By on December 30, 2014

Seal_on_United_States_Department_of_the_Treasury_on_the_Building

The final tally is in: American taxpayers lost $9.26 billion from the Bush II/Obama-led rescue of the U.S. auto industry.

The Detroit News reports the loss comes out of a total investment by the U.S. Treasury of $79.69 billion used to bail-out General Motors, Chrysler Group, Ally Financial and Chrysler Financial. The department recovered $70.43 billion in profit through share sales, loan repayments, dividends and interest.

The reported final figure comes on the heels of the Treasury’s sale of its last 11.4 percent stake in Ally, the automotive lender and bank-holding company formerly known as GMAC Financial. Accounting rules, however, state the government — and thus, the taxpayers — lost $16.56 billion on the bailout, as interest and dividends paid by those rescued were not applied to the principal owed.

The $9.26 billion lost was much lower than the $44 billion projected early in 2009, as well as the $30 billion predicted later that year. Per the Center for Automotive Research and others who supported the bailout, the loss was much preferable over the total collapse of GM and Chrysler, with the former stripping the industry of 1.2 million U.S. jobs, $17 billion lost in Social Security and income taxes for 2009, and $79.5 billion in personal income tossed into the fireplace.

While the government is now out of the automotive business, it still has a small presence in the finance industry: out of 700 institutions who were accepted into the $700 billion Troubled Asset Relief Program in the early days of the Great Recession, 35 are still in the program today. $426.4 billion was invested overall, with the government recovering $441.7 billion; accounting rules, however, state the Treasury has taken $35 billion in losses.

Get the latest TTAC e-Newsletter!

Recommended

216 Comments on “US Treasury: Over $9B Lost In Auto Industry Bailout...”


  • avatar
    PrincipalDan

    Before there is much wailing and gnashing of teeth here let me just remind the B&B that this was one of the last truly bipartisan efforts out of Washington. Nearly all the Congress-critters agreed this needed to be done they just disagreed on some of the form and substance.

    Personally I think there should have been more asset sales. If someone wanted to buy the Hummer brand name and factory to see if they could make a go of it, they should have been allowed to. If someone wanted the rights to the platform for the Solstice/Sky it should have been sold… etc.

    • 0 avatar
      Lie2me

      GM tried to sell the Hummer brand and had a deal with the Chinese, but it fell through

    • 0 avatar
      psarhjinian

      It’s not like they didn’t try; there just wasn’t much money available for those kinds of purchases. That’s why the bail-out happened.

      There were attempts to buy Hummer, by bottom-feeder Chinese ventures, and someone did pony up for Saab (again, bottom-feeders, pseudo-criminals and people with no business plan) but there simply was no one able, or even willing, to finance such a sale.

      • 0 avatar
        tonycd

        Yep. People forget.

        I’ve said it umpteen times, but here goes: The goal of the bailout wasn’t to make a profit. It was to save a million jobs at a time when that was critical to keep the nation from careening fully over the cliff into the next Great Depression.

        And in that most important goal, it succeeded brilliantly.

        BTW, this whole article is shameless click bait. Guess I suckered for it too.

    • 0 avatar
      Detroit-X

      Yep, and $9B is much more of a virtuous, worthwhile expenditure than the $1.5T utterly blown on the endless “wars” of the past 13+ years.

      • 0 avatar
        nickoo

        Agreed. Even the non-war DoD spending debacles such as the F35 and a handful of shipbuilding programs makes this 9 billion look well spent. However, so far, GM hasn’t done much to impress me. I think the next gen volt, shortly to debut, could change that.

        • 0 avatar
          NoGoYo

          The F22 was also very expensive, or so I’ve heard…so that’s one very expensive jet that took quite a long time to actually reach production, and another very expensive jet that as far as I know, hasn’t reached production yet.

          Not to mention that the F-22 is already out of production, after being in development since the mid-90s and having 66.7 billion dollars spent on the program…

          • 0 avatar
            bball40dtw

            Yes, but the F22 is more capable than the F35, epecially when updated to F35 software tech. The cost was low enough that they should have kept making the F22 and done something else with the JSF. That program has been an even bigger mess.

            Continue to update the F/A-18, produce the F22, and don’t kill the A-10.

          • 0 avatar
            NoGoYo

            @bball: But if we just kept making the stuff that already worked, then the military weapons and tech contractors wouldn’t get to rake in billions of dollars making stuff that nobody needs or that won’t actually make it onto the battlefield for another decade!

        • 0 avatar
          bd2

          And while GM and Chrysler have been badly managed (as had been Ford) for decades, it was the financial sector which tanked the economy that finally sent the US automakers spinning into bankruptcy (or near bankruptcy).

      • 0 avatar
        jkross22

        It’s true that wars have killed more people than GM has killed with faulty ignitions.

      • 0 avatar
        TrailerTrash

        nonsense.
        please. keep remarks such as this free of car sites.
        wars are the result of attacks and such. this was not. Afghanistan? Have you forgotten the attack in NY?
        get real.
        And we soon will hear how the non gov spending would have cost the nation far more.
        bull. it’s a belief, a leap of faith thrust upon all, not a fact…and cannot be backed up any more than somebody’s belief in a god. it is a fake and a set up.
        the giving of money to the auto industry as well as the financial wizards cannot not be justified by the “to large to fail” argument.
        nobody knows. and anything can fail and should be allowed to IF the game is to be clean and fair. I see far to many face their poor decisions suffer their failures. these industries should have as well.
        and throughout the day people and companies fail and careers and lives are forced to face realities these industries were not.

        • 0 avatar
          Xeranar

          Sorry but the issue with fighting wars is that you need to raise taxes to pay for them. Bush essentially doubled our national debt by putting the entire war effort on T-bills and then wondered why the debt exploded. Simply put they were unfunded, no other war in 20th century history was funded simply by financing debt and never on such a large scale.

          Following that the failure of an entire industry is catastrophic. We were already hemorrhaging jobs all over the place, losing another 1.2 Million would have cost of trillions in the long run. So whatever your sophomoric views on moral capitalism are the reality is GM isn’t you or I. If GM fails, it takes about 400K+ jobs with it. So yes, it is too big to fail.

          • 0 avatar
            TrailerTrash

            you are doing it.
            again.
            perhaps the argument you try to present cannot exist without this misuse of logic and sense.
            ok…taxes need to be raised for wars.
            then do it. war is war.
            but to tie war together with protecting jobs and industries is , again, nonsense.
            especially when those involved with much of the failure walk away punished free and in many cases with pockets full of money.
            if others are to pay for bad management…bad management needs to be punished.
            if we are to support big money…big money needs to go to jail.
            and when you say such misleading phrases like failures of entire industries you are once again saying garbage.
            entire industries would not have happened. that is the sky is falling bull.
            yes…people suffer and jobs die and whole lives and economies change.
            so friggin what. corrections must take place.
            right now we have simply supported lifestyles and life forms that should have died.

          • 0 avatar
            Xeranar

            I was addressing two completely separate issues. Somebody was discussing the wars and the complete lack of tax increases actually fed into the over-stimulation and exposure.

            You’re ‘nu uh’ response to explaining how the auto industry would have collapsed in the US without a bailout is just cognitive dissonance at this point. I agree that the corporate heads should have paid for their crimes the automakers weren’t exactly violating the laws. So we agree on the justice end, we just disagree on other issues.

          • 0 avatar
            Lie2me

            Xeranar is actually right and coherent this time around. TrailerTrash, taking your approach would have resulted in a repeat of the crash of’29 and the subsequent Great Depression which lasted until WWII. No matter what the reasons and who’s to blame our government did the only thing it could do to avert a similar, if not worse catastrophe

          • 0 avatar
            bd2

            Yes, Obama had to put the cost of the 2-wars (the Iraq War was a purely optional war) back “on the books.”

            GM and Chrysler going down (as well as their suppliers) would have taken Ford down with them.

          • 0 avatar
            Pch101

            It is true that there is no linkage between funding wars and funding auto bailouts.

            But it is ironic that the right wingers who freak out when a Democratic White House engages in deficit spending have absolutely no problem with turning surpluses into deficits whenever their own political party is in power. It’s the hypocrisy that is leading to these comparisons.

            And in any case, GM really was too big to fail in 2008. That may irritate some of you, but those who are in positions of responsibility have to deal with the facts, even when those facts are unpleasant.

            GM was too deeply tied into the broader financial system to allow it to fail. (Its underfunded pension obligations and the unknown risk of the credit default swap market that was associated with GM’s junk bonds were just two of those issues.) Allowing GM to die at that point in time would have required spending far more money fixing all of the other stuff that would have imploded in response to it, not least of which was the cost of addressing the panic that would have hit the financial markets when the world concluded that Uncle Sam was asleep at the wheel.

