By on October 29, 2013

RenCen

With the vast majority of the government’s General Motors shares sold, the U.S. government is reporting a $9.7 billion loss, according to a Congressional report cited by the Detroit News.

With the government’s stake now down to about 7 percent, the report states that

“Because the common stock sales have all taken place below Treasury’s break even price, Treasury has so far booked a loss of $9.7 billion on the sales,” 

The United States Treasury would have to get $147.95 to break even on its GM stake – an unrealistic proposition given that the stock currently trades at $35.80. Once the government unloads the last of its stake (worth about $3.6 billion), the total loss should amount to $10 billion.

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123 Comments on “Government Reports $9.7 Billion Loss On GM Shares...”


  • avatar
    bball40dtw

    Good thing about that $13 billion JPMorgan fine then.

    • 0 avatar
      highdesertcat

      If you amortize a loss over a long enough period, you’ll recoup the money wasted. But you won’t ever recoup the lost opportunity of that money you wasted on the bailouts in the first place.

      Let the people actually paying the taxes bear the brunt of the burden. The smart ones find ways not to support such follies.

      • 0 avatar
        bball40dtw

        I don’t disagree. I find it interesting that the housing programs that had $22.5 billion allocated to them have only used $5.4 billion. The individual homeowner got boned compared to JPMorgan, BofA, Citi Group, GM, Chrysler, etc.

        • 0 avatar
          highdesertcat

          Yep, what you say is true. But that is the nature of the beast.

          Entities that exist for the sole purpose of generating money, like the ones you listed, are going to do anything and everything they can to part the unwary from their money.

          But we should not lose sight of the fact that the US government during Bill Clinton was a major advocate for CRA, individual homeownership, etc.

          What we got were the unintended consequences many had warned against at inception, but blatantly disregarded and downplayed by the proponents within government.

          The government philosophy is that as long as there are taxpayers, we’ll never be broke because they will be forced to pay for these follies.

          (As an aside related to my comment, full disclosure here: the real estate business owned by my wife and her family owns a number of homes, properties, and other investment vehicles. All of them are owned outright, without a lien against them. In fact, last week we sold and closed on two homes that were on the market for less than two weeks. What happens to the lenders and the borrowers, is of no concern to us, since we received the Cashier’s checks and have cashed them since.)

          • 0 avatar
            bball40dtw

            I agree again HDC. A significant part of National City Bank’s downfall was do to their CRA portfolio. They were slapped by the governemnt for not lending enough in certain areas. The urban renewal projects and financing they provided under market rates in Detroit, Cleveland, Chicago, Indy, etc hurt them when they market crashed. They had significant exposure to urban real estate in the Midwest. NatCity made this problem worse by not selling most of their mortgages, prime and subprime.

            PNC ended up getting them in a sweetheart deal where TARP money financed the buy out.

          • 0 avatar
            highdesertcat

            There must be hundreds of experiences like that.

            My brother in CA was with MacIntosh bank when they were taken over by the Feds due to insolvency.

            And my wife’s nephew was with Silver State bank in NV when they were taken over due to insolvency.

            Both eventually got access to their money after the Feds put everything back together again.

            In that sense, America’s fragile economic policy is reminiscent of the story of Humpty Dumpty who fell off the wall, with the twist to the outcome of the story that the Federal government can put Humpty Dumpty back together again.

            And so we have the series of QE experiences which brings me right back to my opening line of

            “If you amortize a loss over a long enough period, you’ll recoup the money wasted. But you won’t ever recoup the lost opportunity of that money you wasted on the bailouts in the first place.”

            Businesses have a lifecycle. When GM and Chrysler died, they had completed their lifecycle.

            They died on their own volition with lots of help from the UAW who collectively bargained their employers into the grave.

            I cannot understand why some people think resurrecting the dead is a good thing when these same people think nothing of letting other manufacturers who died, stay dead.

            If you’re going to bail out one, or two, let’s bail out all of them.

          • 0 avatar
            bball40dtw

            I worked at JPMorgan Chase for a number of years. For over a year, I traveled to all the former Washington Mutual branches to ensure conversion to Chase systems and culture went smoothly.

            In the bankruptcy filing, WaMu listed $33 billion in assets. Too bad they actually had $300 billion in assets and $200 billion in deposits. Chase paid $1.9 billion for all of that. The $13 billion fine looks like pennies compared to that.

          • 0 avatar
            highdesertcat

            bball40dtw, sure, there were a lot of shenanigans going on and financial entities trying to make the most of a financial opportunity should be penalized when they get caught.

            OTOH, when you invest in a financial entity that exists solely for the purpose of making money, you stand a better chance to gain back all your losses in a shorter period of time than if you invest in a dead automaker that needs to sell its products in order to generate a profit, and wasn’t able to do so profitably prior to its death.

      • 0 avatar
        bd2

        $9.7b is less than what the govt. would have had to pay in unemployment benefits and other hits to economy, and the loss would have been lower if not for the political pressure for the govt. to divest so quickly (the Canadians were smart to hold on to their shares until GM stock recovered).

        • 0 avatar
          DeadWeight

          At least GM is now on a path of making reliable, quality vehicles, which is more than can be said for Ford, which in addition to scraping the bottom of Consumer Reports latest reliability index (26th out of 28), makes 1/2 of the 10 LEAST RELIABLE vehicles manufactured and sold today:

          Consumer Reports
          Least reliable vehicles, listed in order of Ratings score starting with the worst score.

          1. Ford C-MAX Energi (Plug-in Hybrid)*
          2. Ford Escape (1.6L Ecoboost)*
          3. Mini Cooper Countryman
          4. Ford C-Max Hybrid
          5. Nissan Pathfinder*
          6. Volkswagen Beetle
          7. Cadillac XTS*
          8. Ford Explorer (V6, 4WD)
          9. Hyundai Genesis Coupe*
          10. Ford Taurus (turbo)*

          • 0 avatar
            28-Cars-Later

            I’d argue GM from about MY05 onward was building (for the most part) reliable vehicles of average to higher quality, they were just so maligned by the automotive press and average people talking up their Toyonda that many potential customers shy-ed away (obviously the bankruptcy didn’t help). I’m more concerned about the current crop in a few years as they age, time will tell.

  • avatar
    GS650G

    Queue the apologists for this debacle in 3.2.1.

    • 0 avatar
      bball40dtw

      There is still $100 billion or more in TARP funds yet to be paid back, so its only a portion of the debacle.

      • 0 avatar

        “The authority to make new financial commitments under TARP ended on October 3, 2010. As of September 30, 2013, cumulative collections under TARP, together with Treasury’s additional proceeds from the sale of non-TARP shares of AIG, exceed total disbursements by $1.5 billion. Treasury is now winding down its remaining TARP investments and is also continuing to implement TARP initiatives to help struggling homeowners avoid foreclosure.”

