By on October 9, 2012

Ford did not receive a government bailout. Not directly. It would have gone down the tubes along GM and Chrysler, if they would have been allowed to die, Steve Rattner, the head of the auto task force, told Bloomberg.

Said Rattner:

“Ford would have closed because it wouldn’t have been able to get parts, because the parts industry in this country was in arguably worse shape than the assemblers.”

Rattner repeated another favorite talking point of bailout supporters, namely that the U.S. government was the only entity that could save the domestic automakers because no one, including banks that were dealing with their own financial crises, was willing to put private capital into GM and Chrysler at the beginning of 2009.

But then, as the head of the taskforce, what should he say?

 

 

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64 Comments on “Rattner Defends Bailout With Old Talking Points...”


  • avatar
    kitzler

    Pretty good argument, but as far as Detroit suppliers go, you have to be a pretty poor manager than hang all your business on the Detroit three…. then if you did your homework, you pick up the pieces and look for business or even new business ventures, that’s the American Way!

    Of course it is hard on the workforce, but as a worker myself I always look over my shoulder for an opportunity, it my job dies…..

    • 0 avatar
      redav

      Also, it isn’t like demand evaoprates because a company dies. That demand gets satisfied by someone else, who happens to need parts, workers, etc.

      Another take would be: Ford’s sales skyrocket, even if overall sales of domestic brands cratered, because there would be plenty of buyers left to handsomely increase Ford’s take. (If the US wants to buy 10 million cars a year, they will buy 10 million cars a year regardless of how many brands supply that quantity.) Ford’s supliers would have to work overtime just to keep up.

      • 0 avatar
        KixStart

        It is doubtful the other automakers could have ramped production to meet the same overall demand. Of course, the economic shock would mean some decrease in demand, anywawy, so it’s moot.

      • 0 avatar
        bd2

        The problem w/ that premise is that it would have taken months for Ford to be able to ramp up production to those levels and the parts suppliers were in even worse shape so there is no way that they would have been able to survive.

        The so-called “talking points” are on point.

        The credit market had done a 180 degree turn and pretty much had frozen.

        Even businesses that were in the black, had customers and were looking for credit to expand were denied during those dark days; so there was no way any bank or even a consortium of banks would have been willing to finance GM or Chrysler, considering the amount of capital both would have needed to continue as operating entities.

        Ford was fortuitous in that pressure from the Ford family to do whatever it took to stave off bankruptcy made them max-out their credit line before the credit market came to a near halt.

        And even then, Ford came close to the brink as they were burning thru their cash reserves. In fact, Ford execs have stated themselves that Cash4Clunkers was a godsend since it boosted sales and auto sales started to recover (w/o the recovery of the auto market, Ford had about a year and half left of operating expenses).

        Also, Ford Credit got more in bailout $$ than GMAC and Ford later received $5.9B from the DOE in basically interest-free loans.

        Now, as a fiscal conservative, I dislike that any of this had to be done, but it was necessary in order to prevent the Great Recession to turn into another depression.

        The banking/finance sector once again brought economic calamity to the US, but they, for the most part, got off scoff-free.

      • 0 avatar

        Good Job bd2 – One of the best posts on the subject I have ever seen on an Automotive Blog. You get it.

      • 0 avatar
        Dr. Kenneth Noisewater

        I agree somewhat bd2, except that I think we’ve merely papered over the banks’ problems with QEx and by ignoring fraud prosecutions. The more the reckoning gets put off, the more damage to the economy will result.

        There’s a lot of nonperforming, leveraged paper that needs to be wiped away, and a lot of banks need to go bankrupt in order to reset the system at a sustainable level of debt, including most if not all of the so-called TBTF.

      • 0 avatar
        bd2

        @ Dr. KN

        I agree that the bailouts could have been better managed.

        For instance, the TARP funds handed to banks were released w/o any sort of conditions on what the $$ was to be used for.

        So instead of using the $$ to renegotiate lower mortgage payments w/ lenders, many banks used the $$ to fund acquisitions or to continue engaging in highly speculative trading via derivatives.

        As for the Wall St. firms, I would have had no qualms in letting them all fail – as their primary business nowadays is “financial engineering.”