          • 0 avatar
            TrailerTrash

            lie2me
            ” taking your approach would have resulted in a repeat of the crash of’29 and the subsequent Great Depression which lasted until WWII.”
            this is simply just another repetition of the sky is falling. A threat. And how did WW2 end what wars are here claimed to begin? The debt from wars is exactly the argument used here NOT to have them. How did WW2 end what it is supposed to cause?
            Did WW1 cause the depression and WW2 end it?
            Remarkable.
            I am angry that nobody suffered from this except the taxpayer.
            To this day I want blood for what the auto Mfrs and Wall Street criminals did.
            Yes…what the managers and unions did was criminal. Every time I hear about those damned pension funds I can scream.
            Years ago they broke up the telephone monopoly due to it becoming to big…and now they support the exact opposite.
            Nonsense.

          • 0 avatar
            Pch101

            They say that ignorance is bliss, but lately it seems to be more angry than joyful.

    • 0 avatar
      alexndr333

      My only wish with the bailout was that as a condition of the government loan, President Obama would require the resignation of the GM Board of Directors. Those folks were asleep at the switch for years, allowing the corporation to settle into deep, entrenched mediocrity. Shouldn’t the putative leaders of the organization have had to pay a price? New leadership could have shaken up an organization that still is struggling to overcome its old ‘culture’.

  • avatar

    OMG, Cameron, really? That is the headline you chose? How about a headline that emphasises the jobs saved, not just in the manufacturers but their suppliers, auto dealers etc etc. Compared to the cost to the taxpayer in supporting those folks without those jobs. Would have been nice to see the word success, or value in your stark headline.

    • 0 avatar
      DenverMike

      Who cares about jobs lost? Millions of jobs are won and lost every day. What makes these jobs so special?

      And any surviving OEMs and suppliers would pickup lost GM or Chrysler sales. And pickup lost workers, with their increased demand.

      Things always shift around in commerce. One brand dies as another one grows. If GM died 1st, Ford and Chrysler would’ve grown exponentially. Same story with suppliers.

      Let the strongest survive and learn from looking at the dead carcass of failed brands. Otherwise it’s business as usual for the “New GM” today. SNAFU again.

      • 0 avatar
        jmo

        “What makes these jobs so special?”

        They were being lost during an epic financial panic the likes of which we hadn’t seen in the country since 1929?

        • 0 avatar
          DenverMike

          “They were being lost during an epic financial panic…”

          That doesn’t make those jobs special. Small piece of the pie over all. Most would get hired by surviving (and GROWING) car makers and suppliers.

          Or McDonalds. So what?

          No need for panic. It wasn’t Y2K.

          “Do you wanna Super Size that?”???

          Some would move down to the pay scale they deserve, while those at the bottom would be the REAL losers. Many illegal aliens would be forced to go home. Canada mostly.

          • 0 avatar
            jmo

            “That doesn’t make those jobs special”

            Yes, yes it does.

            I assume you think we should have, “”liquidate labor, liquidate stocks, liquidate farmers, liquidate real estate… it will purge the rottenness out of the system. High costs of living and high living will come down. People will work harder, live a more moral life. Values will be adjusted, and enterprising people will pick up from less competent people,”

            We tried your way before, and the economy imploded. So, we decided to not follow that path again and it worked.

          • 0 avatar
            mikey

            @ DenverMike…I wasn’t aware that the U.S. had a problem with Canadian “illegal aliens”.

            Right, so, if the their giving you problems, feel free to send them home. All of them…with the possible exception of Justin Bieber. We have a “no return” policy on damaged goods. You may have to also keep Pamela Anderson, for the same reason.

          • 0 avatar
            DenverMike

            @Mikey – OK, but you must take back Brian Adams and all his Albums. I certainly don’t have a problem with Canadians, illegal and otherwise. Nor do I have a problem with illegal aliens in general. But I was just joking about Canadian illegals, since they’re the most forgotten and hardest to spot.

          • 0 avatar
            Lie2me

            Ha, ha, ha, I was totally unaware of the rising tide of Canadian illegals pouring over the boarder into the US. Thank you DenverMike for this astoundingly obtuse revelation. I shall now get my rifle and go sit on the Niagara River and defend my homeland

          • 0 avatar
            PonchoIndian

            Denvermike…you racist bigot!

          • 0 avatar
            bd2

            The country was that CLOSE on the brink of tottering from the Great Recession into another Great Depression.

      • 0 avatar
        APaGttH

        DenverMike:

        Here is what GWB has to say about it. It has nothing to do with these jobs being “special,” it had everything to do with Bush’s advisers telling him that the Great Recession would turn into the Great Depression if he did nothing.

        TTAC has painfully detailed all of the companies covered by TARP to save millions of jobs beyond the finance and auto industry. The list of companies seeking support from the Fed or TARP to stay afloat at the basement of the financial crisis is stunning and includes companies like McDonalds and Caterpillar. Toyota had to seek aid from the Japanese government in the form of loan support.

        Businesses run on lines of credit, not cash, and at the worst of the worst no one could get a line of credit. A non-intervention fiscal policy was tried before to solve a banking crisis – that was in 1929.

        Here is what Bush said…

        http://business.nbcnews.com/_news/2012/02/07/10342178-bush-on-auto-bailouts-id-do-it-again

        “…Sometimes circumstances get in the way of philosophy,” said the ex-pres!dent, during his speech in Las Vegas, referring to his normal stand in favor of free trade. “If you make a bad decision, you ought to pay,” he said, referring to the collapse of both General Motors and Chrysler.

        But Bush also noted that coming on top of the failure of Lehman Brothers, the meltdown of the banking industry and the collapse of the housing market, a painful shift in policy was needed.

        “I didn’t want there to be 21 percent unemployment,” he stressed, echoing forecasts at the time that the loss of GM, Ford and the automotive lenders also covered by the bailout could lead to the loss of 1 million jobs…

        • 0 avatar
          DenverMike

          Estimates are entirely based on fear. Even with a million lost jobs, OK, hasn’t anyone here ever lost a job? And what, you never found work again? I’ll bet you did find work, and much better off today because of the firing, layoff, etc. So what if it wouldn’t be so convenient for auto workers, suppliers, dealers, etc? They would be in that position for the choices they’ve made. They hitched themselves to the wrong wagon is all.

          The strongest suppliers would pickup the slack and feed off the carcass of the weak. The best employees would get hired up 1st, as the stronger car makers and suppliers gained in sales exponentially. Life would go on. What’s with all the fear mongering?

          • 0 avatar
            tonycd

            “Estimates are entirely based on fear. Even with a million lost jobs, OK, hasn’t anyone here ever lost a job? And what, you never found work again? I’ll bet you did find work, and much better off today because of the firing, layoff, etc. So what if it wouldn’t be so convenient for auto workers, suppliers, dealers, etc? They would be in that position for the choices they’ve made. They hitched themselves to the wrong wagon is all.

            “The strongest suppliers would pickup the slack and feed off the carcass of the weak. The best employees would get hired up 1st, as the stronger car makers and suppliers gained in sales exponentially. Life would go on. What’s with all the fear mongering?”

            If you’re a billionaire, you’re utterly amoral. If you’re not, you’re utterly gullible.

          • 0 avatar
            Jimal

            Have you ever looked for a job when there are 900k other people – many living in your area and possessing your skillset – looking for the same job? Jobs by the way that went away because the company y’all worked for collapsed?

            Fear mongering indeed.

          • 0 avatar
            DenverMike

            Dude man.. If you’re up against 900,000 applicants, you’re setting your sights too high. Way too high.

            Get realistic on what jobs you can actually land. And qualified for, ahead of most other applicants. There has to be something.

            It’s not anyone’s fault but your own, you didn’t invest in yourself.

            Millions of jobs go to new immigrants because Americans either refuse to do them or can’t. Everything from heath care to lawn care.

          • 0 avatar
            Jimal

            Wow, what a bunch of nonsense. Tone deaf nonsense.

            In the situation you are describing, you HAVE invested in yourself. You chose a field, you applied for a job and were hired. You were trained to do a job and between that training and your time on the job you developed a set of skills. You make good money and your lifestyle reflects this. Now after being in that job for years – maybe decades – your job goes away. But not just your job, the job. Everyone who developed themselves similarly is now also out on the street.

            Now you and your entire plant’s worth of people are out looking for jobs that your skill set is best for. Except the other companies in your industry are rattled by what just happened to your company – or perhaps they’re in not much better financial condition – so they’re not hiring. Want to take a job at McDonalds or with the local landscaper? Sorry, but you’re “overqualified” for McDonalds and the landscaper isn’t hiring because with the plant closure he’s run out of work.

            Seriously, get a clue.

          • 0 avatar
            DenverMike

            No, You need a clue. Assembly jobs don’t usually pay much. They take as much skill as digging ditch or squeezing mop.

            I had an assembly job. And if it paid as much as union auto assembly, I’d still be there. Auto workers won the job lottery is all. So those jobs are very limited anyways. Not something I recommend for the kiddies, long term. And it’s NOT investing in yourself.

          • 0 avatar
            Jimal

            And that is where you’re missing the point.

            Because the assembly job you had was low skill and low paying, all assembly jobs are low skill and low paying? Whether you consider it investing in yourself or not, if someone got into a line of work, and did what they had to do in terms of training and showing up and what have you, you’ve invested in your career. And more importantly, you’ve gone down a path. If your line of work goes away, you’re not just going to be able to instantly change tact and pick up a different line of work, especially in a job market that is frozen, suddenly flooded with applicants that share your skills, or some combination of the two.