        • 0 avatar
          bball40dtw

          I was looking at my paper copy of the October 2012 TARP report. I didn’t know the October 2013 report came out yet.

          And TARP hasn’t done much to help homeowners avoid forclosure. The “Hardest Hit” programs are way under their goals.

          edit: after quickly looking at the newest SIGTARP report, the taxpayers are still owed $53.4 billion. There has also been $30 billion in realized losses and write offs. So we the people can hope to get the $22-23 billion back.

    • 0 avatar
      racer-esq.

      It was some of the best $10 billion the government has spent recently. Letting GM and Chrysler implode would have been stupid. Since the bailouts Michigan has become a right to work state. Detroit is getting its much needed bankruptcy – with no bailouts. Freedom and capitalism did not die with the automotive bailout anymore than they did with Jefferson’s heavily derided at the time big government, taxpayer money wasting Louisiana Purchase.

      I pay a massive amount of taxes. That some of that means more automotive competition and cheaper cars, along with great enthusiast cars like the Corvette, 300, Challenger, Wrangler, Grand Cherokee, Charger, Camaro, etc., instead of paying for counterproductive imperialism or old age programs that will be diluted by the time I qualify, so be it.

      Factoring in what would have been lost taxes on employees, unemployment insurance payouts, lost sales tax, etc., the government likely broke even.

      • 0 avatar
        krhodes1

        Sorry, but if you live in the US, you do not pay a “massive amount of taxes”. You don’t pay all that much, and you don’t get much for it in return compared to other countries. As one who is relatively well-off, I am OK with that. If I was poor, I would prefer to be somewhere with an actual safety net. There is probably a happy medium in-between.

        But I do agree with you that the various bailouts were ABSOLUTELY necessary – imagine how bad the recession would have been if all the banks and auto companies had gone under? 10s of millions more folks out of work. We as a country got a bargain.

        • 0 avatar
          28-Cars-Later

          I think its difficult to make that judgement without seeing his figures. If you rent, are married, and are not self employed your tax burden may be significantly less than someone single with no deductions and paying real estate taxes or someone who is self employed who pays all of your taxes and more and is taxed on any profits and/or dividends. If your total burden is close to 50% after all told then I’d say that’s pretty high. Just because say Europe could be more ridiculous doesn’t make it better or acceptable. The other thing Europeans have in addition to some interesting taxes is seemingly endless paid holidays (as do the Philippines) for all citizens and in some countries a 35 hour or less work week. Its all relative.

          http://en.wikipedia.org/wiki/35-hour_workweek

          • 0 avatar
            krhodes1

            I think it is pretty easy to say. “I” certainly don’t pay what by any rational standard are high taxes, and I am pretty much on Uncle Sam’s Christmas card list. Single, no kids, small mortgage, relatively few deductions, relatively high income. The only way I would pay any more would be if I did not own a house, and even then it would be a pretty minor difference.

            Compared to what I would pay in ANY European country, or even Canada, I pay diddly squat. But on the other hand, I *personally* do not get very much for my investment. In any of those countries I would at least get basic health care – even with my employer picking up the bulk of it that costs me a substantial amount out of pocket every year.

            Note I am talking about Federal taxes. Local and state taxes vary wildly – though I probably pay a relatively high amount there compared to many too. Our state income tax is high, my town’s property tax is quite high, our car taxes are outrageous, and we pay sales tax on almost everything in this state.

          • 0 avatar
            28-Cars-Later

            I am in a similar position save children and real estate, and I too get near zero in any sort of return on coerced investment. We also have very high property taxes here, state is 3% and local varies but combined state/local for this borough is 4% which wouldn’t be so bad if every property I looked at were not a minimum 3K in annual taxes (these were 100K 2br ranches and 2br townhomes). In my final analysis, I would factor in total tax burden including all state/local, property, additional fees, and sales taxes. If you and I are in the 25-30% area when its all said and done, some folks might have that plus 7% self employment and depending on their state/local another 10% on top, this is where it starts to get a tad ridiculous. I know you are more knowledgeable on Europe than I am and as much as I like the people if I wanted to live/pay for their type of lifestyle I’d move there.

        • 0 avatar
          racer-esq.

          I pay a massive amount of taxes compared to most Americans. And even a lot globally when including federal, state and local taxes. Definitely part of Romney’s 47%. It’s funny that Romney had to back track because so many hard core conservatives are not part of the 47% that contribute.

        • 0 avatar
          TomHend

          You dont live in New York City, half of my paycheck goes to taxes, if you would like to see I will send you an email copy.

          Taxes are high but that is not the problem, it is the one party system and level of corruption that has taken over everything in our society.

          If you think “Democrats good, Republicans bad” you are a useful idiot.

      • 0 avatar

        IMHO the taxpayers are infinitely better off with the $10 billion loss, a drop in the bucket of what was at stake. Seems most agree or Mitt Romney would be President. Romney could never figure out which side of the issue he wanted to take. In the debates he said, “They took my advice.” At other times he called it a gift to the UAW. He didn’t say that much while campaigning in MI and OH but one day he took one position in the morning and another after lunch. When contacted his campaign refused to comment or clarify. They didn’t even know where he’d go next.

        Imagine the supplier base, already in thin ice, going down in a ripple effect with troops in the desert needing parts for the equipment. The auto supplier base also supplies military procurement. Even the RW knew what had to be done even though many voted against it and demagogged the issue.

        • 0 avatar
          bball40dtw

          I don’t think people were thinking about TARP or the auto bailout when they voted. States pretty much voted as they always do. People had made up their mind without the bailout.

          • 0 avatar

            They sure were in OH. And they abandoned Romney over his flip flopping on the issue and his lie about Jeep production moving to China.

          • 0 avatar
            bball40dtw

            Except it didn’t because Romney did better than McCain in 2008. 2012 was 2008 all over again. The GOP had no clear message, besides not Obama, while the Obama supporters had a better ground game. They got the vote out and did well with the early voting.

        • 0 avatar
          wsn

          The $10B figure isn’t much. That I agree. But the moral hazard costs more:

          1) Did all the people in financial troubles get help? No.

          2) Did all important big companies hiring many thousands of people (such as Nortel) get needed help? No.

          3) Why was GM/Chrysler helped? Because of the strong lobbying union.

          4) If there is to be another big recession, what can you do to prepare for it? Forget about being financially prudent. Donate to certain people and pay an arm and a leg to lobbyists.

          • 0 avatar
            wsn

            Just to add to the “moral hazard” part.

            Bailing out GM/Chrysler is like finding OJ Simpson guilty in the original trial.

            With all the facts, evidence and maybe use a little common sense, it’s not hard to find OJ guilty. But then, what about the prosecutor’s error? If you overlook that, you would have dealt the justice system a heavy blow.