  • avatar
    Geekcarlover

    Complaints about political postings may now begin.

  • avatar
    sitting@home

    Didn’t our own Mr.Farago make this very point during his Deathwatch series ? I seem to remember the line “Ford’s biggest worry is a GM bankruptcy”.

  • avatar
    Pch101

    I’ve prepared a list of what I believe would have been viable potential DIP lenders for the Chrysler and GM bailouts:

    –______________
    –______________
    –______________

    If you can think of anyone else, let me know.

  • avatar
    areader

    Didn’t Toyota, at least and maybe more companies, state that without GM, several suppliers would have gone down and taken manufacturing in the US for Toyota, etc. with them?

    Rattner is a smart guy. I’ve heard him interviewed and he can actually speak entire paragraphs with nary a ‘um’ or ‘you know’. IMO he did a poor job of forming the new board, and the current CEO is an arrogant fool. But look at HP and several other companies. Lots of bailing out was done, and tax abatements and subsidies of various forms happen all the time. IBM gets giveaways from New York state every time they put some money in a chip plant. GM gets bashed because they have a union.

    I used to marvel at the big investment houses that kept and even increased their investment in GM with it was obvious that GM was headed down the drain. This went on for several years with Wagoner at the helm. The fact that these large corporate investors didn’t move to protect their assets is the fault of the management at these companies.

  • avatar
    200k-min

    Complete and utter nonsense. The sheeple all believe the lies that if sugar daddy Fed. Gov’t. hadn’t stepped in there would be no more Jeep or Chevrolet or Apple Pie. That’s bull$hit.

    Had GM and Chrysler gone Chapt. 7 their creditors would’ve sold off the assets that were worth $$$ to the highest bidder. To argue that someone would buy Chevrolet and then turf the brand is idiocy. We would’ve had Chevrolet ~ a division of Hyundai, or something along those lines. Vehicles would still churn off the lines and suppliers would still be making stuff, sparing only perhaps a month long restructuring, if that.

    Ford would’ve been just fine, except that they wouldn’t be super lean like the “saved” parts of GM and Chrysler. The Gov’t bailout was good for Ford because it didn’t fix the problems with GM so they’ll fail again.

    • 0 avatar
      Pch101

      Well, that would explain all of the new Studebakers, Saabs and Saturns on the road today. Brands go on forever, except when they don’t.

      • 0 avatar
        KixStart

        This site really needs a “like” button.

      • 0 avatar
        George B

        Counterpoint: Jeep Wrangler. The Jeep brand has survived many owners. I think Chevrolet pickup trucks would have survived too. The core profitable good truck making parts of GM and Chrysler would survive while the mediocre marginally profitable car parts would have exited the market. Would anyone without employee discount pricing really care if the Chevrolet Malibu and Chrysler Sebring/200 car choices went away?

      • 0 avatar
        jkross22

        George,

        Shhhh. Don’t bother them with facts. They’ve looked into their crystal ball and know exactly what would have happened without bailouts.

      • 0 avatar
        Pch101

        Yeah, I can’t wait to see the reviews of the 2013 Hummer. You think that TTAC will get a press car this time?

    • 0 avatar
      jmo

      200k-min,

      You seem to have totally forgotten what it was like at the time:

      “It was an unrelentingly bleak discussion, with the financial guys talking about the world as we know it ending,” recalls Douglas Holtz-Eakin, who was McCain’s senior economic adviser at the time. Another McCain senior staff member, who, like many people I spoke with, would speak only under the condition of anonymity, told me: “At the time, there wasn’t a person on the political team who understood what a credit-default swap was or toxic mortgages or subprime bundling. At one point I asked, ‘What do you mean by economic collapse?’ And one of them answered, ‘It means you won’t be able to get a 20-dollar bill out of an A.T.M.’ Right after the meeting I called my wife and said, ‘Get $30,000 in cash out of the bank today.’ It was terrifying and surreal.”

      You think someone would be bidding on GM’s carcass? That’s ludicrous.

    • 0 avatar
      bd2

      Who would bid on GM (or Chrysler for that matter) and more importantly, what banks would lend $$ to finance such an acquisition?