          • 0 avatar
            DenverMike

            NO, You’re missing the point. There’s no job security in jobs a chimp could do. We’re always going to have literal armies of unskilled labourers. Some may get amazingly lucky and land a high paying job with zero degree, screwing together random parts to other random parts, but the facts remain.

            If there’s nothing a particular mop squeezer can do to set themselves above the rest, they have zero job security. Just a roll of the dice.

      • 0 avatar
        Whatnext

        All the automakers including the transplants agreed that the shock to the supply chain had GM gone under would have had severe consequences for them all.

      • 0 avatar
        Xeranar

        A.) No, millions of jobs are not ‘won and lost’ every day. A cataclysmic shift would have occurred that would have moved unemployment up 5-10% in a single flail swoop. Never mind that losing all those jobs in a single industry would devastate any recovery effort….

        B.) Because the OEMs aren’t built to buy and replace those pieces in simple order. The credit markets seized, the lack of sales was driving the industry into collapse. The same people that couldn’t even manage to buy Hummer and barely managed Saab were expected to buy an entire industry?

        C.) By the way, if ‘GM died’ Ford & Chrysler were next. The loss of major contracts to produce would have shut down suppliers, the constriction in the parts market would drive down wages and create a weaker recovery.

        Do you even understand the basics of an industry-wide meltdown or are you just a microeconomics guy who thinks everything is no bigger than his garage?

        • 0 avatar
          DenverMike

          The whole argument you keep using s!desteps logic. A shared supplier loses the GM contract, but is also very dependent on Ford (if Ford is very dependent on the supplier). That’s good and bad. Add to that, Ford would be selling lots more autos with GM going the way of the dodo. And Ford isn’t dependent on any one supplier for any one part. If they are, that’s a mistake any way.

          And it wouldn’t have been the case that both GM and Chrysler would have died simultaneously. The stronger of the two would have survived to feed off the carcass of the other. Just the taking over the a good percentage of the other’s pickup trucks would’ve been the shot in the arm they needed. And with new incentive not to fail, and with poor decisions, etc, since no more bailouts from Uncle Sam.

    • 0 avatar
      maxxcool7421

      Unprofitable business should ALWAYS $%^&ing die … that the law of economics and the reward for making F$$%ing dumb as a post business decisions and making the worlds crappiest products for decades.

      But no, too many big business ties to congressrats dug 9+ billion dollars to float a company that still makes shit like the dart, and gets a majority share bought by Fiat..

      Screw the dealers, workers and plants. When you get a tumor you cut it out.

    • 0 avatar
      maxxcool7421

      Simply put. No 1 company should have the power to hold a economy hostage. Let it die along with the unprofitable postal service.

      • 0 avatar
        mu_redskin

        Ahh yes – kill off the postal service. too bad you would need to violate the US constitution to do that: Article I, Section 8, Clause 7. I always find it funny when conservatives howl about liberals doing unconstitutional things but forget about the constitution when it’s something they don’t like.

        • 0 avatar
          Sigivald

          The Postal Service is authorized, not mandated.

          (“Congress shall have the power … To establish Post Offices and post Roads.”)

          Note it does not say “Congress shall establish Post Offices”; just that it can if it so desires.

      • 0 avatar
        psarhjinian

        “No 1 company should have the power to hold a economy hostage”

        The only way you’d get around that is either much more brutal anti-monopoly regulations, or outright nationalization.

        I expect you don’t really want that, either.

        The thing is, companies grow and sell things. When they grow big enough, or sell enough critical stuff, you can’t really prevent them short of the kind of market intervention you’re likely not a fan of in the first place.

        • 0 avatar
          jkross22

          The government took a different view of things when AT&T was broken apart.

        • 0 avatar
          maxxcool7421

          “”The only way you’d get around that is either much more brutal anti-monopoly regulations, or outright nationalization.

          I expect you don’t really want that, either.””

          While I agree that nationalization is horrible… there was a choice to allow GMChrysler to sink and die like they should have, instead we bailed them out of fear that it would be worse to allow that to happen.. and certain parties would loose to much money.

          You don’t feed a tumor. look at GM.. pushing hard to recall as many cars as they can so they can force another bankruptcy to get away from the ignition settlements..

      • 0 avatar
        Xeranar

        The postal service is profitable actually, they’re just being forced to fund a pension system 75 years in advance which is an intentional attempt to destroy them. There is plenty of news articles that actually explains that the postal service is cheaper and more competitive with UPS & Fedex than ever but Republicans have no interest in supporting them because the private players are paying for their re-election campaigns.

        • 0 avatar
          Jimal

          Not to get too far off topic, but at the same time on topic, I’ve been selling a surplus of old truck parts I’ve found myself with this summer and with the exception of a couple of large items going via Greyhound, I’ve been shipping via USPS. UPS and FedEx are much more expensive. For example, yesterday I shipped a 20lb, 6 foot long tube containing a steering column from Connecticut to Michigan, 2 days for just over $11. No way UPS or FedEx was going to match

          • 0 avatar
            Xeranar

            Oh totally, my folks have been kind enough to send cute little Pittsburgh care packages while I work in New Orleans. To send a box with through USPS they said it was around $30 bucks, to do it through Fedex like my dad wanted to do originally it would have been almost $60. The USPS has the largest vertical and horizontal infrastructure for shipping. They use both private and commercial jets to get packages around the country at a much-reduced rate. The private players just can’t afford that. Never mind that in most countries UPS & Fedex pay a fee to the government to act as a postal contractor to deliver.

      • 0 avatar
        tonycd

        I’m still waiting for this ideologically pure principle to be applied to the likes of Goldman Sachs.

        I have a feeling it’ll be a long wait.

        By the way, the postal service operates at a solid profit. It’s unprofitable on paper only because a political party saddled it arbitrarily with the artificial obligation to prepay all its actual and anticipated pension costs for the next 75 years, in a deliberate effort to kill the nation’s biggest remaining employer of union members. Bet Rupert didn’t tell you that part.

      • 0 avatar
        ect

        The auto bailout was not an isolated act. It was part of a much larger effort to prevent the complete collapse of the global financial system. It’s easy for people to forget today just how close we came to that, but we did. And that would have made the Great Depression look like unbridled prosperity.

        The abandonment of Lehman Brothers, and the implicit abandonment of stability in the financial markets, raised the spectre of counterparty risk to a level no financial market or institution could tolerate. Credit markets froze, which meant the velocity of money slowed to a crawl.

        No credit, no business activity. Period. Governments made a huge, and concerted, effort to keep this from happening – of which the auto bailout was but one component. Fortunately for all of us, they succeeded (though not without cost, to be sure).

        $9 billion? Not even small change, in the overall scheme of things. And a bargain price for what was avoided.

        • 0 avatar
          APaGttH

          Correct.

          On September 13, 2008, global financial advisers were telling world leaders that without drastic action, we were literally 48 to 72 hours from mass global panic.

          Think cities in flames, spiraling inflation, run on the banks, you can’t get money out of your ATM and your credit cards are useless world panic.

      • 0 avatar
        rudiger

        The money from those postal service retirement prefunding shenanigans also came in real handy to fund the Iraq and Afghanistan invasions and subsequent long-term occupations.

  • avatar
    Roader

    “Per the Center for Automotive Research and others who supported the bailout, the loss was much preferable over the total collapse of GM and Chrysler, with the former stripping the industry of 1.2 million U.S. jobs, $17 billion lost in Social Security and income taxes for 2009, and $79.5 billion in personal income tossed into the fireplace.”

    Nonsense. Both companies would have gone through a restructuring bankruptcy. They wouldn’t have simply disappeared. The bailouts were just a politically expedient way to transfer taxpayer dollars to the UAW.

    • 0 avatar
      psarhjinian

      “Both companies would have gone through a restructuring bankruptcy”

      Not in 2008. There was no capital and no buyers. The government really was the last resort, because any C11 would have disintegrated into a C7.

      “The bailouts were just a politically expedient way to transfer taxpayer dollars to the UAW.”

      Do we have to have this discussion again? The UAW was a creditor, thanks to GM and Chrysler’s lack of foresight, and the only one willing to see either company operate as a going concern.

      Are you going to bring up the “Poor Hard-Done-By Bondholder-Grannies” canard next?

      • 0 avatar
        Roader

        GM would have been broken up and sold off piecemeal. It wouldn’t have simply disappeared. Ford restructured in 2006, closing plants and mortgaging assets. Painful, yeah, but necessary. GM and Chrysler could have done the same.

        Neither GM or Chrysler would have liquidated. Their assets were and are valuable and would have sold. The way the bailouts were structured – shafting secured creditors and rewarding unsecured creditor UAW – was just a quid pro quo: Obama paying back the UAW for their support for his 2008 campaign.

        • 0 avatar
          Pch101

          Again, I’d love to see your resume.

          Nobody who actually worked in the capital markets knew where this money was supposed to come from. What mattress full of cash did you have to work with, and how did you keep it so well hidden?