            Same with the bailout. Sure it’s sooooo easy to bail GM out, but at the same time you are encouraging stupidity and irresponsibility, while at the same time discourage hard and honest work (that would have otherwise gained more market share at that moment).

        • 0 avatar
          TomHend

          $10B? This is the number coming from a government that according to todays New York Times lied to us about Obamacare since 2010 that ” If you want to keep you plan you can”?

          You must think inflation is 2% and unemployment is 7.7%

      • 0 avatar
        Superdessucke

        A lot of Chinese would have lost jobs but for that also, perhaps causing unrest in that region.

    • 0 avatar
      tonycd

      GS650G, I am proud to be one of the “apologists for this debacle.”

      For the umpteenth time, the primary goal of this expenditure was not for the government to turn a profit. The goal was to prevent the immediate collapse of a manufacturing enterprise that directly and indirectly provided a million good jobs at a moment when private banks were paralyzed, and the nation was in imminent danger of collapsing at any moment into a second Great Depression. Together with the equally excoriated and misrepresented stimulus package, it successfully achieved this goal, and thank heaven for that.

      That said, I’d still argue that the continuing function of General Motors and its suppliers has supplied the nation since then with far more than $10 billion of added value through the continuing economic value it has added to the nation at large. Surely it’s done far more in this direction than the much larger sums thrown at Wall Street criminals that somehow seem to get no comparable criticism from quarters like this.

      Which part of this do you choose not to understand?

    • 0 avatar
      bd2

      Not an apologist – but $9.7b is less than what the govt. would have had to pay in unemployment benefits and other hits to economy, and the loss would have been lower if not for the political pressure for the govt. to divest so quickly (the Canadians were smart to hold on to their shares until GM stock recovered).

      And the real blame should go to Wall Street, the hedge funds and the big mortgage brokers which tanked the economy in the 1st place with the largest PONZI scheme in the history of the world.

      W/o that, the economy wouldn’t have tanked as it did, and even if there had been a normal recession, the credit market wouldn’t have frozen so GM would have been able to get financing to undergo reorganization.

  • avatar
    28-Cars-Later

    Feds to taxpayers: Oops our bad.

  • avatar
    aristurtle

    Hey, let’s have the nine billionth bailout argument on TTAC, to celebrate.

    • 0 avatar
      28-Cars-Later

      Let’s not and say we did.

      Instead lets all relax to Thievery Corp:

      youtube.com/watch?v=FnyEy-a9BiE&list=PL3AE747842593FC36

      • 0 avatar
        aristurtle

        Looks like we’re not that lucky.

        • 0 avatar
          highdesertcat

          We’ve got Americans with strong-held beliefs of what is right and what is wrong. That’s the way it should be.

          There will never be agreement on economic policy because it affects each one of us in such a personal way. To me, selective handouts, bailouts and nationalization were just plain wrong.

          What I know is, is that current economic policy is not as beneficial to me as the economic policy of Shrub, Clinton, Bush the Elder, and Reagan was.

          I’d venture to say that current economic policy is worse than that of the Carter administration because my money was still worth more than it is now.

  • avatar
    olddavid

    Must be a slow click day. Not enough unique hits.

    • 0 avatar
      highdesertcat

      Maybe people on opposite sites of this debacle have gracefully withdrawn to their respective corners, safe in their own beliefs and adjusting their lifestyles to deal with this dire reality.

      There was no win for the American taxpayers here. The winners were the UAW and two dead US automakers along with their fans.

      • 0 avatar
        28-Cars-Later

        One of which sold your wife an excellent Grand Cherokee.

        Six degrees of separation, HDC.

        • 0 avatar
          danio3834

          While the JGC is an excellent vehicle, had it not existed, I doubt his wife would be walking.

          • 0 avatar
            28-Cars-Later

            Ah this is true Danio.

          • 0 avatar
            highdesertcat

            All true guys, but we should all know that a woman buys based on emotion, not logic. And her 2012 GC has been and continues to be a truly excellent vehicle.

            Me OTOH, I buy on logic. My logic is, was, and will always be, “a happy wife, a happy life”.

            I stress that I continue to greatly enjoy sharing the same bed with my wife of 47 years, and all the benefits that implies….

            Buying her the GC has not hurt any of that.

          • 0 avatar
            28-Cars-Later

            I’m happy to hear you’ve found happiness for 47 years but I wouldn’t group all women into the “emotion buying” category same as I wouldn’t group all men into the “logic buying” category. I myself often buy based on the little used “what the hell” category which usually doesn’t work out too well (i.e. grandma’s rolling wreck disguised as a cream puff 18yoTown Car)

          • 0 avatar
            highdesertcat

            I’ve used your buying philosophy, especially when I scoured the Lemon Lots of the nearby military bases in the past, looking for a good deal on some Used.

            When my kids and several of their cousins still lived in my home, back in the 80’s and 90’s, that’s how I kept them all on wheels.

            But, in retrospect, it did get out of hand since, at one point I had over 20 cars parked on my property of which only 11 were in in running order, and insured.

            Once I bought my 2011 Tundra, the wife ‘hinted’ for me to get rid of all that used iron, and I did. I must say, the place no longer looks like an auto wrecking junk yard.

            BTW, my wife’s ’92 Towncar must have been a high-maintenance female sedan, in spite of the differential hanging below back there. I spent many hours replacing failed and worn-out parts.

            Ironically, the kid who bought if from me in 2008 is still using it to this very day, back East, with nary a problem………

          • 0 avatar
            28-Cars-Later

            I’m sure he is you fixed everything in it, I wish I had know you then I would have asked you to fix my ’90 when I had it.

          • 0 avatar
            highdesertcat

            28-Cars-Later, where are you at? I’m in New Mexico about 90 miles north of El Paso, TX.

          • 0 avatar
            28-Cars-Later

            Outside of Pittsburgh, and the car’s been gone since 2011 in any event.

          • 0 avatar
            highdesertcat

            I see. Where I live there is no such thing as rust, so the kid who bought my wife’ ’92 got it in pristine condition, with a Reese Hitch to boot.

            When he got out of the USAF he went back home, initially to WV, and was kind enough to send me a letter expressing his appreciation for such a clean car. He also said his dad was trying to buy it from him since the ’92 was in better condition that his dad’s newer one.

  • avatar
    APaGttH

    Oh boy…rage against the government, Obama, unions, big banks, Iraq, Republicans, Democrats, tax and spend liberals, big business wonks, the tooth fairy, and artificial sweeteners in 3, 2, 1…

    The bailouts were inherently “unAmerican” and they appeared to have worked. Can we move on please

    [INSERT WHAT A FAILURE THEY WERE HERE]

  • avatar
    SCE to AUX

    If you love the bailouts, you should love EV subsidies.

    • 0 avatar
      highdesertcat

      But only if you pay enough in taxes to benefit from that tax credit.

