By on November 22, 2012

Bailed-out GM agreed to pay about $4.2 billion for the European and Latin American operations of likewise bailed-out Ally Financial, formerly known as GMAC.

Ally, 74 percent owned by the U.S. government, did put the international operations up for sale to raise money for the repayment of bailout funds. The money now comes from GM.

The deal is expected to add $300 million to $400 million to GM Financial’s annual earnings before taxes.

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35 Comments on “The Artist Formerly Known As GMAC Comes Back To Mami – Partially...”


  • avatar

    Is it just me, or is GM spending a lot of money on mergers, alliances, partners, etc that should have been used to shore up its current business, which I’m sure is far from flush?

    D

    • 0 avatar
      highdesertcat

      GM is in the precarious position of having to do something, anything, to make it seem as if they are improving their position in the global marketplace against their competitors. Buying up also-bailouts is a cheap way to appear to be doing something.

      However, the problems that led to GM’s failure in 2009 are largely still there and have to be dealt with through liquidation and restructuring the whole organization, from the top down.

      But as long as politics has a hand in keeping GM alive there is no way for GM to fail, no matter what it does or doesn’t do. GM will merely continue to reshuffle the deckchairs on the Titanic.

      Most viable auto manufacturers would be self-sustaining and even profitable with the sales numbers that GM enjoys globally but in GM’s case it is not enough because GM’s loss centers overwhelm its profit centers.

      No matter what the GM fanboys and apologists offered as a retort prior to 2009, GM still went bust, and at some future date will do so again, unless GM follows the advice of the industry analysts and implements corrective measures instead of merely keeping its UAW members employed.

  • avatar
    Detroit-X

    Nope. That’s exactly what’s going on. GM’s acting like a drunk who just got a $20 bill.

    • 0 avatar
      porschespeed

      For those who can’t/don’t read the 10-Ks & Qs, this is yet another proof of why GM has 10 years or (likely) less to live.

      Same lousy management logic, same bad systems, same inherently flawed corporate culture. Some of this is just payback to folks who let the bailout happen, but some of it is just the same old unearned hubris.

      • 0 avatar
        Volts On Fire

        On the bright side, at least the bailed out GM has given us Daewoo-derived subcompacts, a truly shitty midsize offering, and an upcoming full-size truck line that promises to be even worse than its current subpar offerings.

        All built by UAW goons and mouthbreathers.

        So hey, there’s that!

      • 0 avatar
        mike978

        Does it matter if the compacts and sub-compacts are Daewoo derived if they are selling well, have good ATP’s and are well reviewed?
        As for the trucks, who knows what the new models are like since there have been no reviews. The current generation are the second best selling truck and easily outsell others (looking at you Tundra).

      • 0 avatar
        Volts On Fire

        Good reviews can be bought, and the slew of ‘git-me-dones’ and intellectual lightweights drawn to GM products are quite easy to please.

    • 0 avatar
      dash riprock

      Calling a broad group of people “intellectual lightweights” because of the brand of vehicle they purchased is either intended to get a reaction, or, indicates some inability to view reality. Either one does not reflect well on the poster. Moderator, why is this type of trolling allowed?

      • 0 avatar
        mikey

        Troll’s are like a bad case of gas. Noisy, and stinky. Given enough time they just go away.

      • 0 avatar
        Volts On Fire

        Another sign of (hmm… let’s be nice and say “challenged”) intelligence: improper use of possessives.

        Enjoy your Camaro, mikey.

      • 0 avatar
        dash riprock

        Mikey,

        I hope you are enjoying your Mustang convertible and Impala. The value you add to forums such as this one cannot be completly negated by the juvenile postings of others.

      • 0 avatar
        mikey

        @ Rip Dash…. Thanks for the support. I traded the Impala in on the Camaro. As is common amongst us low I.Q folks, I paid cash. I drove it back to my paid for nice house, located in a great neighborhood.

        My wife,and I started with nothing. Forty years of work, and planning, and now we are quite comfortable.

        I guess there is something to be said for us intellectualy challenged folks.

        Anyway as far as V.O.F insult goes?

        I’ve been called worse things,by better people.

  • avatar
    el scotto

    Does GM ever intend to pay back ANY of the bailout money or at least do some massive shares buyback? It seems they treat the US Government like “Dad” and they’re teenagers knowing the money will never be paid back.

    • 0 avatar
      mike978

      They don`t technically have to pay any of the money back. I agree that some of the deals (like with PSA) were bad decisions. Share bubacks or dividend payouts would be a good way to “repay” the moral debt to the Treasury.

    • 0 avatar
      jjster6

      Let’s go over this one more time. Read with your lips moving if you have to.

      GM has paid back every dime it owes to the US Treasury. The US Treasury owns 32% of GM which it could sell tomorrow if it wanted to. What the US Treasury gets back depends on what it sells it shares for.

      • 0 avatar
        porschespeed

        If 1% of the shares owned by Treasury hit the market at any one time, let alone a significant sell-off over the course of even a year, share price would tank and leave T getting pennies on the dollar. Likely precipitating the complete liquidation of the company.

        Let’s go over this one more time. Read with your lips moving if you have to.

        Treasury loaned cash money. Treasury got back an asset (stock) valued in fantasyland, that it can’t ever hope to sell to get even a fraction of that original cash back.

        Please loan me $1MM cash. I will “pay you back” with 10 cars that we will value at $100K each. Even though the current market for those cars is $50K, and will never realistically go higher in the next decade. Oh yeah, and if you sell even 2 of them, the market will be flooded and the remaining 8 will be almost worthless.

        I’ll be waiting for your wire transfer.

      • 0 avatar
        el scotto

        And the Treasury owns a wee bit of Ally Bank ;)

      • 0 avatar
        jjster6

        Porschespeed,

        You really demonstrate your absolute lack of a clue with your comment. If the shares of any company were to drop to a penny tomorrow, it would signal liquidation the same way people carrying umbrellas signal it is raining out. Rain and umbrellas are correlated events, but people putting up umbrellas don’t cause rain. The price of a company’s share is generally based on an expectation of return on the investment. In October of 2011 GM sold 500 million shares of the company (my date and share number may be off but you get the idea) for $33 a share. And with that significant number sold to public investors the price did not collapse.

        My point however, is that GM has paid all loans back to the US Treasury. The US Treasury can now dispose of that investment how and when it chooses.

      • 0 avatar
        porschespeed

        jjster6, Ooh ouch. I’m hurt. Oh wait…

        Enjoy the self-delusion of fauxian propaganda, because we all know better. That I’m “clueless” is something I heard alot when I was shorting old GM (and now the new one) on the way down to the inevitable oblivion. Just like Enron and Boston Chicken. As Shatner pointed out, “who’s the warlock now bit…?” I was here when the ‘GM Deathwatch’ started – and I’ve heard “brilliant” arguments like yours before. Your ‘point’ is righ up there with flat earth theory – make it if you want, your chromosome count will be judged accordingly.

        I’m sorry you can’t read a P&L/10Q/10K. I’m sorry you have no idea why nobody in the entire world stepped up with the cash as old GM’s market value dropped below chump change. I’m sorry that you don’t understand that corporate culture is as important as product, and as such, GM will guaranteed fail again soon. But it means sweet FA to reality that primary education has failed you so miserably.

        I’d run through cash value equations, liquidation values and average payouts, intellectual capital and brand value, but if you actually understood them, you’d share my position.

        Treasury liquidating any significant (IE 1%+) of its holdings would signal that the gov was leaving and that GM would have to stand or fall on merit. Any analyst with a clue knows GM will be in BK again in 7 years, tops as a standalone private company free of any past debts. Were anyone to think that GM could make money as is, the Chinese (as they are the only ones could) would simply buy GM as it stands. Where all those buyers? Exactly…

        Regardless, if you truly believe in your economic fantasies, I will gladly trade you a dozen cars that NADA at well over $1.3MM for a mere $900K cash. Doesn’t matter that in reality I’d be hard pressed to sell the lot for $250K, and if I did the value on the rest after you cashed 3 or so, would drop precipitously. It’s all gravy on paper, I paid you well, who’s to argue?

        Pony up if you wanna whip it out and measure on your scale.

        The GM prop-up was a (rather cheap as they go) jobs program, designed to prop GM up until it could be liquidated and the limited IP sold in the conventional fashion without crashing the entire economy.

        Once again, do put your money where these disinfo fantasies are. The GM bailout was a cheap and productive jobs program, taken in context. Nobody I know (including insiders) thinks the company will survive as-is without constant cash injections and captive government customer bases.

      • 0 avatar
        sunridge place

        @porschespeed

        Please…tell us what you see in the P&L/10Q/10K that spells doom.

        You have time to write plenty of paragraphs all around it. Surely, someone as wise as you can sum it up in a few paragraphs…you know..the reason why GM will be liquidated within a few years?

        Just give us 3 or 4 bullet points that you see in the numbers.

      • 0 avatar
        porschespeed

        @sunridge place,

        The profits don’t equal the expenditures, even in the near short term.

        The product in the future as defined by the parent co is (while being the best they’ve ever done) still behind their competitors. Regardless of the ‘greater fool’ corporate dynamic, it won’t cover the overhead.

        Do you really need more data points or are you hopelessly a fanboi?

      • 0 avatar
        sunridge place

        @porschespeed

        I’ll ignore the ‘fanboi’ comment which is one of the first signs that someone isn’t intellectually honest in their point when trying to have a conversation…especially when the conversation isn’t about ‘opinion’ of how good a vehicle might be.

        So, current margins aren’t good on the revenue in your opinion and you feel the small margins combined with poor future product will start a downward spiral?

        Where do you feel the product is weak in the future for GM globally? Keep in mind the whole portfolio and the fact that anyone can cherry-pick a segment or two or market or two around the world and find weakness.

        Is it the current margins you don’t like most…or the future product failings which will (according to you) result in future failure. Please be specific on which product and global markets you are predicting failure.

      • 0 avatar

        Porshespeed,

        GM’s financial statements are out there for everyone to see, as a publicly traded company. Simple math would suggest that a company with $37.5B in cash would live for 30 years or more if they lost $1B a year or 9 years if they lost $1B a quarter. That’s not what is happening though. GM has had eleven straight profitable quarters averaging $1.5B in net income each quarter. GM is making $5B to $7B a year despite Opel losing a billion or so every year. Automotive net cash provided by operating activities is up by $3B in the first nine months of 2012 to $9.1B. Once Opel breaks even mid-decade expect the profits to be higher by a billion. I understand future performance is what matters. Here’s how it looks for GM…

        GM’s biggest cash cows, the GMT900 products are completely revamped for 2013. The new lambdas, GM’s other big money makers are just hitting showrooms. Both will sell in higher numbers with less incentives. It is no secret that 6 year old products require great discounts to sell. Opel is making steady progress towards break-even by 2016. GM is already very lean. 218,000 employees producing and selling 9 Million cars year. Toyota has 320,000 employees selling the same number of cars.

        You want to know the companies really at risk of dying? How about Sony, Panasonic and Sharp? They’ve all had 4 years of straight losses. Panasonic cut 39,000 employees and still lost nearly $10B last year. Sony will lose nearly $6B and Sharp lost $3.1B in the last quarter alone.

        There are weak spots GM’s lineup and so does every automaker. Come back to us for an argument once GM starts losing money every quarter or even if they lost money for one quarter. Until then, all of your arguments are invalid.

  • avatar
    Tortoise12

    In trying not to prejudge, I see they paid approximatly 14 x earnings.
    If this is accurate, and assume growth potential in these markets, I don’t see this as a bad deal. (More so in Latin America than in Europe, presumably). At least its hardly equivilant to a drunk who’s just been handed a 20.
    I’ll admit to feeling uncomfortable with the knowledge they’re taking money they got from the gov’t, and spending it by buying an asset off of the same gov’t.
    There was a time not long ago when GM’s finance arm was carrying the operations side. Then they got into subprimes….

  • avatar
    Jeffer

    I think GM should commit to a gradual buy-back of the Gov’t held shares at $55.00 or whatever the break even price is. GM claims the Gov’t ownership is holding them back, and for me, this would go along way to erasing the stigma of Gov’t Motors. If the Gov’t ownership really is holding back the stock price, everyone wins.

  • avatar
    Dynasty

    Yep. GM needs to be investing this money into their product line and making quality vehicles.

    Then again, had it not been for bad mortgages and what not, GMAC would have been able to keep GM afloat and no bailout would have been needed. So I read somewhere once.

  • avatar
    Charliej

    I thought that this site was about car topics. The election is over. It does not matter who you voted for, the election is over. I am not a GM fan. I will never buy another GM car. I have owned a 55 Chevy, a 57 Chevy, several Corvairs and last and least a Chevette. I do not like GM. However, this constant GM bashing by some of the “best and brightest” is becoming old very quickly. GM management made mistakes that drove the company into bankruptcy. With the economic situation in the country, the company could not be allowed to fail. The economic situation is better, if GM gets into a bankruptcy situation again, it will be allowed to fail.

    Can we please get over the politics and get back to auto topics?

    • 0 avatar
      ranwhenparked

      What does this have to do with politics? GM Financial is buying a large part of Ally Financial, they are a captive finance company of an automaker, so this transaction is car related.

      • 0 avatar
        porschespeed

        ‘Xactly. There’s nothing political in this article save for the enabling of private looting of public monies – which is enthusiastically practiced by both parties.

  • avatar

    Business in America…
    Step 1: Sell finance unit before markets collapse.
    Step 2: Let govt bailout said financial unit and restructure it back to profitability on taxpayer’s dime.
    Step 3: Buy back the profitable parts of the financial unit for pennies on the dollar.
    Step 4: ??????
    Step 5: Profit.

    • 0 avatar
      mik101

      That’s what I couldn’t help but think when I read this article.

      The cronies do it again…

    • 0 avatar
      sunridge place

      @alluster

      ‘Step 3: Buy back the profitable parts of the financial unit for pennies on the dollar’

      Really??? Please, tell us why this is ‘pennies on the dollar’ and that the overseas portions of Ally automotive financing are the ‘profitable’ parts of Ally automotive?

      @mik101

      ‘when I read this article’

      Really??? This ‘article’ is four sentences long….it made you ‘think’ that cronies are involved???

      Ok.

  • avatar
    -Cole-

    to hell with akerson yo


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