      Pretty much the only ones I can think of are the Chinese w/ the backing of the Chinese govt. purchasing the remnants of GM at a bargain price.

  • avatar
    tatracitroensaab

    I have always believed that the bail out was done just to keep the unions alive. If GM and Chrysler had gone bankrupt, they wouldn’t have actually closed. They would have been able to substantially renegiotiate their contracts (even more than they did) and would have ended up in just as good of shape as now, but without taxpayer expense.

    • 0 avatar
      KixStart

      Why? Who else are unions going to vote for? Romney? Obama didn’t have to do this for the UAW or any other union. And the unions took in in the shorts, anyway, it’s not like they got some massive gift.

      The unions were screwed over by decades of GM kicking their obligations down the road, which is what really took GM out.

      • 0 avatar
        28-Cars-Later

        “it’s not like they got some massive gift.”

        They got to keep their jobs and the union leaders got to keep their fat cat positions. How is this not a gift? Especially given globalization and outsourcing jobs so prevalent in our society.

      • 0 avatar
        KixStart

        And that’s somehow worse than letting a everybody go, disrupting the lives of hundreds of thousands of union workers and then letting the already rich on Wall Street profit, which is what people seem to think the alternative would have been?

        GM had been serving those parasites for decades, continually kicking their obligations to the unions down the road, so that their profit margins would look good in the short term and keep Wall Street traders happily raking money off “investments” in GM.

        I disagree that this was all about the unions; there was too much at stake for the Administration to stand around with its thumb up its ass and let the economy collapse.

        But if it was all for the unions… given GM’s past history, I’m fine with that. The US would have been on the hook via the PBGC, anyway.

      • 0 avatar
        dave504

        The UAW got the massive gift of 40% ownership of the new GM, as bondholders got crammed down to 10% ownership. The UAW only had 10 billion in equity in the old GM and the bondholders had 27 billion, yet Obama saw fit to award them the second highest ownership stake after the US govt. This was the first time in history that bond market rules were rewritten – all to favor the UAW.

      • 0 avatar
        28-Cars-Later

        “there was too much at stake for the Administration to stand around with its thumb up its ass and let the economy collapse.”

        I very much agree on this point, and although it can be disagreed on the methods, I think few can dispute something needed to be done.

        “letting the already rich on Wall Street profit, which is what people seem to think the alternative would have been? GM had been serving those parasites for decades”

        I do however disagree on this point, all publicly traded companies do the dance, every companies needs investors and loans to grow. A well run company isn’t just chasing quarterly profits, they plan for a decade, clearly GM wasn’t well run, no argument. However UAW should have been broken up long ago, it was ridiculous to deal with them as long as they did. Most other countries don’t play UAW games which is why so much of auto manufacturing was off shored. GM/Chrysler went bankrupt, and thus ALL union contracts should have been null and void, period. This bailout should have been a full system rebuild from the ground up and instead it turned out to be just a reboot.

      • 0 avatar
        KixStart

        As far as I can tell, the rule in Chapter 11 are whatever the parties want them to be. The Feds had the big stick in this conversation, though, and if they didn’t want to end up on the hook for defaults on pensions and could “persuade” everybody else to go along, then they could arrange that.

        Money IS power. Unions are one of the few counterweights working class people have. Exporting jobs to the “miserable country of the month” is one “solution” to the problem of “paying workers fairly.”

        We’ve offshored stuff. Quality, invariably, suffers. And suffers quite a bit. But companies love cheap labor.

      • 0 avatar
        jkross22

        Kix,

        Consumers love cheap labor, too.

        Wal-Mart epitomizes this.

      • 0 avatar
        KixStart

        I don’t shop there. Nor at Sam’s Club. Some deals are not worth the price.

      • 0 avatar

        I agree the bailout gave nothing new to the union — only more take-backs. Second-tier wages were frozen for the life of the contract, at half the pay of workers hired before September 2007. Language whereby lower-paid workers might at some time move into higher-paying, “traditional” positions was eliminated.

        The Voluntary Employee Beneficiary Association was set up to fund retiree health benefits and relieve the company of any future retiree health care costs prior to the Bankruptcies. The Bush Treasury had demanded that GM’s and Chrysler’s cash obligation to the VEBA be reduced by 50 percent and the other half given in company stock. This is how the VEBA became part owner of GM and Chrysler. It’s not like President Obama gave them something for nothing.