      • 0 avatar
        SCE to AUX

        Not so with Nissan. When I got my Leaf, they immediately deducted the $7500 off MSRP, and collected it for themselves. This reduces the hassle for the consumer and eliminates the tax question.

        Incidentally, I’m philosophically opposed to bailouts and subsidies, but admit that I will pick up money laying on the table.

        • 0 avatar
          highdesertcat

          Did you buy?

          If you leased, the deduction went to the firm holding the Lease that will, at some point, retail the car to the Used market and hopefully make some profit on your lease.

          • 0 avatar
            SCE to AUX

            I leased it through Nissan. The terms were better than buying, and although I qualify as an early adopter, I have enough knowledge and doubt about the battery to not commit just yet.

            I won’t pay the buyout price, but if the car is still performing well after the 3 years are up, I’d consider making a lowball offer.

          • 0 avatar
            highdesertcat

            SCE to AUX, I hope it works out for you. If an EV does the trick for you, that would be great.

            It’s hard telling what the buy-out price will be, since this is the first time these guys are up to bat.

            I would think that the buy-out price of a 3-yo Prius (percentage wise) would be a good indicator of what you can expect.

  • avatar
    thegamper

    I read this story earlier and was a bit confused. Weren’t there many billion dollars that were given to GM prior to the bankruptcy filing that were simply discharged in bankruptcy and not considered part of the recoupment of TARP funds? Not to mention TARP funds used to prop up suppliers, GMAC/RESCAP, etc, etc. I think the real cost to the American Taxpayer is significantly higher. As TTAC, I expect you to do math now that we can put a pretty firm price on what remains of the government’s holding in GM. What was the actual cost? Not what the treasury booked as an accounting loss.

    That being said, I think the UAW bailout was necessary, perhaps not executed in the fairest manner (i.e. everyone takes a massive haircut except the UAW), but the money paid saving the UAW by virtue of saving their employer was probably a drop in the bucket compared to the economic mess that would have followed without TARP funds.

    • 0 avatar
      highdesertcat

      Considering that the UAW collectively bargained GM and Chrysler into financial ruin, the UAW was actually rewarded by Obama and the ‘crats for doing so.

      I don’t remember if any Republicans voted for the bailouts since I’m an Independent not affiliated with any political party.

      Accounting principles in America being what they are, no one should be surprised that with some creative accounting the proponents of this bailout will actually tout the losses as gains for the US economy.

      That’s how screwed up we have become in America. But hey, majority rules and this is what the majority wanted and voted for. So let them pay for it.

      • 0 avatar
        racer-esq.

        “That’s how screwed up we have become in America. But hey, majority rules and this is what the majority wanted and voted for. So let them pay for it.”

        Sweet, we don’t have to pay for what we don’t like? The BS waste, fraud and abuse combined with welfare jobs programs that I’m going to stop paying for cost way more than $10 Billion.

        And stop getting so worked up by the UAW, compared to public sector employee union members like cops UAW workers actually work hard, retire late and don’t make much money (especially with two tier wages). I’m glad Michigan is a right to work state now, but it always amuses me when people get worked up about private sector unions, which actually have to negotiate with profit motivated managers, and ignore public sector unions. The FOP puts the UAW to shame in terms of redundant overpaid workers with bloated benefits and pensions.

        • 0 avatar
          highdesertcat

          racer-esq., labor participation rate in the US is only 63% which means that 37% of the workforce is not contributing and not paying for what they don’t like.

          As an Independent I can see both sides of the issues. I understand that the Party in Power (or PiP) makes the decision that suits their wants and needs best, without regard to what is good or bad for America — since that is an entirely subjective argument, depending on one’s perspective.

          The key here for the individual is in what they decide to support. No doubt the UAW AND Public Sector employees have an ax to grind.

          When it doesn’t get resolved, bankruptcy resolves it for them, unless there is selective intervention on the part of the Federal government, like in 2008/2009.

          • 0 avatar

            What was the selective intervention of the government in 2008/2009? Obviously, there was some, for example, the government had to furnish DIP financing because there wasn’t any other available. Before that, there was government intervention by the Bush 43 administration where they place “stips” on the bridge loans they extended.

            Are you talking about anything else? The major decisions were made by the BK judges in accordance with BK law. The issues were litigated, one issue to the Supremes.

          • 0 avatar
            highdesertcat

            No, you got it. I’ve learned to be cautious in my comments and not open up too many aspects of any given topic since interpretation of any comment on this board is wide and varied.

        • 0 avatar

          The UAW has seen its membership drop over the decades, largely because of improved automation and because cars are built these days by putting together assemblies and modules purchased complete from their suppliers. The percentage of a vehicle today that is made up of labor is quite small. The UAW rightfully gave up a lot, especially the infamous “jobs bank.” They had a lot of their benefits turned into a VEBA.

          There are some who think the UAW should have been broken and new hires brought in if necessary to build the cars. As it is, parity with the transplants was imposed as a condition of the Bush 43 bridge loans. The details of how that was done was worked out during the Obama admin.

          • 0 avatar
            highdesertcat

            +1 . I’m in the camp of those who think the UAW should have been broken. Just so you know.

          • 0 avatar
            Thill

            GM is shifting production of cars outside the US as well where there is no UAW. GM is importing more and more vehicles into the US that were built outside CONUS. Specifically exports in China has increased dramatically in recent years. As in exports from Chinese GM plants to US consumers.

          • 0 avatar

            So who would have built the cars? Bankers? New hires?

          • 0 avatar

            GM is EXPANDING production in the U.S. as well as China and other places around the world. They ARE a global company.

            There are no cars built in China and exported here. IN fact, in China there is only one OEM operating WITHOUT a Chinese partner. Honda has a single plant due to an accommodation based on other issues. Otherwise, China doesn’t allow standalone foreign OEMs to produce in China. That has something to do with why Chinese cars aren’t sold here. Another is the fact that their quality isn’t up to spec.

            Imagine a Chapter 11 liquidation of the D3. Ford would have been sucked down along with the others. Who had the cash to buy up the best pieces in a banking environment with credit frozen? U.S. lenders, as well as many lenders around the world, held toxic assets they couldn’t sell, and little cash.

      • 0 avatar

        Actually, Obama and the “crats” weren’t the BK judges, to of the most respected BK judges in the country, chosen by lot.

        Anyone tally up what the cost would have been without the “bailout?”

        What would have happened if AIG had folded?

        • 0 avatar
          28-Cars-Later

          Just because they were respected doesn’t mean the fix wasn’t in.

          • 0 avatar

            SO you are saying the BK judges were “fixed?” You have proof of this? What was done in the BK that wasn’t proper? Ever see a C11 where everyone comes out happy?

          • 0 avatar
            28-Cars-Later

            I’m simply suggesting a healthy dose of skepticism should be placed on whomever outside of the White House was making decisions. You could put Dudley Do Right in charge it doesn’t matter who the people were, what matters is how much was riding on the outcome and who benefited. Cui bono? Who benefits?

          • 0 avatar
            highdesertcat

            MY belief is that there was an “expectation of outcome” and the judges did their best to choose the better of two evils.

            No one knows what would have happened if the judges had chosen another route for us to travel.

            What we got, is what we got.

          • 0 avatar

            RE: “I’m simply suggesting a healthy dose of skepticism should be placed on whomever outside of the White House was making decisions. You could put Dudley Do Right in charge it doesn’t matter who the people were, what matters is how much was riding on the outcome and who benefited. Cui bono? Who benefits?”

            The instructions from the White House were, “Everyone takes a haircut.” This was interpreted by Larry Summers to mean car dealers had to get cut, something that makes no sense because dealers represent shelf space and are the OEM’s only customer. The SIG for TARP agreed and excoriated Team Auto for the dealer terminations, many of which were reversed.

            http://www.sigtarp.gov/Pages/Results.aspx?k=dealer%20terminations

          • 0 avatar

            Some interesting asides: Some say the bondholders got screwed and Obama gave their rightful stake to the UAW. First, Obama wasn’t the BK judge. Second, the bondholders were responsible for forming a committee under C11 to reach a consensus to present to the BK judge. This is SOP and is done so the judge doesn’t have to try to deal with each bondholder individually. Many of the bondholders had purchased their bonds at a steep discount. Even more had purchased credit default swaps that only paid off in the case of a complete default. As a consequence, the bondholder committees couldn’t reach a consensus on what they wanted, so the BK judge gave them what he thought they should have.

            In the case of JP Morgan: Jimmie Lee was negotiating on behalf of the bank on the Chrysler deal. Lee is known as a tough negotiator. He was negotiating with Steve Rattner, a rather calm, cool negotiator in his own right. Lee wouldn’t agree to any of Rattner’s offers. So Rattner said, “Okay. We’ll just give you the the whole Company.” An agreement was quickly reached.

          • 0 avatar
            Pch101

            “dealers represent shelf space and are the OEM’s only customer.”

            Nope. Dealers require (a) credit and (b) inventory. When the inventory doesn’t sell, then they also require (c) incentives.

            GM and Chrysler had severe credit constraints circa 2009. There were too many dealers to keep stocked with inventory to match market demand.

            It’s no coincidence that GM and Chrysler improved their inventory management after shedding excess dealers. Now they can build to the real market (retail consumers) instead of to the wholesalers.

            If dealers bought inventory for cash, provided their own credit, and didn’t demand incentives, then you’d have a point. But they don’t do anything of those things.

    • 0 avatar

      The government still holds a substantial stake in ALLY Bank. I don’t know of a single supplier who received direct TARP money. MAny of the largest were already in Chapter 11 at the time.

      At some point someone will do a scholarly synopsis of what might have happened, what did happen, and the actual losses (there will be some).

      Its still too early.

  • avatar
    Thill

    While GM employs over 200K people nearly 2/3rds of those employees are outside the United States, and only 1 in 5 vehicles produced are produced in the United States. Still think $9.7 billion dollar loss was a wise investment?

    Sorry, but I never agreed with all these bailouts. Our country cannot even pay the debt on our deficient without taking on more debt to make minimum payments. We have been writing checks that we cannot cash for years now (this started well before Obama, but has gotten progressively worse).

    It is like telling Visa you need to increase your maximum credit limit ASAP otherwise you cannot make your payment on time for your maxed out AMEX card…

    Yes, I know interest rates are low and buying more debt is cheap but interest rates cannot remain low forever and once interest rates rise we will be in a really bad place as we are going to be hitting $20 trillion in debt by the time Obama leaves office.

    • 0 avatar
      highdesertcat

      You’re absolutely correct in your observation!

      But the majority in America hold the opposite view and as such GM and the UAW, in turn, have the full faith and credit of the US government behind it. They cannot fail and they cannot do wrong.

      We in America always get exactly what we deserve, because Majority rules and we vote for it!

      • 0 avatar
        challenger2012

        Well, not exactly true. The majority did NOT vote for Bush in 2000, yet somehow we got him for Prez.

        • 0 avatar
          highdesertcat

          Blame that on the Electoral system that does not take into account the Popular Vote.

          • 0 avatar
            TomHend

            We do not have a democracy we have a republic, that means NO POPULAR VOTE.

            Here is what is wrong with popular vote, lets put on the ballot that any man can have sex with any woman at anytime, there are more male voters than female voters, guess what would win- There needs to be a barrier to protect us from ourselves.

          • 0 avatar
            28-Cars-Later

            @TomHend

            Charlie Sheen is running?

          • 0 avatar
            SCE to AUX

            Somewhat off topic, but the Electoral College is designed to look a lot like Congress, which is why it has 538 delegates. If people want to live in a true democracy, then we should abolish both the Electoral College and the Senate.

            Then, look out for abuses like TomHend pointed out.

            Those like me who were opposed to the bailout can only do so much through our representative vote, since such actions are never put to national ballot.

          • 0 avatar
            Pch101

            “We do not have a democracy we have a republic, that means NO POPULAR VOTE.”

            You’ve confused some concepts here. A republic is a form of representative government that also has an executive.

            In this republic, we use a popular vote to choose our legislators (the House and the Senate.) We don’t use a popular vote to choose the executive (the president and the vice president.)

            A republic is a variant of democracy. It isn’t a pure democracy but it is still democratic, as we use elections to choose who represents us.

            “There needs to be a barrier to protect us from ourselves.”

            That’s what existing law, the Constitution and the courts are for.

            “the Electoral College is designed to look a lot like Congress, which is why it has 538 delegates”

            The president represents both the people and the individual states. In the US federal constitutional system, the states are granted powers that are separate and apart from the public.

  • avatar
    olddavid

    There was a saying back in the 70’s that went -“owe your banker $5000, and he’s got you. Owe him $5 million, you’ve got him”. Apply this statement to all countries who use U.S. dollars as basis for currency evaluation and international commerce. $20 Trillion? At current rates, we’re stupid to not rebuild our entire infrastructure with what amounts to free money. We’ve seen what austerity has done to Japan for 20 years? What it’s doing to Europe now? Sorry, but the Adam Smith acolytes have lost this argument – decisively.

    • 0 avatar
      Thill

      So you want to be Greece at some point in the future? At some point the “free money” will stop flowing, interest rates will rise, and countries like China will want their interest on their debt and American currency will be replaced with Chinese currency as the world standard. When that happens the American way of life will be drastically different than it is today. The first thing to go/change will be the entitlement programs such as Social Security, healthcare, food stamps, welfare, etc. This is where the vast majority of our debt resides. And then you will see riots as most Americans depend on these programs to survive.

      This current generation of leaders and voters are setting up future generations for failure.

