I just saw a commerical with the head of GM bragging about paying off their debt early. Explain why this is not proof that it was a good decision to bail them out.
Democracy means the opportunity to be everyone's slave.—Karl Kraus.
why don't you start?
How is their income statement/cash flow looking this year? What is their bond rating/credit risk spread?
I don't think GM has paid off their debt. Only Chrysler.
Irregardless, if I am a businessman and I make a good investment, does it really matter where the money came from when it comes to whether or not it was a successful investment? The problem with GM is not that it received government money, but the fact that it still has the same problems which caused GM to become a failed company after the recession. Namely, high wages due to union coercion, which make its fiscal situation very difficult. So, the question is if GM will continue to be a viable automobile manufacturer down the road. Also, we have to consider where that money given to GM would have gone otherwise.
Mtn Dew: I just saw a commerical with the head of GM bragging about paying off their debt early. Explain why this is not proof that it was a good decision to bail them out.
What he didn't tell you is that most of their debt has already been liquidated by unprecedented and irregular bankruptcy procedures, where most of the creditors got screwed.
The government, in order to avoid bankruptcy, basically bought most of the shares at overpriced values, then proceeded to bankruptcy court itself to get rid of its remaining debt. A few subsidized government loans could now be paid by further subsidizing the consumer (cash for clunkers, tax rebates, etc...)
There is also this from Sheldon:
http://www.thefreemanonline.org/anything-peaceful/gm-repays-government-in-a-manner-of-speaking/
>Irregardless
Oh god, please don't start with double negative psuedo-language.
Beyond that, I would imagine they can pay off their debt with taxpayer money (though I haven't been paying much attention recently).
yessir: why don't you start? How is their income statement/cash flow looking this year? What is their bond rating/credit risk spread?
Well they aren't listed on a US Stock exchange as far as I can tell. Unless they have a parent corp or I'm dumb. GG.
twistedbydsign99: yessir: why don't you start? How is their income statement/cash flow looking this year? What is their bond rating/credit risk spread? Well they aren't listed on a US Stock exchange as far as I can tell. Unless they have a parent corp or I'm dumb. GG.
No you are not dumb.
What I meant is that it is not a market entity anymore, there is no way to establish whether it is actually adding any value...thus the question on wether the bailout was justified now that GM is 'up and running' again is like looking at a crown corporation with implicit debt guarantees etc and saying 'omg their doing great! all firms should be nationalized!'
"I just saw a commerical with the head of GM bragging about paying off their debt early. Explain why this is not proof that it was a good decision to bail them out."
They used money from a second bailout to pay back the first one. Source: http://www.foxnews.com/politics/2010/04/22/grassley-slams-gm-administration-loans-repaid-bailout-money/
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As I understood it, they didn't even pay back all the money and were told later that they should not have made that remark (I could be mistaken it's 3:10 AM). GMAC was begging for more fascist money the other month, again. Let's also keep in mind they've had the cash for clunkers nonsense and money printing. They'll continue to be a bottomless pit of money losing, just like Chrysler, AIG, Fannie, Freddie, the banks, etc. and any other zombie on life support.
Sat. 10/04/24 11:22 EDT.post #66 Jonathan M. F. Catalán:I don't think GM has paid off their debt.Neither does this columnist:GM's fresh new face and the ugly truth
Jonathan M. F. Catalán:I don't think GM has paid off their debt.
Derek DeCloet:Saturday, April 24, 2010DEREK DeCLOETddecloet@globeandmail.comGeneral Motors chairman Ed Whitacre fired the CEO and, in the exhaustive search for a replacement, stumbled upon the perfect candidate: himself. Seeking to break GM's bailout-tainted image, the new boss then set out to find a new public spokesman for the company, went as far as the bathroom and said, Well, who's that handsome man in the mirror?Television viewers are getting a good look at the bespectacled visage of the auto maker's CEO/pitchman this week. In a new television commercial, Mr. Whitacre (in navy suit and red tie, natch - some things never change) strides into a car factory as the bearer of happy news."A lot of Canadians didn't agree with giving GM a second chance. Quite frankly, I can respect that," he says. "We want to make this a company all Canadians can be proud of again. That's why I'm here to announce we have repaid our government loans, in full, with interest - five years ahead of the original schedule." (The American version of the ad is nearly identical.)From there, it descends into standard auto-advertising fare - forklifts gliding around the factory floor, a pretty young woman on the assembly line, a pickup slicing its way through a shallow river in a test run.His Edness keeps on talking through the whole thing, and at the end of 60 seconds, the viewer is supposed to be left with nothing but good impressions. Hey, these GM guys aren't so bad! Hey, the bailouts worked and they repaid the money! With interest, even. But certainly not: Hey, they still owe more than $50-billion!Actually, "owe" isn't the right word. A corporation doesn't owe its shareholders anything, strictly speaking, except responsible management of the money left over, if any, once