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Another fine mess

Goodbye and good riddance to Government Motors:

You may recall that during the presidential election, the Treasury Department refused requests by General Motors to unload the government's stake in the giant automaker.

Taxpayers had sunk $50 billion into a union bailout in 2009 and were now proud owners of 26.5 percent of the struggling company. Reportedly, GM had growing concerns that the stigma of "Government Motors" was hurting sales in the United States. At the time, any transaction would have come at a steep loss to taxpayers and undermined the president's questionable campaign assertions that the auto union rescue had been a huge success. 

Well, now that the election is over and the Treasury Department is freed of political considerations, it plans to sell its 500 million shares of stock over the next 12 to 15 months and ease its way out of the company. GM will buy around 200 million shares at $27.50 per share by the end of the year. GM's buy brings taxpayers back to around $5.5 billion of the $27 billion the company still owes. The special inspector general for TARP estimated in October that the Treasury would need to sell the remaining 500 million shares at $53.98 per share just to break even on its investment.

There are still people who defend this moronic deal because it "saved" the auto industry. Nothing was done here that wouldn't have been better accomplished with a bankruptcy.

Comments

Harl Delos
Fri, 12/21/2012 - 6:07pm

 Leo, David Harsanyi is either a fool or he thinks you are.  General Motors filed with bankruptcy court on June 1, 2009.  On July 10, 2009, General Motors sold all its assets to Ngmco, Inc.  One of those assets was the GM trademark.  The old GM company changed its name to Motors Liquidation Corp, and Ngmco, Inc, changed its name to General Motors.

The bailout was not of the union.  Their renegotiated their contracts with the unions to have competitive work rules and wages, and they bailed on payments to workforce that had been fired, laid-off, or idled. They cut back from 40 factories to 31.  They workd on sale of Saab, Hummer, and Saturn, and eliminated Pontiac. They've closed half the GM dealerships, which means average sales per dealer should be up. 

Under a bankruptcy, unsecured debtors get zilch, and secured creditors own the assets. However, this leaves nothing for operating funds, so basically, the assets need to be auctioned off piecemeal, and all the car production is done by Japanese and Korean factories.

With the reorganization, management mostly gets bailed out. The secured creditors become stockholders, and the unsecured creditors mostly get screwed.  To make a reorganization workable, though, you need operating capital, and don't forget, the company is losing money every day and has to pay cash for everything because nobody trusts it, so you have to get DIP - debtor-in-possession - financing. Top management was searching for anyone, anywhere, that would give them DIP financing, and nobody had any money to lend.  Ford had sold massive amounts of bonds earlier, with a plan to redesign their products and production in mind, and just happened to be the only auto manufacturer globally that wasn't forced to go to their own government with hat in hand.

If the gummint didn't give GM the bailout, the truck plant would be a Supersite toxic waste project, giving cancer to half the cancer.  They probably could have sold the foundry in Defiance - it's been incredibly profitable and productive when the rest of the industry was gloomy.  There are a lot of mom-and-pop companies that would have closed, and there would be a lot of work for demolition companies as unemployed people in the area would be selling their houses to the insurance company with a match, before they were foreclosed upon.

Did you catch the news Friday morning about the neighborhood in Indianapolis that recently exploded?  There was a "Burn Notice" rerun a month or two ago, that showed how you could cause an explosion with a microwave oven by disconnecting the surge protector, turn it on empty, and quickly leave. It seems the explosion in Indy was started in the inside of a microwave oven, one that could be programmed to start up to 24 hours later, which gives you a wonderful alibi if nobody notices that the microwave exploded from the inside out, and nobody notices that you recently upped your insurance, and you don't knock down the neighboring houses, killing people.

 
Butch Cassidy:Well, that ought to do it.

[after blowing the train car to smithereens]

Sundance Kid: Think ya used enough dynamite there, Butch?
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