny including interest.

    If they don't and then not claim the shortfall as income the IRS should go after them.

    It's real simple. Pay your debts in full.

  • Report this Comment On July 17, 2013, at 3:57 PM, androidct wrote:

    you owe you pay or you get your legs broken and pay your choice

  • Report this Comment On July 17, 2013, at 4:07 PM, SkepikI wrote:

    John: This has generated even more commentary and better (non-data) anecdotal information on "GM Grudge" than I predicted.

    As such, it ought to be if not a warning, at least a caution to those who are GM investors, shareholders or GM employees. Grudges die hard and take a long time to do so.

    More to the point, no matter where your opinion falls, pretending this caution is not real, boarders on the pollyanaish. For everybody's sake, I hope there is NEVER another round of GM disaster (unlike Chrysler), but if it happens, there should be no illusions on the part of employees, bondholders, shareholders. If you think you will get better treatment than the last bunch got, I will have no sympathy for you.

  • Report this Comment On July 17, 2013, at 4:48 PM, jepense wrote:

    Look at it from this perspective: What if the government had borrowed $49.5 billion from GM. How much of that do you suppose GM would want repaid?

  • Report this Comment On July 18, 2013, at 5:08 PM, etexan wrote:

    The GM bailout was (is?) a disgrace to American business and government. Since the unions have such a tight grip on the industry, their leadership were essentially the ones calling the shots - and union leaders do NOT have their members nor US taxpayers at heart when making decisions. They make deals for themselves. (period)

    I will not buy a GM product because of both the administration's shady dealmaking, which essentially was to mislead the American public AND the fact that the unions have too much control. Plus, GM's products are not as good as they make them out to be. The Japanese and Germans make far superior products and frankly, the Koreans are not far behind. I considered Ford when I bought my last car, but Toyota (one made in Indiana) was the better choice.

  • Report this Comment On July 19, 2013, at 1:47 PM, colleenvo wrote:

    I think if there is some comparison to what could have been lost (jobs, taxes, state and local government revenues, longer recession, permanent loss of some jobs, permanent damage to the industry) 10 B might be a bargain. However, as in most of these situations, perhaps a split 50/50 could close the door on this. Now on to saving Detroit. (ugh!)

  • Report this Comment On July 21, 2013, at 12:11 PM, EatMorChikn wrote:

    John,

    I have one question for you regarding GMAC/Ally and GM. When a company and especially a mfg. company's most profitable division becomes its finance div. like GMAC did at GM?? Does that mean the magin on their actual product is limited or even at a break even point or a loss?? (If production costs equal or even exceed selling cost and they only can rely on finance?? If and when the market changes like it did when Toyota took #1?? They are and were toast!!! (You can't lose money on both the production and other related expenses and make a profit on loans if there is no growth!)

  • Report this Comment On July 21, 2013, at 12:17 PM, EatMorChikn wrote:

    I have one other question - Is it true that part of the reason GM showed record earnings in some of the periods since the bailout due to the Governments Purchase of GM products??

  • Report this Comment On July 21, 2013, at 6:20 PM, jaybird43 wrote:

    I agree with DPM1945. Pay your debts or expect the IRS to come knocking. After all, GM has a lot more money than the Tea Party. A morally bankrupt company dealing with a morally bankrupt government. Save Detroit!

  • Report this Comment On July 22, 2013, at 12:31 PM, TMFMarlowe wrote:

    @EatMorChickn: To your first question, I don't think that necessarily follows, but it's obviously not a sustainable situation.

    To your second question, no -- GM's fleet sales (which includes government sales) have actually been somewhat lower in recent times than they were last decade. More than anything else, their profits have been up because their fixed costs are down -- the new two-tier UAW pay structure plus all of the surplus factories and other obligations they were able to unload in bankruptcy are the key reasons why, though organizational changes made since bankruptcy by the current management have also helped quite a bit.

    Also, the vehicles are improving, and the newer ones need fewer discounts to sell. They're still a few years behind Ford, but it's really a similar story, at least in North America.

    John Rosevear

  • Report this Comment On July 22, 2013, at 12:32 PM, TMFMarlowe wrote:

    @androidct: I'm sure this massive multinational corporation will be terrified by your threats of violence. Classy.

    John Rosevear

  • Report this Comment On July 22, 2013, at 8:06 PM, SkepikI wrote:

    ^ John: Very amusing sarcasm ;-) However, the more revealing part of the commentary including the threat remarks is the level of passion and "grudge generating" thought this represents. This is not hard evidence and analysis type stuff but worth noting. I cant think of a single example in the past 10 years that approached this level of mistrust.

    AND congrats on an article that generated all this and lots of recommendations. No matter they agreed with you or not, you had LOTS of readers.. keep it up, very valuable content

Add your comment.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2538735, ~/Articles/ArticleHandler.aspx, 10/25/2014 4:39:47 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement