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GM repaid all of its TARP, you say? (Auto Bailouts=FAIL)

The federal government bailouts of both GM and Chrysler were wrong philosophically (government has no business entering private enterprise) and monetarily (we’ll lose money doing this) and popularly (most Americans didn’t support the bailouts). You’ve probably seen GM Chairman Ed Whitacre in a television commercial recently saying that GM has “paid it all back.” Hogwash!

This is how Crazy Eddie Whitacre spinned it in the Wall Street Journal:

OPINION APRIL 21, 2010 The GM Bailout: Paid Back in Full
The investment of U.S. and Canadian tax dollars worked.
By ED WHITACRE
Today, General Motors is announcing that it has made a payment of $5.8 billion to the U.S. Treasury and Export Development Canada. We’re paying back—in full, with interest, years ahead of schedule—loans made to help fund the new GM.

Wonderful stuff, until you read the next paragraph:

Our ability to pay back these loans less than a year after emerging from bankruptcy is a sign that our plan for building a new GM is working. It is also an important step toward eventually reducing the amount of equity the governments of the U.S., Canada and Ontario hold in our company. Combined, these governments hold a majority of GM’s equity, and we want citizens to know how their governments’ money is being put to work.

Here’s one comment, remembering the creditors who had to step aside so that the UAW could prosper:

John W. Condon replied:
Let us not forget the bond holders who saw their priority position evaporate along with the rule of law.

Here’s another comment:

Jared Potter replied:
This article is hilarious – GM received billions of dollars more as a bailout, not just a loan – has GM paid that back? From what I understand, GM is taking money from the taxpayers as a government gift to pay back the government loan. obama is ridiculous for being a part of this, and whitacre is ridiculous for being part of GM.

This article from Consumerism Commentary makes it a little clearer:

General Motors Paid Back Bailout Loans in Full
by Flexo on April 21, 2010
Earlier today, General Motors announced that the company paid $4.7 billion to the U.S. government and $1.1 billion to the Canadian government, fulfilling its obligation agreed to when it received its initial bailout funds. In total, GM received $52 billion from the U.S. government, but only $6.7 billion of this amount was considered a loan. The company already paid back $2 billion, so this $4.7 billion is the last payment.

This doesn’t mean that “Government Motors” is no more. Despite the payback, the government still owns a controlling portion of the restructured GM. The United States will eventually relinquish its ownership, but this will take some time. Even when the new GM completes its initial public offering, the U.S. government will still be an owner for some time.

Get it? Only $6.7 billion was considered a loan, but we gave GM $52 billion! When are we getting that back? Don’t hold your breath.

Some comments:

Scott April 21, 2010 at 1:31 pm
Now if the government would only sell off the additional 46 billion in stock buyouts that they gave GM, we’d really be in business. The loans were only a drop in the bucket.

G April 21, 2010 at 1:50 pm
It’s unconscionable to say that GM has “paid back” the government when WE gave them $52 billion and they only paid back $6 billion and change. I guess this is more creative accounting.

Here’s some of today’s radio wisdom from Rush Limbaugh:

Story #3: GM Cuts 65,000 Jobs, Pretends to Pay Gov’t Back
RUSH: There’s a story out there, the automobile salesmen at General Motors, automobile salesmen at AP, an excited headline, breathlessly so: “GM Pays Back Government Loans from US, Canada.” No, they didn’t. Here, listen to the lede: “General Motors Co. has repaid $8.1 billion in loans it got from the U.S. and Canadian governments, a move its CEO says is a sign automaker is on the road to recovery.” Now, if you only read the headline and the lead paragraph, you’d get the distinct impression that what? They paid it all back, right. You get the distinct impression that GM has fully repaid all the money they’ve gotten from the US and Canadian governments. Why would the AP want to mislead its readers like this? In fact, the General Motors outfit got a total of $61.5 billion from the US and Canada, but now it’s shouted from the rooftop when they paid back a mere eight billion. That’s what they’ve paid back. They have paid back a total of 13% of the government loan, and here the car salesman from the Associated Press report says they fully paid it back, which they have not. One thing that they don’t point out here very stridently — of course, leaving it to me who can read the stitches on the fastball — they had the money to do this. Where did they get some of the eight billion to pay back? They did it by jettisoning 65,000 jobs, and the pensions that go with them, so they fired 65,000 people, got rid of their pensions and they said that they are paying it back. They haven’t earned it. They’re cutting and it’s only because Obama owns the car companies along with the UAW that you can fire 65,000 union people.

