Actually I have to agree with mcbrett on the BK part of the deal because the financing they were going to need had dried up so I dont think GM would have survived. I cant get real excited about the union concessions because in return for that they were handed a significant portion of the company which presumably will be worth orders of magnitude more than they gave up. And again, I paid for that, along with the bondholders who were frankly robbed in contravention of all contract law. That is what I mean by a hostile business environment.
Getting back to government subsidization, in anticipating the new Volt and the $7,500 tax credit, I can tell you exactly how some of this will work out. Around the first of the year, we'll see a high number of sales. Thousands of Volts will be sold to totally unqualified, fraudulent purchasers. Immediately after the purchase, they will claim the refundable credit on their tax return and never make a single payment. GM will show profits on 1st quarter sales as their new finance division will reflect millions of dollars in assets from new sales. The government gets screwed having sent out millions more in refunds. About a year or so down the road, GM goes through the hassle of repossessing cars and writing off bad loans. But its worth it I guess if it temporarily adds jobs.
Bullzak, I didn't own bonds but am sorry for those who did- they were robbed. In a sad way- someone had to lose something. A similar thing happened to me with our favorite Houston utility, Calpine, when they went through Ch. 11- but luckily I sold a lot before it got too bad. Bronco, I still stand by what I say. The bailout, and again, I don't like the use of a bailout, worked. Two companies were saved that otherwise would not have survived. Hundreds of thousands of jobs were saved- and this is easily a net positive for the tax payer. What is more interesting than an issue that was settled on the WSJ weeks ago- is the reaction of those above who get their finance news from dubious sources if they actually believe this was a bad investment of our money. If anything, this is one of the best uses of money our govt. has ever done. That being said- they better not ever rescue these firms again- ever.
it is!! OK I probably was insensitive in that reply. But THINK about what you just posted! First, what value have we seen yet? You're basing this "greatest investment of all time" based on something that may or may not ever happen. They haven't paid us back yet. They're waffling on the date of the public offering (even though Obama wants them to play politics by doing it before November, so kudos to GM at least for not just rolling over.) But second and most ludicrous is your "they better not ever get bailed out again." Or WHAT??? What exactly do you have to threaten them with. NOTHING. You've already said it had to happen, and you've crowed about the jobs it saved and how smart a move it was. And that's pretty well straight from the Obama administration. So I'm GM... do you really think I'm scared that you're just gonna let me fail if it happens again? NO!!!!! They're going to buy AmeriCredit because they saw how well high-risk loans worked for Fannie and Freddie and they want to duplicate that. And they know for a FACT that it's no-lose for them. And do you know how they know that? Because you just told them that they could get away with ANYTHING! So no, I'm not being partisan, that's just a freaking ridiculous pair of statements. Anyway, apologies, not trying to be rude, but subtlety doesn't seem to work.
Keeping GM afloat with taxpayer money to protect union jobs is good in much the same way staying married to an abusive jerk one hates is good to keep from splitting up the foster kids one is currently housing. There is obvious short-term injustice, but at least one helps avoid finding out how much better off things could be if only the painful truth were admitted and change allowed to take place.
One caveat to GM's improvement in auto sales: (link) It seems retail sales were actually down 1%, but fleet sales were up 13% from figures a year ago. At that time, fleet sales were in the basement and much of the surge last quarter was replacing inventory. Not that there wasn't improvement, but GM can't count on similar revenue in upcoming quarters as a result of fleet sales. This is also true for Chrysler.
More on GM (Link). Here's an excerpt: In other words — and take a moment to think about what this means — G.M. plans to prod sales of its vehicles by using AmeriCredit to extend loans and leases to automobile customers with questionable credit. (That’s why they are called subprime loans.) These are the same customers who could very well be denied a loan by other lenders. But prudent lending is not at the top of G.M.’s to-do list: it needs to move its vehicles off the lot and it needs to do so quickly. As Mr. Whitacre bluntly put it, “When you own somebody, you can tell them what to do.” When General Motors last owned a financing arm, GMAC Financial Services, it was its mortgage business, Residential Capital or ResCap, that got into trouble, not its auto loans. In 2007, G.M. sold off 51 percent of GMAC, which ultimately required a $17.2 billion bailout as the housing market imploded. Still, General Motors arguably exploited GMAC, using it to make some bad loans so it could increase car sales to what now look like unsustainable levels. (The company, by the way, held talks to repurchase GMAC, now Ally Financial, but instead chose to buy AmeriCredit.) So here we go again, three years later, and G.M. is buying a subprime company to finance cars for people who may not be able to afford them, and given high unemployment levels, may not even have jobs to start saving for one. And yes, we, the taxpayers, still own 61 percent of the automaker.
I'm curious about the increase in fleet business - whether it came as a result of cutting their prices dramatically to Hertz, Avis, et al, or whether it suddenly got a mysterious influx of government contracts. It's funny that I have yet to get a single reply on the AmeriCorp issue from those who continue to trumpet GM's success.