      • 0 avatar
        olddavid

        You guys who believe this standardized dogma will not have your minds changed by a random comment on a car site. Sorry I brought it up.

        • 0 avatar
          highdesertcat

          Hey, you’re entitled to your beliefs.

          Others have equally strong-held beliefs. That’s what makes America go ’round.

          Such divergence of beliefs is normal in a country made up of immigrants, both past and present, who bring their own value systems with them or grow them here based on personal experiences.

          What gives me the creeps is people in FOREIGN countries, not living in the US, passing judgment on our values, or the lack thereof. And we’ve got plenty of these here as well.

          What some of the know-it-alls on THIS board seem to forget is that we can disagree without being disagreeable because an economic policy that works out good for one may not have the same beneficial effect on another.

      • 0 avatar
        krhodes1

        We cannot be Greece. We control our own currency. Greece does not. Greece is at the mercy of the other European Union members. Had Greece still had it’s own currency, they could have devalued it – which is painful, but not as painful as NOT being able to do that. With the currency devalued, suddenly Greece is a super cheap place to vacation or do business. The economy rebounds, and all is well eventually. With austerity, everything stays put, and the suffering just drags on forever.

        We are also not Greece in that no matter how out of control you think “entitlements” are, they are not even in the same universe as what the average European country expects to give their citizens. And even aside from that, Greece also had/has a HUGE problem with tax evasion, so they are not even collecting a fraction of what they should be, all adding to the current crisis there.

        The United States has devalued the dollar. And guess what – business is coming back! A ton of jobs that were outsourced are coming back, because it is no longer cheaper to pay Indians to do tech support work, or Thais to assemble disk drives. Even Apple is bringing production back to the US. Every little bit helps.

        What always seems to get lost in budget discussions is that a sovereign country is NOT a household. If you personally are spending more money than you bring in, you are fundamentally screwed. But a sovereign nation has more options. You can devalue the currency by printing more of it. Your borrowing cost should be very, very low. Inflation (within reason) is not necessarily a terrible thing, and the resulting devaluation can greatly increase your competitiveness vs. other countries.

        Ultimately the economy is cyclical. When it is down, government can borrow at super cheap rates to prop things up and get the economy going again. When it is up, the government should make it a priority to pay back that debt. But when the economy is in the crapper is NOT the time to be yanking back on the reigns, as that will only make things worse. Just like when the economy is roaring is not the time to be borrowing money at inflated rates.

        As to China taking over as the world reserve currency, seems pretty unlikely. China needs us MORE than we need them. The US could produce what we buy from China – afterall, we used to do so 25-50 years ago. China has no other market the size of the US. None. I think we have a pretty good gig going with them – we take stuff from them and give them dollars. We then take those dollars back and give them promises. If we break our promises, what are they going to do, stop giving us stuff? Then 1.X billion people go back to being really really poor, really, really fast. How happy are those people going to be with their government?

        As olddavid said, owe a little and the bank owns you, owe a lot and you own the bank. The United States is literally too big to fail.

        • 0 avatar
          olddavid

          I liken it to getting a home improvement loan with no interest, while still enjoying the expectation of increased value and more equity. With a very favorable repayment schedule. The principles are identical.

    • 0 avatar
      danio3834

      Right, by the time it matters, you’ll be dead. Why would you care? That time may be coming sooner than we think.

  • avatar

    RE: “But we should not lose sight of the fact that the US government during Bill Clinton was a major advocate for CRA, individual home ownership, etc.”

    What does the CRA have to do with any of this? It was signed by Carter. Home ownership was touted by every President thereafter. At the link is a speech by Bush 43. The CRA had nothing to do with the mortgage crisis. The damaging loans were made by non CRA regulated lenders. Only 16% of loans made during the bubble period were made by CRA regulated traditional depository banks, and only a fraction of those were CRA category. Fannie and Freddie also had nothing to do with it. They were prohibited from buying the kind of risky stuff that Wall Street bought routinely. They DID buy some risky stuff as a part of AAA rated MBSs that turned out to be crap, but they did NOT approve or guarantee those loans. They could only buy those MBSs because of the AAA rating. And how did issuers of those MBSs get those ratings? Answer: Credit Default Swaps. Now for the BIG question: WHO blocked the effort of the Commodities and Futures Trading Commission to regulate those CDSs? All the CFTC wanted to do was to force them to reserve capital to pay potential claims. What a novel concept. Identify those culprits and you’ll have your answer. Today, we don’t even know how many unbacked CDSs there are in force. One thing we DO know. There STILL are no reserves to pay claims.

    http://autosandeconomics.blogspot.com/2010/12/george-w-bush-2002-speech-on-home.html

    • 0 avatar
      racer-esq.

      It’s good to see some actual understanding of the financial crisis.

      • 0 avatar
        highdesertcat

        Being in the Real Estate business certainly had an affect on the business owned by my wife and her family. It was at that point that the family made the decision to buy up as many houses as they could by pooling their money and use them as rentals because at some future date the demand would be there for previously-owned homes.

        We have reached that initial stage. We sold and closed on two homes last week.

    • 0 avatar
      Pch101

      You got this one right.

      Anyone who believes that the mortgage crisis was a subprime crisis is a dupe. Let’s all remember that the subprime blame game began early, when the Fed and the banking industry were (incorrectly) explaining why the problems would be limited to only the subprime sector.

      The banking industry was not interested in informing the public that the lending problems were systemic, and not limited to just a particular subset of mortgages. Excessive lending was broad and deep, cutting across all product types and credit classes.

  • avatar

    RE: “What gives me the creeps is people in FOREIGN countries, not living in the US, passing judgment on our values, or the lack thereof. And we’ve got plenty of these here as well.”

    Worse yet, due to Citizens United, they can buy influence in our political system.

  • avatar

    GM and Chrysler are new companies. The old ones still exist as assets are sold. The fact that the new companies bought the brand names from the old corps throws folks off. They are new companies.

  • avatar
    LALoser

    I agree with the bailouts, of automakers, and while holding my nose, the banks. In the big picture of the past, large companies such as GM, Ford, Microsoft, etc has paid, or been responsible for a nice tax base from employees and a nice spendable income which translates into travel, appliances, home remodels, landscapers, and so on. For, I think, 90 years or so, GM paid tax and supported many areas around the country…so a little pay-back for a restart seems OK with me. GM seems to be doing well, not as well as the banks, but they will be fine with normal hitches along the way. And hopefully they bring improved employment to depressed areas and foreign funds to our shores.
    I vote we are far better off because of the bailouts, and yes, I know a lot of the details. The US government has always helped private industry when needed because of the greater good.

  • avatar
    Big Al from Oz

    What’s done is done. The US Government must have realised they will have a loss when they entered into this.

    I don’t support any form of subsidised industry, GM should have been left to fold. Many may not be aware but GM did pull money out of other more profitable areas globally. So yes foreigners should be able to bitch about poor decisions in the US.

    I do hope GM does do well in the future, but somehow I think the US still has deep rooted issue in its vehicle manufacturing industry. Every vehicle manufactured in the US has a $2 900 subsidy. The Germans are only putting in $1 300.

    That’s the kind of difference that will make or break an industry.

    Also, ‘foreigners’ in other countries have every right to bitch and moan when the US makes poor decisions. US industry has its fingers in many pies in many countries.

    A very insular and selfish view.

    • 0 avatar
      racer-esq.

      “Also, ‘foreigners’ in other countries have every right to bitch and moan when the US makes poor decisions. US industry has its fingers in many pies in many countries.”

      I see what you are getting at. Those bastards cancelled your Ute.

      http://oppositelock.jalopnik.com/the-death-of-the-holden-ute-1453033814

      • 0 avatar
        Big Al from Oz

        @racer-esq.
        The manufacture of the Ford and Holden ute is not viable. I fully support their demise. There are better alternatives out there now.

        I do like those V8 utes, but not at the expense of taxpayers.

        The majority of the public in Australia don’t support subsidising the auto industry. GM wants 1/2 a billion dollars from the government to remain. Are Holden’s worth that much money? How many do they sell?

        The government stated it will give them some money, but also exports must increase. GM doesn’t like this. Look at GMs response, they sent GMH’s boss Deveraux to the US for a new job. Not good.

        I suppose we can go down the use the industrial socialist welfare systems that the Japanese/Europeans/US use in maintaining industry. But why? So we can be as broke as you guys.

        We already have more than enough subsidisation in industry, but nowhere’s near many other OECD economies. User pays is the best system.

  • avatar

    RE: “1) Did all the people in financial troubles get help? No.”

    Tru Dat. There was enough to manage without going downstream, FBOW.

    RE: “2) Did all important big companies hiring many thousands of people (such as Nortel) get needed help? No.”

    I don’t know anything about Nortel. What happened to them? The Great Recession wasn’t kind to many.

    RE: “3) Why was GM/Chrysler helped? Because of the strong lobbying union.”

    Wrong. The North American industrial base AND the production of ALL N.A. auto production, including that of the transplants, was at stake. The suppliers supply them all. Military procurement was also at stake.

    RE: “4) If there is to be another big recession, what can you do to prepare for it? Forget about being financially prudent. Donate to certain people and pay an arm and a leg to lobbyists.”

    GM got in trouble for a variety of reasons. The storm clouds began to develop when Roger Smith was in control. UAW contracts and legacy issues played a role, but HUGE mistakes by management trump everything. If GMAC hadn’t gotten into the mortgage business, the old GM might still be limping along.

    Chrysler? Bought by Daimler, gutted and sold to Cerberus. Nuff said. At the time Bob Eaton sold Chrysler to Daimler, Chrysler was a thriving concern.

  • avatar

    RE: “MY belief is that there was an “expectation of outcome” and the judges did their best to choose the better of two evils.”

    And you think the UAW should have been broken and GM and Chrysler should have had to build cars with new hires? OR they should have been place into C7 and liquidated, causing a ripple effect through the auto suppliers and the North American industrial base?

    • 0 avatar
      highdesertcat

      I do. The former UAW members could have been hired back under a different non-union agreement that met Federal mandates. When Reagan broke PATCO, many of those controllers were hired back at lower-paying positions.

      And air-transportation safety ranks higher with me than road vehicles of which there are many other producers, like the Japanese, South Koreans, and Germans all making cars in America.

      But all that is a moot point. We got what we got, and we’re stuck with what we got. For some it worked out great. For others, not so much.

      • 0 avatar
        bd2

        The UAW did give up quite a bit.

        GM now has lower labor costs than Ford – which is one reason why GM can build a SUBCOMPACT (the Sonic) profitably in the US (Ford builds the Fiesta in Mexico).

  • avatar

    Yes, we in the U.S. exported our poison globally, with bought and sold AAA rated MBSs. Its was laissez faire types that blocked the regulation of the CDSs. These are the same ideologues that would have let the whole thing come crashing down, like burning down the house to get rid of the rats. I don’t blame other countries from being bitter. Having said this, most of the most toxic AIG CDSs were issued from London. Some from Switzerland and Hong Kong. Its really difficult to get a handle on it. But TARP offered GLOBAL stability, not just stability to the U.S.

    BTW, National City Bank was NEVER forced to over buy CRA loans. And they certainly didn’t have to hold them in house. Wall Street types were looking to buy them in quantity. You just can’t call every risky loan a CRA loan. That just isn’t accurate. Jumbos, Alt A, Reverse AMO, Interest Only, NINJA, etc. are NOT CRA. Besides, the loans that did the most damage were ELOCs which are most certainly NOT CRA.

    • 0 avatar
      bball40dtw

      It wasn’t just the HELOCs. It was the fact that they were packaged with conventional mortgages in areas that the bottom fell out of. Management was bad at responding to CRA issues and made bad investments at the worse possible time. NatCity had a much higher exposure, as a percent of total loans, in Midwestern urban areas. They went above and beyond original CRA obligations as atonement for previous violations. The commercial side did much better than the residential. PNC almost paid for NatCity with tax all tax breaks. After TARP denied funds, the sharks smelled blood.

      I was a credit analyst with National City at the time, and lived in Detroit. I saw all the BS that should have been turned down get approved. Alot of it was in urban areas, in condo complexes, that the bank had funded the building, and the units had crazy inflated values. In hindsight, if the bank would have sold the loans investors liked to buy, they would still be headquartered in Cleveland.

    • 0 avatar
      bball40dtw

      I agree with you on most things bailout and TARP related. I have been unhappy with the lack of TARP funds being used to help individual homeowners though. I know they signed the mortgage documents, but when you have a $170k mortgage on a house that is now worth $65k, life sucks.

  • avatar

    RE: “Author: TomHend
    Comment:
    Ruggles You are a flaming know it all liberal.

    Jack I am done with TTAC”

    Not THAT’s an intelligent argument. WE all know the RW is correct and liberals are always wrong. The problem is, the RW calls moderates “liberals” as if arbitrarily assigning a label wins a discussion. I’m loyal to the facts, and only the facts.

  • avatar

    RE: “They went above and beyond original CRA obligations as atonement for previous violations.”

    The midwest is not the country. Atonement for previous violations? Someone please tell me the force of law of the CRA.

    http://www.federalreserve.gov/PUBS/FEDS/2011/201136/

    For further documentation there is plenty out there.

    http://www.minneapolisfed.org/publications_papers/pub_display.cfm?id=4136

    http://defendyourdollars.org/posts/372-the_community_reinvestment_act_did_not_cause_the_foreclosure_crisis

    I guess one could say that me taking a leak in the Pacific added to the Japanese tsunami.

