Government Reports $9.7 Billion Loss On GM Shares
October 29th, 2013 1:04 PM Share
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.
Published October 29th, 2013 1:04 PM
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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.
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?
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.
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...