Treasury ups the ante in government losses at GM and Chrysler
According to the Detroit News yesterday, the Treasury Department increased its estimate of government losses in the $85 billion auto bailout by another $170 million.
In the government’s latest report to Congress this month, the Treasury upped its estimate to $23.77 billion, up from $23.6 billion.
Last fall, the government dramatically boosted its forecast of losses on the rescues of General Motors Co., Chrysler Group LLC and their finance units from $14 billion to $23.6 billion.
And not just GM:
The government booked a $1.3 billion loss on its $12.5 billion bailout of Chrysler.
Why is this? Well the government basically gambled on GM and Chrysler stock:
The Treasury, which initially held a 61 percent majority stake in GM, now holds a 26.5 percent share, or 500 million shares in GM. To break even, the government would need to average $53 per share for its remaining stake.
Well, that may have seemed like a good idea at the time, but GM is currently trading at under $25. What is that old adage about buying low and selling high? I might have worked for the UAW, whose jobs (and votes) Øbama sought to preserve, but the taxpayer is taking it on the chin once again.
Our “Fearless Leader”, Øbama said in the State of the Union address last week:
On the day I took office, our auto industry was on the verge of collapse. Some even said we should let it die. With a million jobs at stake, I refused to let that happen. In exchange for help, we demanded responsibility. We got workers and automakers to settle their differences. We got the industry to retool and restructure. Today, General Motors is back on top as the world’s number one automaker. Chrysler has grown faster in the U.S. than any major car company. Ford is investing billions in U.S. plants and factories. And together, the entire industry added nearly 160,000 jobs.
Øbama skims at the real reason he did this Chavez like takeover with the statement about “a million jobs at stake”, i.e. he was out to save union jobs (read it: likely Democrat voters), but the rest of it was pure fertilizer. He has a lot of gall bringing up Ford, whose success has nothing to do with him, despite the not so subtle insinuation.
In a normal world, GM would have gone bankrupt, which it did anyway, not die. It would have reorganized, stockholders would not have been stiffed, and the company would have shed decades of union dead weight. Heck, cars might even have gotten a bit less expensive! But no, our imperial leader, on an unending campaign run, chose to set aside normal business practice yet again, and apply his “vast economic knowledge” to the problem. Did this self proclaimed genius even take an Economics course in college? Who knows? Like John Kerry’s military/medical records, we will never get to find out.
The taxpayer takes a bath, the unions get stronger, the company gets weaker, and Øbama preens himself with false credit.
Øbamanomics 101.
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the new ad for the volt says this is the car America needs…REALLY
As long as we get out the amount doesn’t count.
160,000 jobs (families) were saved. Shudder to think how bad it would be if this wasn’t done.
How many jobs did the trillions for the bank bailouts save?
How about the subsidies to wealthy farmers who made $100 billion last year?
How about the subsidies to big oil?? They need it..$902 billion in profits in 2011…..
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Well, sticking to the point of the topic, I don’t shudder to think of what might have happened if ?bama didn’t partially nationalize the two auto companies.? GM went bankrupt anyway.?? The only difference is that ?bama effectively gave the company to the unions and away from the stock holders, stock holders that include people like you and me, crystal, and many other retirement accounts.? ?bama lied and said GM would “die”.? No, it would have reorganized and shed many of the “cart riders” in favor of the “cart pullers”.
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Meanwhile, the taxpayer takes it on the chin yet again to finance this scheme.? I truly hope the stock price goes up, but who knows?
How many jobs were lost with the apparently random shutting down of dealerships, some that had been around for generations?
$23.6 billion is a lot of money outstanding, and that is just for GM! Unbelievable!
And how much does Chrysler still owe the government? Another $1.3 billion!
To paraphrase Barry Goldwater, a billion here and a billion there, pretty soon we’re talking about real money!?
No matter how it is viewed, that’s an awful lot of (our, err, Chinese) money to buy votes.
And, the costs are still rising.
Obama’s limo should be a Chevy Volt with fireproof Union labels, printed in China.
Chrysler made $183M in profits in 2011, and its workers will get a $1500 bonus per employee. Some people are bound to be happy.
The question is, would it have been more/less with time and no ?bama takeover, and how much of that was due to care and feeding by FIAT.
If you had a question, Dims, it is moot. Hypotheticals, in this case, are of no significance since we have hard facts.
And we have assumptions, i.e. that ?bama’s actions had anything to do with those cited facts.? Hundreds of years of economics trumps a president with completely unknown economic qualifications (and don’t get me started on the quality or success of his economic advisors).
$183 million in profits is chump change compared to what the gov’t put into Chrysler/GM and what they owe us. Why are employees getting bonuses with outstanding debt?
I suppose you do not work for Chrysler, in which case no bonus for you. And I made no assumptions about about what Obama had to do with those facts.
No, I don’t.? And that does not change the facts.? The assumptions are that the bonuses/profits occurred “because of” ?bama’s actions instead of “in spite of them”.
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The point of the post is that these “profits” and bonuses are being made on the backs of the taxpayers, not customers.
Now that I think of it, as an involuntary creditor for Chrysler (and GM), I am getting quite the opposite of a bonus.
I think that it works this way: a company puts together a budget for a given year, at the end of the year the company adds up all the expenses from the year and subtracts that amount from the revenue. If the difference is positive, the company has made a profit, if it is negative the company has incurred a loss. Chrysler posted a profit for 2011. The process is repeated for the next year.
On a normal basis, yes.? When a business is artificially propped up with taxpayer funds, investors are thrown out in the cold in violation of contracts, and the business is not allowed to go through the normal, time tested process of bankruptcy, you aren’t looking at normal anymore.? Can you make a profit when you owe your “supplier”, in this case the government, money?? Is that balanced or negative?
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If you ignore all that, then, yes, you made a profit.? Try it with a non subsidized company.
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Read my lips: the Chrysler employees are getting a bonus because Chrysler posted a profit for 2011.
Read mine: they are getting a bonus in lieu of paying back the taxpayers.? The creditors are getting antsy.
Sammy, If you start with a premise that is wrong, your conclusion will be wrong. Chrysler still owes We the Tax payers money, call it a loan. Therefore, there is NO profit to pay for bonuses.
You guys are displaying a serious lack of business knowledge.? 1) profits are part of the P&L, debt is part of the balance sheet.? They are not related to each other in any way.? Almost every publically traded company has debt – that has no effect on their profit nor their ability to pay bonuses to employees to incent them to continue performing in ways that make the company profitable. 2) Shareholder almost ALWAYS lose the entire value of their investment when companies go through Chapter 11.? So to say investors got screwed by the bailout is a patently false statement.
And one more point, the auto industry was bailed out because it was widely believed that the car companies and their supply chains could not survive the slow legal process of bankruptcy proceedings.? The general consensus at the time was that there would be no supply chain to restart in North America…