        The VEBA was already a gamble, with its investments subject to fluctuations on Wall Street. In 2009, GM and Chrysler stock was valued at zero. By having the lump sum payment to the VEBA cut in half, the Treasury increased the risk that the health fund would go bankrupt, leaving retirees without coverage. Moreover, the loan terms now gave the new company 20 years to pay its cash obligation, putting the fund further in jeopardy.

        Seems to me the union didn’t get such a good deal after all…

    • 0 avatar
      bd2

      People seem to forget that GM got a two-tiered wage system and that, along w/ other concessions by the auto unions, lowered the cost of production for GM BELOW that of Ford.

      It’s the reason why GM can build the SUBCOMPACT Chevy Sonic in the US and still make a profit while Ford builds the Fiesta in Mexico.

      And where was GM or Chrysler going to get the funding (tens of billions) to rise out of bankruptcy as operating entities?

  • avatar
    el scotto

    All of the parts suppliers would have taken a hit. Japanese owned plants make parts for American companies and vice versa. Yes, some of the parts on your USA produced Japanese car may have been made by someone wearing a t-shirt of their favorite Big-10 team.
    All of the parts suppliers, of course, were squeezed to make the lowest priced parts. I don’t think the Japanese business combinations, I don’t know the correct Japanese for word for them, would let their parts suppliers fail. I do think American parts makers would have thrown in the towel and told their employees and families “sorry”. I think unemployment would have soared in the Midwest and that’s why I barely favored the bailout. I could be wrong.

    • 0 avatar
      dejal1

      So, if in a couple of years, we go through this again with GM or the other 2, you in again or out this time?

      • 0 avatar
        el scotto

        No, not if the economy is in better shape. KixStart said it better than I can. “I’m perfectly happy with not finding out whether or not the recession could have been worse.” I just thought a bad economy would have gotten worse. I didn’t see a lot of the parts makers surviving and those that did greatly cutting back. Ripple effect on the economy, sound bites/video of a one plant town after the one plant leaves, local charities almost broke, etc.

      • 0 avatar
        bd2

        Uhm, this time the credit market is operating back to near normal levels, which is why GM is looking to double its credit line to $10B.

        And considering that GM has about $33B in cash and securities on hand, I doubt that we will go thru this any time soon.

      • 0 avatar
        el scotto

        @bd2 Excellent analysis on you above comments. I just believe GM’s balance sheets are made for fiscal controls and are fairy tales until they buy back all the shares the US Govt owns. I don’t see the gubmint ever getting their money back from the GM stock they own.

  • avatar
    KixStart

    Maybe we would have seen a tidal wave of banktuptcies wash over the landscape with 15-20% unemployment.

    Maybe not. There was a lot of potential collateral damage from businesses dependent on GM’s business or wages. Maybe, in a time of extremely tight credit, all that potential collateral damage could have arranged financing to carry them through. Maybe all the actual collateral damage would have been rescued and revitalized with private capital quickly enought to avoid further damage downstream.

    Maybe our Fairy Godmothers would have swooped in and rescued us all.

    I’m perfectly happy with not finding out whether or not the recession could have been worse.

  • avatar

    Rattner was right to can Red Ink Rick and also that John Smith was a big part of the downfall. what’s not right is Republican donor dealers being axed.

  • avatar
    DC Bruce

    The fallacy of all of these arguments/justifications is that they assume that GM and Chrysler would just dry up and blow away. In a normal bankruptcy, the valuable pieces of these companies would have been sold off; or shareholder equity would have been reduced to zero (as it was), debt would be restructured (as it was), pension liabilities would have been restructured, dealer networks would have been restructured and agreements with the unions would have been restructured.

    Most of this happened. It’s just that the unions, union workers and union retirees came out of this probably better than the would have, had Rattner and his pals not made a deal.

    And, I agree, given the state of the credit markets at the time and the large amount of money required, probably the government was the only realistic source of debtor-in-possession financing.