    Read “All the Devils are Here,” watch two documentaries, “The Warning” and “Inside Job.” You can even wade through the Financial Crisis Inquiry Report” if you want to hear both sides. It quickly becomes apparent which is partisan and which is fact based.

    Or you can even read my piece on the issue brought on by months of research:

    http://autosandeconomics.blogspot.com/2012/12/understanding-mortgage-crisis.html

    As I live in Las Vegas and watch substantial net worth evaporate over night I was anxious to determine blame. Watching “The Warning” was a REAL eye opener. Seeing and hearing the tearful mea culpa of Greenspan and Leavitt were compelling. Then there was the following from that well known LIBERAL Jack Kemp:

  • avatar

    RE: “Not an apologist – but $9.7b is less than what the govt. would have had to pay in unemployment benefits and other hits to economy, and the loss would have been lower if not for the political pressure for the govt. to divest so quickly (the Canadians were smart to hold on to their shares until GM stock recovered).”

    Lots of truth here. For persepctive – Just the UAL C11 a few years back dropped $6.1 billion on the Pension Benefit Guarantee Corp. Multiply that times GM, Chrysler, Ford, and their suppliers and what do you come up with just in pension guarantees. There there is the UE benefits for thousands, INCLUDING the transplants who couldn’t build cars without parts. PhD Economist Mike Smitka and I penciled it out to WELL OVER $85 billion dollars just for estimated UE until things got reformed and pension guarantees.

  • avatar

    RE: “The former UAW members could have been hired back under a different non-union agreement that met Federal mandates.”

    There was no precedent for that in C11. How would the BK court break the union anyway? As it was, parity was imposed. What more could you want in a BK? Are you telling us that a Repub President would have tried to break the UAW? If YOU were President, this is what YOU would do?

  • avatar

    RE: “Author: Pch101
    Comment:
    “dealers represent shelf space and are the OEM’s only customer.”

    Nope. Dealers require (a) credit and (b) inventory. When the inventory doesn’t sell, then they also require (c) incentives.”

    This one doesn’t even get you an E for effort. You seem to know just enough about the issue to be dangerous. Yes, dealers require credit. They get that on their own, NOT from their OEM. The ONLY inventory problem they had in 2008 – 2009 was too much of it. Dealers accept incentives but would sell old inventory anyway. Of course, they might not order so aggressively from their OEM if not for the incentives. OEMs know this. But the OEM mantra is “inventory pressure sells cars.” All new factory recruits are immersed in this theory.

    RE: “GM and Chrysler had severe credit constraints circa 2009.”

    NO shit. It was called lack of cash and no ability to borrow for av variety of reasons.

    RE: “There were too many dealers to keep stocked with inventory to match market demand.”

    Here’s where you REALLY go off the rails. Sounds like a high class problem to me. Too many customers eager to buy your product? During the time frame in question, it wasn’t a problem. Dealers held and financed a 6 month supply of inventory at rate of travel. These days it is a different kind of problem. The OEMs can’t keep up with demand and are running extra shifts, opening or expanding facilities, hiring new employers AND paying overtime.

    RE: “It’s no coincidence that GM and Chrysler improved their inventory management after shedding excess dealers.”

    Inventory management ALWAYS looks better when demand and supply are balanced. But here you go into the tall grass again. You think they improved their inventory management because they got rid of dealers. Each dealer was a customer of the OEM. Chrysler and GM have both lost sales and market share because of having fewer dealers. In over 40 years in the business I have NEVER known a factory exec who thinks fewer dealers is a good thing for the company. And as a dealer, I pored over and paid “The Parts Statement” every month. If you know anything about this you’ll know the significance of this monthly document.

    The first this “new thinking” surfaced was when the auto execs arrived in Washington DC, on bended knee, and said what they thought Congress wanted to hear. Steve Girsky, in particular, had been spreading a theory he called “The Toyota High Throughput” model. These auto execs, who didn’t even know how much money would be needed to bail themselves out, thought the Congressional panels wanted to hear about dealer cutbacks even though they KNEW it would be counter productive. And when the time ultimately came, they used C11 to legally abrogate dealer agreements and settle old scores. Thanks to Tammy Darvish, and the group of dealers she marshaled, many of the terminations were reversed. I was particularly close to some of the Chrysler hearings. IN the case of GM, they held some informal kangaroo courts and reinstated a bunch of dealers. But they used the opportunity to hammer the dealers into some disadvantageous situations. The level of trust, or lack of it, between GM, Chrysler, and their dealers is edgy at best.

    Each dealership represents incremental sales that would not be achieved otherwise. The signs, special tools, marketing materials, and high priced DCS programs are an OEM profit center. Each dealership is a potential buyer at OEM closed used vehicle auctions. They buy parts and do repairs. This costs an OEM nothing. Even the visitation that used to require manpower on the road is done via phone centers these days. Dealers pay for not only the dealers DCS system, but also the OEMs.

    http://autosandeconomics.blogspot.com/search?q=toyota+high+throughput

    You seem to lack understanding of how dealer inventory is paid for.

    Now they can build to the real market (retail consumers) instead of to the wholesalers.

    If dealers bought inventory for cash, provided their own credit, and didn’t demand incentives, then you’d have a point. But they don’t do anything of those things.

    • 0 avatar
      Pch101

      I read that in search of a cogent rebuttal, and couldn’t find one.

      If you truly believe that dealers are merely an asset, then have your ilk put up or shut up by buying their inventory for cash and forgoing incentive payments. They can prove your point by buying product without the automaker’s money, then eat their own losses on the orphans.

      But you and I both know that isn’t ever going to happen because the new car dealership model is built on leveraged returns. Without credit to pay for the inventory and manufacturer incentives to move the dogs, the whole thing falls apart.

  • avatar
    AlternateReality

    Ruggles has too much time on his hands… like, waaaaay too much time.

    I hate the bailouts and always will, but was done is done, and in the grand scheme of things a $10 billion loss is a pittance compared to most other examples of federal largesse.

    So, GM is free to push its UAW-built Daewoos upon the ignorant masses, and the UAW remains breathing, for now, in a shallow and tenuous existence. The government may be able to spend my money on saving a company that absolutely deserved to die, but at least it can’t force me to buy one of that company’s products.

    Yet…

    • 0 avatar
      highdesertcat

      AlternateReality, I like to read what others have to say in the topics that appeal to me. I always learn something from what others write.

      I may or may not agree with everything they present at face value, but I have picked up a few pearls of wisdom here and there. After all, this is ttac, the most widely-read site of its kind in the industry.

      I especially follow comments of people who have been in business for themselves or in positions of strategic value to a company, like decision makers. That’s the real nitty-gritty, not the self-agrandizing sophomoric rantings of the jacks-of-all-trades, master-of-none.

      If this is the same Dave Ruggles I met last century, he’s done alright for himself in his chosen area of expertise. I believe his comments are worth reading, and I do.


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