Rush also points out that the American taxpayer might be liable for UAW pensions:

Is Buying a GM Car Like Making an Obama Campaign Contribution?
April 21, 2010
(…)
RUSH: Well, let me share with you the way TIME Magazine deals with that in their April 15th issue: “Could taxpayers really be on the hook for UAW pensions? — Yes. GM could face a funding crisis in 2013 or 2014 when, under the current projections, the automaker will be required to make more than $12 billion in contributions to its pension funds to keep them solvent, according to the GAO analysis. Chrysler’s estimated future pension obligation is $3 billion. If the companies cannot meet their funding obligations they may have to terminate their plans, and the financial responsibilities (up to government limits) would be assumed by the Pension Benefit Guarantee Corporation.” meaning us, Candy.

The New York Times’s Dealbook spins the GM story as the success that it’s not:

G.M. and Chrysler Show Progress After Bankruptcy
April 21, 2010, 5:17 pm
(…)
Officials would not give a specific forecast on Wednesday, but the Treasury estimated in December that it could lose about $30 billion of the $82 billion in aid given to the auto industry since December 2009, $62 billion directly to G.M. and Chrysler. But a senior administration official who spoke on condition of anonymity said it now appeared possible that the Treasury could recover nearly all if not all of the amount. The person was not authorized to speak publicly.

The government EXPECTED TO LOSE $30 BILLION on the auto bailouts, but now expects to lose less? Break out the champagne!

Meanwhile, General Motors said it had finished repaying the $8.2 billion — with interest — it owed the American and Canadian governments, and it introduced television commercials telling consumers the money had been paid back.

“The government and the taxpayers made a terrific investment and it’s going to pay off big time,” G.M.’s chief executive, Edward E. Whitacre Jr., said during a visit to an assembly plant in Kansas City, Kan., where he announced the repayment in front of an American flag.

A terrific investment, Crazy Eddie?

Chrysler earned an operating profit of $143 million in the first quarter on revenue of $9.7 billion. Counting one-time charges, it lost $197 million in the first quarter, mostly because of interest payments, compared with a $2.5 billion loss in the fourth quarter.

Chrysler lost $2.5 billion in the fourth quarter of 2009? In the first quarter of 2010, Chrysler earned an “operating profit” of $143 million in revenue of $9.7 billion? So that’s 1/70th of “profit” to “gross revenue.” But Chrysler still lost $197 million in the first quarter of 2010? Tell me why this company was bailed out? To lose more money?

From June 10 to Dec. 31, the company lost $3.8 billion and had revenue of $17.7 million. It said $2.1 billion of that loss was a charge related to the trust fund that took over coverage of health care for United Automobile Workers retirees on Jan. 1. The rest was attributed largely to its steep decline in sales and “significant start-up costs.”

Sounds like Chrysler was a sweet deal for the U.S. taxpayer, huh?

G.M. did not repay all $50 billion it borrowed from the United States. Most of that amount was converted to a 61 percent equity stake held by the Treasury Department.

Chrysler is 8 percent owned by the Treasury.

Placed at the very end of the article!

SUMMARY:
GM CEO Ed Whitacre is conning the public. Most of the bailout was put into GM equity, with only a small amount classified as a “loan.” GM is still Government Motors and will be that for some time.

The auto bailouts looked wrong when they were made and they still look wrong now.

Obama bought a money-losing car company to lose more money, but hey, the UAW is making out OK.

This is crony capitalism at its worst.

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