          • 0 avatar
            bunkie

            In 2008, I was working for a very large international bank. We weren’t sure that we were going to be able settle our outstanding deals because we didn’t know which firm was going to collapse next. Had the Fed not stepped in to inject capital to guarantee those deals, we would have held onto our cash, as would every other financial institution. The result would have been the largest liquidity crisis the world had ever seen. That’s why we have the Fed. It did its job quickly and decisively. The auto bailout was no different (albeit on a much smaller scale). Bitch about the loss all you want, but it was a very small price to pay for the stability it ensured.

          • 0 avatar
            Lie2me

            “Nobody who actually worked in the capital markets knew where this money was supposed to come from”

            It came out petty cash, duh!

          • 0 avatar
            Roader

            By 2008 it was too late. The Big 3 made out like bandits in the late-90s. Got big and bloated and apparently thought they’d always party like it was 1999. Then 9/11 happened and it became apparent that the party wasn’t going to last forever i.e., time to tighten the belt.

            Ford did. GM and Chrysler didn’t. It’s as simple as that. Call it what you want, justify it to your heart’s content. What it comes down to is privatizing the profits and socializing the risk. GM management and the UAW and the Democrats’ campaign coffers were enriched with billions of taxpayer dollars, directly or indirectly. It’s as if we’re reverting to some third world system where the dictator decides who gets to stay in business dependent on how much money slides from one pocket to another.

            What’s next? The Big 3 teaming up with the UAW to lobby the Feds to put a 30% duty on imported cars? That’s the kind of banana republic idiocracy we can expect if we get another Bush/Obama-type president in 2016.

          • 0 avatar
            Roader

            [Spam filter strikes again?]

            By 2008 it was too late. The Big 3 made out like bandits in the late-90s. Got big and bloated and apparently thought they’d always party like it was 1999. Then 9/11 happened and it became apparent that the party wasn’t going to last forever i.e., time to tighten the belt.

            Ford did. GM and Chrysler didn’t. It’s that simple. Call it what you want, justify it to your heart’s content. What it comes down to is privatizing the profits and socializing the risk. GM management and the UAW and the Democrats’ campaign coffers were enriched with billions of taxpayer dollars, directly or indirectly. It’s as if we’re reverting to some third world economy where the dictator decides who gets to stay in business dependent on how much money slides from one pocket to another.

            What’s next? The Big 3 teaming up with the UAW to lobby the Feds to put a 30% duty on imported cars? That’s the kind of banana republic idiocracy we can expect if we get another Bush/Obama-type crony capitalist president in 2016.

          • 0 avatar
            Roader

            [Spam filter strikes again? Or I’m being censored because some authors are butthurt. Third time, five hours apart.]

            By 2008 it was too late. The Big 3 made out like bandits in the late-90s. Got big and bloated and apparently thought they’d always party like it was 1999. Then 9/11 happened and it became apparent that the party wasn’t going to last forever i.e., time to tighten the belt.

            Ford did. GM and Chrysler didn’t. It’s that simple. Call it what you want, justify it to your heart’s content. What it comes down to is privatizing the profits and socializing the risk. GM management and the UAW and the Democrats’ campaign coffers were enriched with billions of taxpayer dollars, directly or indirectly. It’s as if we’re reverting to some third world economy where the dictator decides who gets to stay in business dependent on how much money slides from one pocket to another. So. Lyn. Dra.

            What’s next? The Big 3 teaming up with the UAW to lobby the Feds to put a 30% duty on imported cars? Fauxcahontas and Bernie Sanders are already talking about increased tariffs on mfg’d goods. That’s the kind of banana republic idiocracy we can expect if we get another Bush/Obama-type crony capitalist president in 2016.

        • 0 avatar
          mu_redskin

          That is nonsense – take Jeep for example. A lot of parts underneath, engines, transmissions are shared with other models in chryslers lineup. Let’s suppose that out of all of chrysler, only Jeep makes it and is sold off to another automaker. They would also would have to keep chrysler’s engine and transmission plants running to put in just those Jeeps. Otherwise, you would have to shut down and not build any Jeeps for a year or 2 that it takes said automaker to fit in their transmission and engines.

          • 0 avatar
            jmo

            “Let’s suppose that out of all of chrysler, only Jeep makes it and is sold off to another automaker.”

            With auto sales in free fall where was this magic money going to come from? Toyota, Honda, Geely, Hyundai, needed all their cash to survive.

        • 0 avatar
          lne937s

          What do you think “liquidated” means? When you break up a company and sell off the assets to pay creditors, that is called liquidation. GM had twice as much in Liabilities as it had in Assets in 2008. As such, GM would cease to exist if you sold off all of its assets to pay half the people it owed money.

          And, if the money did not go to the UAW for retiree benefits, the taxpayers would have paid more than what we lost in TARP through the Pension Benefit Guarantee Corporation.

          We should have never been put in that kind of lose-lose situation. Business regulations and safety net programs should be looked at more closely. But doing nothing would have cost us more in the long run.

        • 0 avatar
          Jimal

          This is pure fantasy. A neo-con wet dream. Assets have no value if no one is willing to buy them. And in 2008, they tried. No one was willing to buy them.

        • 0 avatar
          Scoutdude

          There were probably takers for parts of GM but no one was willing/stupid enough to pay money for Chrysler. If someone had wanted to pay for Chrysler no bank would have been stupid enough to loan them money.

          Daimler had them up for sale for a number of years they had no takers for the company as a whole until they found Cerebus and Daimler still had to tote the note for much of that transaction. Cerebus went about the usual methodology for a LBO. They sold the assets that they could and then tried to prop up the sales with their lifetime warranty (which they wouldn’t honor) and heavily subsidized leases.

          The plan was to show that they had “turned it around” and get rid of it before the losses created by the lifetime warranty and subsidized leases started to materialize.

          The gov’t payed Fiat to take Chrysler because that was what they had to do to unload it. Cerebus walked away with nothing and Daimler was left holding worthless paper.

    • 0 avatar
      Pch101

      Please provide me with your resume. You apparently must have some amazing near-magical ability to raise capital during times of crisis that nobody else possesses.

      Your financial acumen should not be kept secret from the rest of the world. Where were you hiding in 2008-9?

    • 0 avatar
      jmo

      “Nonsense. Both companies would have gone through a restructuring bankruptcy. ”

      Hah, and who was offering debtor in possession financing at that point?

      Names of firms please as you obviously must know to make such a bold statement.

    • 0 avatar
      APaGttH

      Certainly not in 2008.

      In order to do a restructure you need to find someone to do the debtor in possession financing. Do you understanding anything about bankruptcy?

      No one would because no one could because credit markets were frozen. All of this history is very well established.

    • 0 avatar
      jimbob457

      There were two practical problems with Chapter 11:
      1. By the time all the lawyers and accountants got through sorting things out the economy would have been in a death spiral.
      2. There was not enough DIP financing available in the private sector to do a Chapter 11 anyway.

  • avatar
    Lie2me

    The US Government has never been known for it’s wise investment strategies

    • 0 avatar
      psarhjinian

      Actually, the government does reasonably well as an incubator (consider, eg, the Internet)). It (and the institutions it funds) generally have much longer-term vision than the current crop of next-quarter-thousand-percent-ROI VCs.

      It’s especially important now that much of the pure R&D that used to be done by the likes of Bell Labs has been sacrificed to the God Of EBITDA.

    • 0 avatar
      Drzhivago138

      I know, right? I mean, all those countless billions funneled into some national parks or something…what do we get, a bunch of trees? :P

      Also, *its. The neophyte copyeditor strikes again!

      • 0 avatar
        psarhjinian

        I had a longer response, but it got eaten.

        I’ll summarize my counterpoint: the Internet.

      • 0 avatar
        jkross22

        Yeah, like the $100 billion ‘misallocated’ in Afghanistan, the $10 billion lost due to Medicare fraud and the hundreds of millions lost on websites for the FBI and ACA.

        I mean, other than those, the government’s a reliable, trustworthy steward of tax dollars.

        http://finance.yahoo.com/news/5-most-egregious-examples-government-110000550.html

        That’s just at the Fed level. Look at airport expansion projects, parking lots for bus stations, etc. You know, the boring, unsexy stuff no one pays much attention to. It’s not surprising to hear these projects are 40-60% above expected costs.

    • 0 avatar
      psarhjinian

      “The US Government has never been known for it’s wise investment strategies”

      Actually, the government does reasonably well as an incubator (consider, eg, the Internet)). It (and the institutions it funds) generally have much longer-term vision than the current crop of next-quarter-thousand-percent-ROI venture-capitalists.

      It’s especially important now that much of the pure R&D that used to be done by the likes of Bell Labs has been sacrificed to the God Of EBITDA.

    • 0 avatar
      Pch101

      Given the trillions — yes, that’s trillions with a “t” — in GDP that were saved, the $10 billion was a relative bargain.

      It’s just unfortunate that there was no corporate partner for GM as there was for Chrysler. (I remain surprised that Renault-Nissan didn’t give it a go.)

      • 0 avatar
        psarhjinian

        “It’s just unfortunate that there was no corporate partner for GM as there was for Chrysler. (I remain surprised that Renault-Nissan didn’t give it a go.)”