    But the bottom line, is that this was a politically-orchestrated bankruptcy, and Rattner’s suggestion that it was either this or GM and Chrysler — and all of their business — would simply vanish is disingenuous at best.

    • 0 avatar
      Pch101

      “In a normal bankruptcy, the valuable pieces of these companies would have been sold off”

      Fiat was essentially paid to take over Chrysler.

      Prior to that, net-net, Daimler paid Cerberus to take Chrysler.

      Toyota effectively paid Tesla to take over the NUMMI plant.

      Nobody wanted to pay anything for Hummer or Saturn.

      All of this “value” is in your imagination. The bondholders took the deal that they got because it was the best deal that they could get.

      The assets of GM and Chrysler were worth only a tiny fraction of what was owed in liabilities. The problem with a failed car company is that a car company that isn’t producing cars isn’t worth squat, since the value of the company comes from its earnings.

      Companies that have been shut down for liquidation don’t have any earnings, so they aren’t worth a whole lot. And if you think that an old factory with environmental issues and no useful output is worth a fortune, then think again.

      • 0 avatar
        dave504

        Chrysler’s situation was different, as they had zero capital thanks to being pillaged by Nickel-and-Daimler.

        Hummer had a potential buyer, but the sale was vetoed by the Chinese government.

        Saturn had a deal with Roger Penske, but Penske could not line up an engine manufacturer when Renault backed out.

        The bondholders were 100% screwed by Obama, having been strongarmed after vetoing the bankruptcy deal.

        GM has a ton of assets, and their liabilities were mostly related to the UAW. If bankruptcy were allowed to happen, the union contracts would have been voided and terminated, and suitors would be lined up around the block to purchase the profitable Chevrolet and Cadillac divisions, now unencumbered from the UAW. This is how bankruptcy is supposed to work (witness the bankruptcy of every major airline in the US, most of which are still alive and flying planes). Not to mention that Buick was a guaranteed sale due to the brand’s popularity in China, and a truck buyer would have taken GMC.

      • 0 avatar
        Pch101

        Woulda, coulda, shoulda.

        No buyers means no buyers. Someone who talks about putting a deal together but can’t close it isn’t a buyer.

        These companies had virtually no value at all. Bruce conjured it up in his imagination, but in the real world, this value of which he speaks did not exist.

      • 0 avatar
        dave504

        Chevrolet, Buick, GMC, and Cadillac had no value, including nameplates, goodwill, plants, patents, factories, technology, infrastructure, etc? You are delusional. These companies had no buyers because a true bankruptcy was not allowed to happen – Obama had to save the UAW at all costs.

      • 0 avatar
        Pch101

        I guess that I need to repeat myself: “The assets of GM and Chrysler were worth only a tiny fraction of what was owed in liabilities.”

        It’s pretty clear from your comments that you have no understanding whatsoever about how to value a business or the rights of bondholders. Maybe you should go figure that stuff out, then reply later if you ever correct those deficiencies.

      • 0 avatar
        dave504

        Your response is rich with condescension, and inability to address facts, but zero actual knowledge of how bankruptcy works.

        GM’s assets would have been sold to the highest bidder, free of the liabilities of the UAW. By your “reasoning”, Roger Penske would have never made an offer to buy Saturn, as it never made a profit for GM and its assets were a fraction of its liabilities. Penske made an offer for those assets, since he would not have to assume the liabilities of the UAW. An orderly bankruptcy would have worked the same way – allowing suitors to buy pieces of GM as they saw fit, and leaving the liabilities to be worked out in court for whatever was left (namely the cancellation of union contracts). Your extremely faulty assumption is based on someone buying GM as a whole instead of the individual parts which was most likely to happen.

      • 0 avatar
        Pch101

        Unfortunately, my comment was accurate. You don’t know what you’re talking about.

        Chrysler didn’t have much value, before or after Cerberus entered the deal. Hence, the problem for the Chrysler bondholders. That’s just a fact.

        There were obviously no serious buyers for Hummer, because nobody bought it. It’s hard to reasonably argue for value when no one will pay it. That’s just a fact.

        There were obviously no serious buyers for Saturn, because nobody bought it. It’s hard to reasonably argue for value when no one will pay it. That’s just a fact.