workers, suppliers and creditors have been paid. When the governments of the United States, Canada and Ontario decided to pump more than $60-billion into GM last year to keep it from sinking, they agreed to convert the vast majority of the cash into shares, so as to not saddle the business with too much debt. A sliver of the money - about $8.4-billion (U.S.) - remained as loans, and that's what has been repaid. Big shareholders, the taxpayers remain.Alas, the ad agency was struggling with the original script."I'm Ed Whitacre from General Motors. A lot of Canadians didn't agree with giving GM a second chance. Quite frankly, I can respect that. We want to make this a company all Canadians can be proud of again. That's why I'm here to announce we have paid back to governments, with interest, about 14 per cent of the money they gave us last year. We don't know when they'll get other 86 per cent. There's a chance they'll never get it all back. Either way, it's going to take a long time. While you ponder that, take a look at this shiny GMC driving through water. Isn't it nice?"Had he said those words, quite frankly, I could have respected that. It would have made GM a company I can be proud of again. It would also have been better than trying to fool the stupid into believing GM had just accomplished the impossible - the complete payback of $60-billion in less than a year. But never mind. Let's move on. How about that other $50-odd-billion in government money still locked up inside GM? Ottawa and Queen's Park account for about $8-billion of that, and together they own 11.7 per cent of GM. What are the odds of ever seeing the money? It's still early in the GM turnaround, but not so early that we can't make an educated guess on the question.So far the company has bounced back faster than the skeptics had believed possible. Having shed loser brands like Saturn and Hummer and ditched many of the perks in its labour agreements, GM lost about $200-million-a-week (on an operating basis) in the six months after it emerged from bankruptcy court - which sounds like a lot, except that it was losing about $600-million-a-week before. A small profit is probably not far off. (Chrysler, its bailout companion, posted a small operating profit in the first three months of the year.)But here is the dirty little (not so) secret about the car-making business: as far as investors are concerned, it's toxic. Like the airline business, it's highly unionized, rigid, requires massive capital spending and suffers from too much competition. It's very hard to make a consistent profit, which is why even the best auto companies - think Volkswagen or Toyota, despite the latter's recent troubles - get very low valuations in the stock market. Volkswagen's equity, for example, is valued at 28 per cent of annual sales, and it's usually profitable. Ford trades at 36 per cent because it's on a roll and is making money again.GM is going to go public soon. Assuming it gets the same valuation as Ford, how many cars would it have to sell for our governments' shares to be worth $8-billion, enough to get our money back?Answer: $190-billion worth. Last year, GM's sales were $105-billion.Anyone want to buy a Chevy Tahoe? Please? I'm here to announce our government thinks that would be a terrific idea.
and suffers from too much competition.
What is this supposed to mean?
The very short answer is General Motors repaid the bailout TARP funds with bailout TARP funds. GM's repayment and the PR campaign is nothing but a farce.
Excerpt from zero hedge article:
" ... Government Motors is now blatantly lying to its existing and future buyers, and everyone in the administration is complicit. ... General Motors is running ads on all the major networks this week claiming it has repaid its bailout from the taxpayers "in full." But the claim isn't standing up to scrutiny from lawmakers and government watchdogs who have found that the automaker was able to repay the bailout money only by dipping into a separate pot of bailout funds. The TV spot may land GM in hot water with the Federal Trade Commission over its truth-in-advertising laws, which prohibit ads that are "likely to mislead consumers." ... [the]charge was backed up by the inspector general for the bailout — also known as the Trouble Asset Relief Program, or TARP. "
http://www.zerohedge.com/article/welcome-banana-republic-gm-hot-water-ftc-over-misleading-repaid-bailout-ad-when-all-just-tar
Sat. 10/04/24 13:04 EDT.post #69 jmorris84:and suffers from too much competition.What is this supposed to mean?Translation: "suffers from competition."
jmorris84:and suffers from too much competition.What is this supposed to mean?
Is the author implying that competition is bad? I don't get what he is trying to say.
Sat. 10/04/24 14:03 EDT.post #71 jmorris84:Is the author implying that competition is bad? I don't get what he is trying to say.I don't think he's implying that. I think what he's implying is that the greater the competition, the lower the profit margins tend to be. This interpretation is sugested by his next sentence: Derek DeCloet:It's very hard to make a consistent profit,...
jmorris84:Is the author implying that competition is bad? I don't get what he is trying to say.
Derek DeCloet:It's very hard to make a consistent profit,...
Here's another article outlining exactly how GM paid off its debts with other government money. It basically confirms the other articles already posted.
http://www.forbes.com/2010/04/23/general-motors-economy-bailout-opinions-columnists-shikha-dalmia_print.html
Long story short: 1) Not all of the given money was a "loan." 2) Loan was paid off with another part of the given money. 3) Loan was paid off to make another lower interest loan toward CAFE standards politically viable.