        Scale. Chrysler worked because there were synergies between the two without much overlap.

        GM is simply too large, too diverse and too encumbered. The only options would have been dismemberment, nationalization. R-N could have done so with Chrysler, but would have been insane to try so with GM.

        Maybe, maybe one of GM’s Chinese JV partners could have done it.

        • 0 avatar
          Pch101

          Renault-Nissan was interested in a merger with GM in 2006. It would seem that Rick Wagoner killed it off. (He really liked his job.)

          With Wagoner out of the way, that would have been an opportune time to resume the deal. GM would have probably been trimmed down, but I would say that would have been a good thing.

          • 0 avatar
            psarhjinian

            “GM would have probably been trimmed down, but I would say that would have been a good thing.”

            I’m not sure. They have near-duplicate presences in Europe and China. R-N would get a bump in North America, and GM in Japan.

            Both would pick up some pretty terrifying costs, and their respective workforces would bear a lot of pain as they rationalized.

          • 0 avatar
            Pch101

            GM has enough market share to make it work; the different brands of cars reach somewhat different audiences. As an added bonus, R-N would have obtained the full-size pickup that it wanted.

          • 0 avatar
            DeadWeight

            GM will find itself in big financial trouble again when the now white hot pickup truck & large CUV/SUV segment cools off, as it inevitably will (for a variety of reasons). These profits probably represent the difference between swinging GM from a net profit to a net loss position at present (i.e. nothing fundamental has really changed at GM).

            GM is dependent on pickups & large CUVs/SUVs for the the overwhelming bulk of their profits, and they’re literally betting their future on being a (1) number one or two position seller in China long term, and (2) seeing China turn evolve into the world’s most stable, successful, largest developed economy over the long term.

            Also, GM is still putting out loads of terrible, shoddy product, and they’ll never develop strong Toyota/Honda level goodwill intangible value and a deeply loyal customer base given this.

            If both (1) AND (2) don’t pan out, GM’s current business model will be put into serious jeopardy.

    • 0 avatar
      MPAVictoria

      Lie2me: What has the Federal Government ever done for us?

      MPAVictoria: The Interstate Highway System?

      Lie2me: Oh yeah, yeah they gave us that. Yeah. That’s true.

      MPAVictoria: The technology that led to the Internet?

      Lie2me: All right, I’ll grant you that the Interstate Highway System and the Internet are two things that the Feds have done…

      MPAVictoria: And the Social Security…

      Lie2me: (sharply) Well yes obviously the Social Security… the Social Security goes without saying. But apart from the Interstate Highway System, the Internet and Social Security…

      • 0 avatar
        Lie2me

        What, huh? Have your imaginary conversation with someone who’s point you understand.

        .
        The Point

        .

        You

        The US Government isn’t suppose to invest tax dollars, they’re suppose to spend those dollars in a way that benefits the people they in theory serve. It doesn’t always work that way, but I was FOR the bailout because the benefits outweighed the negative, but the US government is a lousy investor.

        • 0 avatar
          MPAVictoria

          Public infrastructure IS an investment you dolt.

          /And one that is almost always undervalued.

          • 0 avatar
            Lie2me

            Go look up the word “investment” then go to your room and think about how you embarrassed yourself

          • 0 avatar
            MPAVictoria

            DEFINITION OF ‘INVESTMENT’
            An asset or item that is purchased with the hope that it will generate income or appreciate in the future. In an economic sense, an investment is the purchase of goods that are not consumed today but are used in the future to create wealth.

            Like say a bridge or a highway.

          • 0 avatar
            Lie2me

            So, does this mean the government is planning to sell the Interstate Hwy System (which was created for the purpose of mobilizing the military not for our convenience) or The National Parks System? Because without an expectation of a fixed monetary/goods return over a defined period of time it’s not an investment, it’s an improvement or an expense

          • 0 avatar
            MPAVictoria

            By any reasonable definition of the term public infrastructure projects are investments. That is why the IMF calls them “infrastructure investments”.

          • 0 avatar
            Lie2me

            You’re right, I was wrong the government does invest

            “The federal government pays for a wide range of goods and services that are expected to be useful some years in the future. Those purchases, called investment, fall into three categories: physical capital, research and development (R&D), and education and training.”

            Here is the results of those investments…

            BUDGET RESULTS FOR FY 2014

            OUTLAYS

            $3.5 Trillion

            REVENUES

            $3.0 Trillion

            DEFICIT

            $483 Billion

            DEBT HELD BY THE PUBLIC
            (End of Fiscal Year)

            $12.8 Trillion

            Source: Department of the Treasury.

            My original statement…

            “The US Government has never been known for it’s wise investment strategies”

            ***DEFICIT $483 Billion***

            Now go back to your room and think some more

            http://www.cbo.gov/publication/44974

        • 0 avatar
          Xeranar

          Why are they a lousy investor? They blew 10 billion on an industry that will pay that back in less than a year in tax receipts (you know, the money they get to collect by virtue of GM & Chrysler still existing). The hit to the economy they saved by eating 10 billion is an insane profit margin. 1.2 MILLION jobs is a great deal of jobs. Just the income tax alone from those jobs amount to more than 10 billion annually.

          So no, they are excellent investors. You just don’t understand the argument you’re making because it’s built off of lazy presumptions and self-supporting cultural views.

          • 0 avatar
            Lie2me

            You’re saying that because the government is running at a 483 billion dollar deficit instead of perhaps a trillion or more dollar deficit that they’re excellent investors? I gave them credit for avoiding a catastrophic financial disaster with the bailout, but that doesn’t make them “excellent investors”, it just makes them less lousy then they could have been

          • 0 avatar
            Xeranar

            Running a deficit has zero to do with their investment strategy. In fact, the main reason we run at a deficit is because one political party has worked to make raising taxes anathema to the discussion so regardless of how we like to think about it a system doesn’t run on air. The return on investment of military is terrible but the return on investment in medicare/medicaid/SS are amazingly high.

            It’s easy to attack the government for shortcomings but you have to recognize that the culture surrounding it has an agenda and that agenda isn’t recognized in the core statements being made. In other words: You can’t want lower taxes and keep a 1 trillion dollar military machine running at the same time.

          • 0 avatar
            Lie2me

            “Running a deficit has zero to do with their investment strategy.”

            In my house it does

          • 0 avatar
            Xeranar

            Really? Because the government isn’t like your house and you shouldn’t try to make comparisons to it. Your house can’t raise taxes to cover expenditures. Your house isn’t building public goods. Your house isn’t a government and drawing comparisons based on it just isn’t sound logical views.

          • 0 avatar
            Lie2me

            Give it a rest…

            Happy New Year, go out and have some fun

      • 0 avatar
        Conslaw

        +1MPAVictoria

        The people who didn’t get this need to watch more good movies.

    • 0 avatar

      “The US Government has never been known for it’s wise investment strategies”

      Darn, Warren Buffet, you should run for office, I know of at least one person who will donate

    • 0 avatar
      jmo

      Louisiana Purchase – $0.04 an acre.

      Alaska – $0.02 an acre.

      Thoughts?

      Interesting side note – the actual check we used to purchase Alaska:

      http://www.ourdocuments.gov/doc.php?flash=false&doc=41#

    • 0 avatar
      jmo

      Louisiana Purchase – $0.04 an acre.

      Alaska – $0.02 an acre.

      Thoughts?

      • 0 avatar
        Lie2me

        Alaska=Good deal

        Louisiana=Not so much

        Me=Kidding

      • 0 avatar
        darkwing

        healthcare.gov: $533 per signup.

        So the lesson here is Jefferson/Seward ’16?

        • 0 avatar
          Xeranar

          @DW – Every year that number will decline, never mind that the cost of an uninsured patient is extraordinarily higher. But thanks for being a complete right-wing loon still trotting out that broken dodo to your friends and excitedly clapping like a buffoon.

          • 0 avatar
            Lie2me

            Did anyone every tell you that you can make a point without being a condescending dick? You probably could win more people over to your point of view that way, but you’re a political expert, so you must already know that

          • 0 avatar
            Xeranar

            @Lie2me – Honestly? I am exceedingly polite, to a fault even in personal contact. The reality is politics much like religion are such personal choices that using basic logic is simply not enough.

            It’s when these remarks are made that I find myself so displeased that I express myself in a far less civil manner but trust me, DW is never going to vote for actual economic benefit for himself as long as he can blow smoke like this. I’ve been explaining basic union benefits and the economic model behind them for years now on TTAC and it never seems to get any further than the right-wingers frothing more angrily as they stumble around holding desperately on to their perceptions because to be wrong would force them to re-evaluate their entire worldview.

            I had to face that when I started dealing with public unionization and services. The best approach is to use a competitive system that allows some private sector actors to work in it and I had to accept that. But I did and grew, when others are willing to they’re welcome to join me.

  • avatar

    Good Obama did. Detroit was/is already in shambles. I wish The Big Three had taken the time to become more competitive globally. They didn’t. GM will probably have to settle for the #3 position within the next 2-5 years, perhaps even slip to a #4 position.