        Bondholders need not be paid in full when there isn’t the money to pay them. That’s just a fact.

        If you don’t wish to be misinformed, then get better information. So far, pretty much everything that you’ve said is wrong or deeply flawed.

      • 0 avatar
        dave504

        “Chrysler didn’t have much value, before or after Cerberus entered the deal. Hence, the problem for the Chrysler bondholders. That’s just a fact.”

        Chrysler had no value after they were stripped by Daimler in the phony “merger of equals”. Chrysler was the most profitable car company in the world at the time of the merger, then Daimler stole their free cash and starved them of future product. Cerberus bought it because they thought they would be able to strip what was left and sell the pieces.

        “There were obviously no serious buyers for Hummer, because nobody bought it. It’s hard to reasonably argue for value when no one will pay it. That’s just a fact.”

        FALSE. Sichuan Tengzhong had cash in hand to acquire Hummer, and the deal was announced as closed. It was then vetoed by the Chinese government. Lie debunked.

        “There were obviously no serious buyers for Saturn, because nobody bought it. It’s hard to reasonably argue for value when no one will pay it. That’s just a fact.”

        FALSE. Roger Penske had cash in hand and the deal was worked out and ready to go until the Renault board of directors rejected guarantees for future products. Lie debunked.

        Don’t bother responding if all you have are more uncited and unsourced lies.

      • 0 avatar
        Pch101

        I know that you are having a tough time understanding this, Dave, but a deal that doesn’t close isn’t a deal.

        Nobody bought Hummer.

        Nobody bought Saturn.

        These entities could have theoretically been put into Motors Liquidation and sold off there. But nobody is banging down the trustee’s door trying to buy them. In the real world where real humans with money live, those entities weren’t and aren’t worth squat.

        This is the same problem that the bondholders faced. Had they liquidated Chrysler or GM, those bondholders would have ended up with less. They took the deals that they were offered because they weren’t going to do any better otherwise.

      • 0 avatar
        KixStart

        If Hummer was worth buying, the right officials would have been bought.

        Edit: And if you have any lingering doubts about the value of a brand, “goodwill,” etc, take a look at the history of Saab and a look at what’s going on with Opel.

      • 0 avatar
        dave504

        The deals fell through due to third party actions that the buyer and seller had zero control over. It takes a big leap of logic to state that there were no serious buyers and thus no value, when both deals had already been worked out with cash in hand. Both entities were worth something at the time and apparently had value to a potential buyer – as would Chevrolet, Buick, Cadillac, and GMC had GM been allowed to go bankrupt.

        Bondholders are a different story. They got the mother of all cramdowns thanks to Obama’s attempt to save the UAW. They were strongarmed into the deal, receiving two shares of the new GM for every $1000 in equity. They would have likely made out better in bankruptcy.

        http://am.blogs.cnn.com/2009/06/01/bondholder-furious-over-gm-bankruptcy/
        http://usatoday30.usatoday.com/money/autos/2009-04-27-gm-bond-proposal_n.htm

      • 0 avatar
        Pch101

        Most of us aren’t able to eat the fish that got away. Dave must believe himself to be an exception, having placed the fish on tonight’s menu even though no one has been able to catch them.

    • 0 avatar
      George B

      In bankruptcy don’t companies usually try to reorganize under Chapter 11 rules to be a profitable ongoing business? Shutting down the company and selling off the pieces occurs if the reorganization fails.

      • 0 avatar
        jkross22

        There you go again quoting rule of law. None of that mattered. Desperation was being felt and had a lot of cheerleaders including some on this board.

        It’s hard to think clearly when you’ve lit your hair on fire.

    • 0 avatar
      bd2

      And assuming there would be buyers (can really only think that the Chinese would be interested), it takes time to go thru bankruptcy proceedings.

      Meanwhile all the GM and Chrysler workers would be out of work and on unemployment and their suppliers and the other businesses that depended on them would also have shutdown.

      This country was on the precipice of entering another great depression; yeah, waiting for everything to sort out after bankruptcy proceedings (negotiating agreements, etc.) would have sooooo been the “smart thing” to do.