    • 0 avatar
      Jeff S

      What’s done is done, it is to easy to Monday morning quarterback. The damage that would have been done to the US economy would have far exceeded 9 billion dollars and we would all be paying for it in more unemployment benefits and welfare. The fact that Ford and Toyota were pushing for GM and Chrysler to get a bailout should tell everyone something about today’s auto industry. Ford, Toyota, Nissan, Honda, and a few others buy many of their parts and components from the same suppliers that supply GM and Chrysler. What do you think would have happened to many of those suppliers? I do have some misgivings about the bailout and see government loans as a last resort which I believe for GM and Chrysler it was–no one would provide either with additional funding. As for Ford they did not get a loan but they got Government funds to retool their plants to make more fuel efficient vehicles in the US (Focus and Fiesta).

      My main concern about the Ford, GM, and Fiat Chrysler is their main reliance on trucks for most of their revenue. Long term this reliance is not sustainable. Consumers can change preferences for certain type of vehicles based on price, fuel economy, life style changes, and just because they get tired of a certain type of vehicle (station wagon, SUV, minivan, and large sedans). The next generation might not want to own what their parents or grandparents drove.

    • 0 avatar

      You must have missed the point of restructuring. It wasn’t meant to make GM, the biggest, baddest automaker ever. It was to create a smaller, nimbler, profitable automaker. No one expected them to be at #2 or #3 globally after cutting brands/dealerships by 50% and hourly/salaried workers by 30%. They would have sold Opel (~10% of total sales) too if someone was willing to buy. And no one expects them to remain at #3 for long. Long term, GM will be lucky to remain in the top 5 and that is a good thing.

    • 0 avatar
      APaGttH

      I don’t care if GM becomes the number 8 auto makers as long as they are number 8 and profitable.

      Being number one and losing thousands of dollars on each car sold for decades isn’t a business model.

  • avatar

    All I can say is Money well spent when I look at the Dodge Dart, Avenger, Chevy Impala Classic and captiva.

    • 0 avatar
      APaGttH

      Wow nice cherry picking there.

      Lambda triplets?
      Colorado/Canyon?
      C7?
      CTS-V (the one retiring now)
      Impala (new one)
      Encore (created an entire class whether you like the car or not)
      verano (reference TTAC – literally owns it’s segment in sales)
      Jeep Cherokee
      Charger Hellcat
      Challenger Hellcat
      200 (the new one)
      Cruze
      Sonic (one of the best B-segment cars you can buy and sales leader)

      Ya — thanks for nothing…

      To the point of the W-Body Impala and the Capitva, both were fully developed and R&D basically completely amortized. Translation – each one built is a license to print money at this point.

      • 0 avatar
        deanst

        Not sure if citing a list of unreliable or gas- guzzling vehicles advances your argument. The lambda vehicles were around pre bankruptcy, hellcats are gas-guzzling irrelevancies, the 200 remains one of the worst mid size cars, while Cruze and sonic remain among the least reliable cars in their class. (While delivering sub-par fuel efficiency.). And the versa dramatically outsells the sonic. Chrysler remains a builder of trucks and SUVs, and together with gm they remain unable to build a reliable small car. The biggest problem with the bailout is that no change has occurred at gm – they continue to be wildly uneven in their ability to consistently develop desirable vehicles, and continue with their never-ending promises that their next vehicle will represent the best vehicle ever made. (See Malibu)

        • 0 avatar
          APaGttH

          Gas guzzling by what standard?

          The Hellcat twins have literally triple the horse power and torque of 1/2 ton pickups of less than a decade ago with better fuel economy. Their capabilities are stunning.

          According to True Delta, the Sonic is quite average in the quality department:

          http://www.truedelta.com/Chevrolet-Sonic/reliability-1065

          According to True Delta only the first year Cruze is problematic, with models after being average to above average.

          http://www.truedelta.com/Chevrolet-Cruze/reliability-1008

          Even TTAC has praised the Cruze and Jack has written numerous pieces on the longterm viability of the Cruze – so argue with the editorial staff there.

          The new 200 is anything but subpar or uncompetitive. It is getting excellent reviews and has high praise from the B&B.

          Never mind that this is in day and age there is no such thing as a “bad car.” You really can’t get a piece of crap in the B (sans the Yaris, which isn’t bad just incredibly uncompetitive in its class), C, D, or E segment. Ditto for the subcompact, combat, and midsize SUV space.

          As far as your earlier comment about the Dart – certainly a marketing and product mix lot, but are you really going to cry tears for the Caliber it replaced?

          You certainly danced around the complete success of Jeep, which has catapulted Chrysler back to the number three maker in the US.

          Certainly in the C segment you can’t say the Corolla or Civic are “bad cars” but they sure aren’t competitive. Unless you consider 4-speed automatics, carry over engines, drum brakes, steel rims, torsion beam suspension, and 1987 digital clocks in the middle of the dashboard competitive. LED headlights (which are reported to be weak) are lipstick on an old show girl.

          Why don’t you just admit that your argument against the bailout is not rooted in any semblance of historic or economic reality.

      • 0 avatar
        05lgt

        Shouldn’t the grand cherokee make this list?

  • avatar
    J.Emerson

    $9.26 billion that could have been used to REALLY investigate Benghazi instead. What a waste.

  • avatar
    dwford

    So, when it’s all said and done, the profits from the financial bailout more than offset the small losses in the auto bailout, so the bailout ended up being a net revenue producer for the government. Financially, not bad. Moral hazard-wise, still terrible.

  • avatar
    Dirk Stigler

    Yep, moral hazard is the name of this game.

    $9b could be used to set up about 4500 people for life, at $2m a pop, or carry 60,000 for a couple years at $150k each. That’s a lot less than the number who would have been affected by GM going bust, so it’s fair to say we got something for our money in those terms.

    But we also got something else, which is the certain knowledge that companies like GM, BofA etc will be bailed out if they get into real trouble. We’re going to be spending that $9b over and over again in the future.

    And you all act like GM would have disappeared into thin air. It should be obvious that it wouldn’t. Yes, its assets would be sold for peanuts, but they’d be sold and put back to use, and a good part of the workforce would have been rehired. When you look at the practices of New GM that are already starting to strongly resemble Old GM, it’s not very clear that any meaningful restructuring took place, or that our $9b was as well spent as some of you think.

    • 0 avatar
      Pch101

      The goal wasn’t to save GM, but to keep the US economy from collapsing.

      GM was bailed out because it was quickly becoming the next Lehman. And Ben Bernanke realized quite quickly that allowing Lehman to fail in the name of moral hazard proved to be a mistake.

      GM could fail tomorrow, and it still would have been worth it.

      • 0 avatar
        Dirk Stigler

        What would be the mechanism of the US economy collapsing due to GM shutting its doors? A lot of people just take that on faith, but it comes apart pretty quickly if you give it some informed thought. Yes there’d have been greater short-term pain, but the economy and government finances would have recovered within a year or two. As they did in several other countries that didn’t engage in bailouts. People being out of work? We’ve carried tens of millions on unemployment for several years anyway.

        The GM bailout was about a) retail politics – “I saved your job!”, and b) reducing the creditors’ exposure, said creditors being entities that make a lot of political donations. You could make a case that the GM bailout was really part of the Wall Street bailout.

        • 0 avatar
          Pch101

          If you want a show of faith, then look in the mirror.

          2008 was shaping up to make 1929 look like a picnic. The markets were already spooked by Lehman. If GM had not been propped up by Bush and then saved by Obama, then the markets would have gotten the message that the US was out to lunch and the capital markets would have shut down completely. All eyes were on the United States and what it would do to intervene.

          This country’s economy was within weeks of collapse, and it was mostly Ben Bernanke who was responsible for saving it. People like you will never appreciate how bad that it really was — sometimes I wish that we had a depression so that a lot of you would have been eating kibble and sleeping in the park, which would have been a hard but effective way to teach you about what it’s like to get punched by the invisible hand.

          • 0 avatar
            Dirk Stigler

            Okay, done talking to “people like you”. Have a good one.

          • 0 avatar
            Lie2me

            “Okay, done talking to “people like you”. Have a good one.”

            People like who? People who know what they’re talking about and who make sense? You really should talk to more “people like you” you might become a smarter man

          • 0 avatar
            Dirk Stigler

            Pch referred to “people like me” in his post above. I didn’t appreciate it.

          • 0 avatar
            Pch101

            Nobody asked you to appreciate it.

            The lesson is there waiting to be learned, you just don’t want to learn it. I’m just thankful that Ben Bernanke was the Fed chairman, and that you weren’t.

          • 0 avatar
            Jimal

            Lie2me, in the vernacular of the youth, somebody got told and didn’t like it.

          • 0 avatar
            bd2

            The sup-prime mess would have been about 10-15 times worse than the recession which arose from the S&L crisis (politicians seem never to learn from past mistakes or is it that the $$ coming from the finance sector just makes them “forget”), but financial derivatives like credit default swaps made it about 40-50 times worse.

        • 0 avatar
          jmo

          “As they did in several other countries that didn’t engage in bailouts. ”

          List please.

      • 0 avatar
        APaGttH

        This.