      The only buyers interested in Hummer, Volvo and Saab were the Chinese (and the govt. stopped the sale of Hummer b/c it wasn’t considered a viable investment).

  • avatar
    dash riprock

    Cannot say I was absolutely 100% in favour of the bailout, and I do believe that the UAW was treated in an very advantageous manner. But the thought that there was someone out there willing to pick up a financial basket case of a company during the worst credit crisis in at least 70 years is extrememly optimistic to say the least.
    Here in Canada, our big 6 banks(all profitable then and now)had no access to credit markets because no banks were lending to other banks or other commercial operations. The federal government moved in and purchased in the neighbourhood of $50 billion in mortgages from them to increase liquidity and ensure that lending in the economy would continue and the crisis not deepen.

    So if these very safe companies could not get access to money, who was going to step in to buy, and capitalize, GM?

  • avatar
    PaulVincent

    http://www.theatlantic.com/business/archive/2011/05/gms-bailout-has-been-a-huge-net-loss/238795/ Try reading the entire article as this is only its beginning:
    An analyst at Jeffries provides some full frontal snark about GM’s recent performance:

    How many large-cap IPOs have you bought over the last six months in which the issuer already missed initial expectations by 30% and were hit with senior management turnover? This is what seems to have happened at GM since the November IPO, yet few analysts seem concerned. We struggle to understand why.

    Investors seem a little concerned, though:

    (thanks to Mickey Kaus for the idea)

    About $40 billion of the money that the government gave GM was converted to GM common stock. In the November IPO, the government made about $20 billion selling 478 million shares, leaving us with around $20 billion more to recoup on our remaining 26.5% stake in the company. That means we need to sell the approximately 365 million shares we have left at about $55 per share, net of underwriting and legal costs. At the current share price of $31, we’d be left with a loss somewhere north of $9 billion–plus the $1 billion we gave the “old GM” to wind things up, and the $2.1 billion worth of GM preferred stock we own. Since I don’t know the details of the preferred transaction, I’ll leave that out, which gives us a loss after expenses of $10 to $11 billion on our investment in GM.

  • avatar

    I don’t think anyone seriously believes that nothing should have been done about the grim fates of GM and Chrysler. It would have been politically impossible to let them fail totally, and for proof of this, just note that President Bush approved of a bailout plan just strong enough to give Obama the reins.

    Obama’s plan seems to have been designed to keep GM out of bankruptcy court, but GM wound up declaring bankruptcy anyway. So it seems like the bail out money itself was pretty much wasted.

    So how about this? GM should have declared bankruptcy on its own, the government should have offered debtor in possession financing if no private bank would have done it, and the normal bankruptcy procedure should have been followed.

    At least that is my impression. Is there anything wrong with my plan? That probably would have given bondholders a lot more money and unions less. But there would have been many fewer accusations of cronyism and it’s possible a lot of the bailout stigma could have been avoided, or at least reduced.

    D

    • 0 avatar
      Pch101

      “Obama’s plan seems to have been designed to keep GM out of bankruptcy court”

      I have no idea where you’re getting that.

      “GM should have declared bankruptcy on its own”

      GM did file bankruptcy (and you just managed to contradict yourself.)

      “the government should have offered debtor in possession financing if no private bank would have done it”

      The government did just that, for the reasons that you just stated.

      “the normal bankruptcy procedure should have been followed”

      It was.

      “Is there anything wrong with my plan?”

      Everything that you claimed to want was done. It seems that you don’t really understand what happened with the bankruptcy, and your complaints are based upon your lack of understanding, instead of what actually happened.

  • avatar
    jimboy

    Arguing about the auto bailout is a moot point. Once the feds decided to bail out the very first financial institution, they were pretty much forced into bailing everything out, including Ford, BTW, since they were the only Detroit automaker that received the $6.9 billion DOE ‘loan’ to develop fuel efficient vehicles.

  • avatar
    Jellodyne

    Original article: “Watch me generate 100+ comments regurgitating last year’s counter-talking points”

    I agree completely

  • avatar
    PaulVincent

    Better yet, see this: http://www.breitbart.com/Big-Government/2012/10/10/50-Billion-Bailed-Out-General-Motors-vs-Bailout-Free-Ford


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