        And if memory serves me correctly, PCH101 is no defender of the bailouts in general.

        I don’t get why people can’t understand this even with a mountain of data to back up the reasons all these decisions were made.

        • 0 avatar
          05lgt

          Because they’re not looking at the mountain of data through clear eyes. They’re looking with the intent to find affirmation of thier dogma. It’s important to recognize this trait and weight statements accordingly.

        • 0 avatar
          Pch101

          Government bailouts are akin to using the jaws of life to open a car door — rarely necessary, usually not desirable, but useful when times are desperate and there are no other options.

          In 2008-9, there were no other options.

      • 0 avatar
        jkross22

        Right. GM is still too big to fail, but didn’t reform itself sufficiently, as we’ve seen through a number of their post bail out decisions.

      • 0 avatar
        ellomdian

        Shhh, don’t bring Logic into this!

        Let everyone keep assuming that General Motors works just like the Sandwich shop down the street! Free market, live and die, survival of the fittest, et al.

      • 0 avatar
        tonycd

        Beautifully stated, pch.

    • 0 avatar
      jmo

      “And you all act like GM would have disappeared into thin air. It should be obvious that it wouldn’t. Yes, its assets would be sold for peanuts, but they’d be sold and put back to use, and a good part of the workforce would have been rehired.”

      Who would buy them and with what money? I need names of the buyers and the consortium of banks, hedge funds, sovereign wealth funds, etc. who were ready and willing to commit to restarting GM in 2008.

      • 0 avatar
        hriehl1

        Your question presumes that GM had some special privilege or right to continue existing. By what law?

        What if it had been shut down… liquidated for pennies on the dollar? So what? It is what they (investors, management, employees) collectively deserved.

        Would we have had some social and economic turmoil? Perhaps. But the lessons of the Great Depression helped give us 60 years of prosperity. Perhaps we avoided another depression, but at what larger cost?

        The idea that any enterprise is too big to be allowed to fail leads us away from what made us great… equal opportunity to succeed… and fail.

        Somehow we all made it through the demise of Montgomery Ward, an entire domestic steel industry, dozens of railroads, dozens of airlines and more. There’s always someone more resourceful and competent to pick up the worthwhile pieces of failed enterprises. When the government interferes in natural economic selection… it starts us down a slippery slope to mediocrity and beyond.

        • 0 avatar
          jmo

          “Somehow we all made it through the demise of Montgomery Ward, an entire domestic steel industry, dozens of railroads, dozens of airlines and more.”

          True, but not during a massive financial crisis. When we let large enterprises fail during a massive financial crisis, the economy imploded.

        • 0 avatar
          Dirk Stigler

          Pch and jmo drink the establishment koolaid and angrily refuse to see that the people who benefitted from the bailouts weren’t the workers, but the banks and other investors who took a much smaller bath than they would have if GM were liquidated in a normal bankruptcy.

          What happened, in a very small nutshell (and yes it was bipartisan. Imagine that) is that the entities whose paper wealth was being destroyed got the government to backstop them at the expense of the taxpayers, while claiming that it was all for the taxpayers’ benefit.

          Iceland allowed its financial sector to fail outright (imagine if we let Lehman, Goldman, BofA and several others go at once) and saw its economy recover years earlier than ours.

          Even so, I could stomach the bailouts in terms of being a way to just mentally roll back to the day before the crisis (since confidence is key to financial markets), if not for the fact that we’ve still got all the same people in the same places who caused it to begin with. And now they have a recent example that similar bad/incompetent behavior in future will be rewarded instead of punished. That’s the moral hazard.

          • 0 avatar
            Pch101

            I’m not angry. On the contrary, I’m relieved that you aren’t in charge of anything.

          • 0 avatar
            Lie2me

            That is the most short-sighted babel I have ever read

            Are you from Australia?… just wondering

          • 0 avatar
            DeadWeight

            Just my .02, but we really did have an historic liquidity crunch (i.e. frozen credit markets) back in 2008-2009 that necessitated having an entity such as the Fed act as a provider of liquidity as last resort, using extreme monetary policy to “unstick” markets.

            The problem is that they’ve left the spigot open far too wide for far too long, created a tsunami of now malinvestment, have over-reinflated asset value to the point of creating a new, very broad & deep bubble, and they’re essentially broken any efficiency in markets as well as the ability to engage in true, efficient price discovery.

            Oh, they’ve also expanded their balance sheet from 800 billion to 4.5 trillion in 6 short years by vastly overpaying financial entities for assets (many spoiled ones), artificially supressed short & long term yields on all credit instruments (from treasuries to corporate bonds), and ruthlessly punished responsible savers to the betterment of irresponsible yield chasers (too-big-to-fail entities that they’ve now made even more too-big-to-fail – i.e. letting TBTF banks and even smaller entities hold a gun to equity, bond & credit markets’ heads and threaten to b,ow the hostages brains out if they don’t get continued zero interest rate subsidies from the Fed).

          • 0 avatar
            jmo

            “Iceland allowed its financial sector to fail outright (imagine if we let Lehman, Goldman, BofA and several others go at once) and saw its economy recover years earlier than ours. ”

            Iceland, as in a population of 323,000 Iceland? It was relatively easy for them to do as the Fed, BOJ, ECB, Bank of England, Swiss National Bank, the CBC, etc. were moving heaven and Earth to keep the world from economic collapse.

          • 0 avatar
            Mr. Orange

            Iceland’s banks were propped up with Russian Loans.

          • 0 avatar
            Mr. Orange

            Iceland’s banks were propped up with Russian loans. They didn’t collapse.

        • 0 avatar
          Xeranar

          You know what the great depression brought us? The most liberal and socialist government in the history of the US. The fact that most of the banks collapsed gave rise to a much tighter central banking system that actually attempted to regulate. The idea that burning down the house will teach the next lot owner to build a better home is insane. The list you follow with is really kind of obtuse for these reasons:

          Montgomery Ward – Never actually had that many employees, less than 100K and most were in retail so were able to shift to other positions as the company waned out of existence.

          Domestic Steel Industry – Still exists, sorry. The major steel cities like Pittsburgh, Gary, Birmingham have either become desolate hellholes (Gary), or rebounded by basically dumping their blue collar workers in other cities while keeping their high tech and white-collar industries (Pittsburgh). If you looked at 1984 Pittsburgh and 2015 Pittsburgh you would see a recovered city but one that took nearly 30 years and a great deal of public investment to reach that level again.

          Dozens of Railroads – Eh? Names changes, tracks didn’t. The consolidation of workers happened really before 1950. There is actually a shortage of rail hands and engineers today. The panics that railroads caused in the 19th and early 20th centuries are literally TEXTBOOK examples of how an industry too large to fail failed and caused seismic shock waves. Basically every panic and depression between 1855 and 1929 was sparked by railroad collapses or speculation.

          Dozens of airlines – EH EH? Same deal, the paint changes, the crews and planes stay the same. The collapsing of the industry has been slow but has caused staggering issues with much higher wait times and loss of services. It’s an example of an unbalanced market with too many competitors chasing too few customers due to the routing that makes lesser cities undesirable stops.

          I’m really under the impression most people who talk like this think that GM is their mom and pop store, that selling the equipment worth maybe 100K is like unloading several tens of billions in factories and assets. It really isn’t and basic economic history & macroeconomics explains why it isn’t.

          • 0 avatar
            hriehl1

            So yes, all you say about steel, railroads and airlines is true. In essence, we survived the seismic changes those industries have suffered.

            So, tell me again, what is different about GM and Chrysler that makes them bailout-worthy when so many others have not been?

            Do you not think Ford, Toyota, Nissan et al wouldn’t have carved up and redeployed the worthwhile pieces (capital and labor) if GM and Chrysler went under?

            I am finding your position to be inconsistent… you endorse economic natural selection in steel, railroads, airlines and others… but espouse different treatment for GM and Chrysler. Help me understand.

          • 0 avatar
            Lie2me

            “I am finding your position to be inconsistent”

            Yeah, he does that. As soon as I get him on my radar screen, zing, off he goes in a different direction

          • 0 avatar
            Scoutdude

            The big difference between those cases and the auto industry is that when the auto industry was in trouble the economy was in peril. There was no money flowing for those that might have been interested in picking up the pieces of those companies. Look what happened with Chrysler, Fiat was payed to take an ownership interest in the company. To put that another way Fiat did not buy the assets of Chrysler, they were paid to take a portion of them. Part of the deal was that they could “earn” more ownership interest in the company by meeting certain milestones. No one that had experience in the auto industry want Chrysler even before the economic melt down. Daimler had been trying to unload them for years before they found a patsy in Cerebus and the only reason Cerebus purchased them is because Daimler discounted them heavily and Cerebus didn’t have a clue what they were getting into.

            GM might have been different in that they had greater market share, still had a full engineering staff and a lot of assets, but I still can not fathom anyone being able to come up with enough cash to purchase any significant portion of the assets. Look what happened to the portions they were able to find a buyer for. Saab, done and gone because the purchaser couldn’t come up with the cash to keep them running. Ditto for Hummer. Saturn’s buyer Penske couldn’t put together a deal that they felt would make them money and walked away. Those were the cheap pieces of GM too.

            The other factor is that the automakers who build vehicles in the US are already tied together by their supplier network. Many of those suppliers were going to go down if they were left completely unpaid by GM and Chrysler. So the other automakers would have not been able to continue if their suppliers closed up shop. So now we would have had even more companies in bankruptcy that no one would have had the cash to pickup and return to production, even at pennies on the dollar.

            It was a tough situation all around and unfortunately the gov’t bail out of GM and paying Fiat to take Chrylser off our hands was the lesser of evils.

          • 0 avatar
            Pch101

            I’ve already addressed the point that the US economy was on the verge of collapse in 2008. The markets were watching the US government’s reaction to GM, and were going to act accordingly. A US failure to respond would have induced global panic and capital flight.

            If you were alive in 2008, then the gravity of the problem should not be difficult to understand. Does your hair need to be lit on fire for you to know that burning off your head is a bad idea?

          • 0 avatar
            Xeranar

            The difference? The railroads caused a series of massive panics that collapsed our country into depressions for no particularly good reason. Standard of living dropped repeatedly and we lost two to three decades of economic growth or sustain due to them. In all three cases those industries shuttered over the course of decades and were consolidated. The auto industry is already consolidated, so shuttering 2/3rds of the established industry would dramatically break down our system.

            The peak of steel employment was the 19th century, same for railroads, the slow decline ended in the 1980s. The airline industry didn’t shed workers so much as it shed redundant company ownership and they took from the 1950s to the 2000s to reach this level. The dramatic differences make them bad comparisons never mind that when we did see dramatic drops as in the Railroads they did create crushing depressions that sent shockwaves through our entire economy. Your refusal to see it isn’t proof of anything other than your cognitive dissonance on the matter.

            The point again isn’t that GM’s assets wouldn’t have been split up, it was who was going to buy them and put them to use immediately? Their dealer network alone employs hundreds of thousands of people. None of them would be held over in the new system. Never mind that nobody had the capital to buy the plants and maintain the workforce. In a healthy economy it could work, but in one so badly beaten and on the tipping point of complete credit freeze there was nobody there to make it happen.

            Your ‘findings’ are wrong, I never endorsed economic natural selection, I described WHY they weren’t similar, I never supported their decline because ultimately they were smaller and/or declined over a much longer period of time. Your presumption makes you think your case is special, I merely explained why you were wrong from the outset.

            @Lie2me – I wouldn’t toot your horn too much, I kicked your puppy and you’re still upset, I get it. But take your licks and learn from the mistakes I keep showing you’ve made. You can’t even figure out the difference between your dependent financial situation and the government.

          • 0 avatar
            Lie2me

            You’re delusional, I wouldn’t even let you clean up after my puppy

    • 0 avatar
      Roader

      [None of my comments have gone through since yesterday so I’ll try another tack.]

      Moral hazard nails the automakers’ bailout and I think it sets up a situation for more bailouts. Specifically, state government bailouts. Debt + unfunded pension obligations have some states in really rough financial condition, to the point that the credit ratings agencies now have Illinois’ bond ratings on par with Botswana and not too far from junk status.

      Will Obama let his home state become insolvent? Doubtful. And the rally cry of the left will be “You bailed out corporate fat cats but you’re willing to let an entire state go down the tubes! Beyond bailouts, some on the hard-left are making noises about increasing tariffs. They don’t call them tariffs of course. Rather, Elizabeth Warren and Bernie Sanders are calling for “Fair Trade”, which is just a euphemism for tariffs. Both are top Dem contenders for the presidency so both are angling for campaign contributions from big manufacturers and big unions. What’s not to like? High tariffs allow big manufacturers much higher profits, giving big unions more bargaining power, and in turn both they give more money to the politicians who create the tariffs. Win-win, right?

      The road to serfdom.

  • avatar
    Jeff S

    GM will never be Number 1 or 2 again. A smaller leaner GM is better than a bloated GM. I fear that GM still has not learned its lesson when I see a new form of rebadging creeping in. Chrysler is not out of the woods as well but both GM and Chrysler are doing much better and hopefully they will continue to do so. I don’t think there would be as much support for another Government bailout.

  • avatar
    daver277

    $16B – big deal……..
    The US military burns that up in a busy week.

    • 0 avatar
      -Nate

      Please stop using facts when there’s perfectly good hate and intolerance at hand…

      -Nate

    • 0 avatar
      mkirk

      So quit electing politicians that feel the need to deploy it to every global hotspot for decades on end and it will get much cheaper. You must be a Libertarian since both Republicans and Democrats have no issue with funding a war when it suits them politically then railing against it a few years later when the politics dictate.

      Maybe we could cut it entirely and just be nice to everyone and they’ll leave us alone. Now where did I park my unicorn.

    • 0 avatar
      APaGttH

      Busy week?

      A busy day!

    • 0 avatar
      George B

      daver277, both are a big deal for very different reasons. The primary constitutional reason we even have a US federal government is national defense. Bailing out private companies is optional, but figuring out what to do with the military is something the federal government has to get right. Clearly the US military is very expensive. Probably too expensive as currently configured. Actually using our military in wars adds some marginal cost over having a large military, but not deploying it. I personally think that war itself has changed and we’re rather slow to adopt the low-budget tactics of our terrorist enemies.

      The reason spending $9 billion or $16 billion on bailing out GM and Chrysler is a big deal is that there’s no limiting principle that tells the federal government when to get involved and when to stay out of it. Congress and the President appear to be making ad hoc decisions based largely on short-term political considerations while accumulating long-term debt.

  • avatar
    RogerB34

    TARP Report to Congress 10/29/14, Auto Industry Support, $B:
    Obligated: $79.7
    Repayments, Reduction in Obligations: $61.9
    Balance: $17.8
    Interest, Dividends: $6.7
    Net Balance: $11.1
    Banks far exceeded TARP Obligations.

    • 0 avatar
      deanst

      I’d like to play this game too. Give me a few billion and I’ll promise to return it in a few years without interest! Obviously the banks should pay the government a market rate for these funds before the program can be claimed to be a success. Anyone remember what buffet charged for his loans to the too- big-to-fail banks?

    • 0 avatar
      jkross22

      This is the logic that people used when they claimed that C4C was a success because it spent all the money it was allocated.

      • 0 avatar
        bd2

        Ford execs stated that C4C saved them.

        Without the auto market recovering somewhat as it did under C4C, Ford would have burned through what was left of their cash reserve (only had about enough to run FoMoCo for about a year if auto sales hadn’t started to turn around).

  • avatar
    thegamper

    I am curious if this accounting includes the original TARP funds that were discharged in bankruptcy. I have seen multiple accountings that do not include those funds discharged in the GM/Chrysler Bankruptcy. I am not an accountant, but seems that should fall into the overall cost, not just the money lent to the new GM and Chrysler following the bankruptcy. Just sayin.

    I really do think that every headline out there is incorrect though. This was a bailout of the UAW, not the automakers. The UAW was the only creditor to basically come out of the deal without a haircut. I agree that it was the right thing to do for the government to step in, but disagree that the priorities seemed to fall heavily on saving UAW jobs, pensions, health care and wages above all. The UAW should have taken a proportional haircut. I think deep down, even Union fanatics would secretly agree that would be a fair outcome.

    Instead….the end result, like it or not, was essentially a wealth transfer to the UAW courtesy of the taxpayer that just so happened to save the auto industry by forcing every other creditor of GM/Chrysler to take the write off.

    • 0 avatar
      carlisimo

      I’m glad they gave the UAW a stake in GM – it was the best way to get the union to notice the effects of its pay structure on GM’s finances.

    • 0 avatar
      Xeranar

      You do understand that the UAW was being paid off to fund their pension in GM stock instead of cash. Where the institutional investors took a major cut the UAW took a much smaller cut. The issue at hand was that the UAW whether they took a major cut or not could have turned tail and dumped stock. This was done to reward them and keep them from simply backing out of GM and pushing for a stronger hand.

      When you’re in the drivers seat you get to steer the car. The UAW was in the driver’s seat for a few simple reasons not the least of which they were actually the representatives of the workers who if they lost their pension fund would create an even greater and lasting depression. Call it what you will but the Union had no reason to suffer greater than Goldman Sachs and institutional investors who were too happy to sit there and burn the economy down by playing both sides of the fence.

  • avatar
    Master Baiter

    No company should be allowed to grow to the size of “too big to fail.”

  • avatar
    APaGttH

    …American taxpayers lost $9.26 billion from the Bush II/Obama-led rescue…

    Cameron.

    Thank you. Thank you. Thank you.

    I think TTAC may be the first place I’ve ever read where the auto bailout creators are shown factually. Thank you again for providing the “truth” in this important, and sad part, of US auto history.

  • avatar
    seth1065

    I am not sure if the Gov lost 10 Billion on this or if they would have just paid out that amount in other programs, unemployment, job training, mortgage relief … to everyone effected if GM/Chrysle went into bankruptcy or not, most of congress voted for it , it was not by party lines and in the end it mostly worked, I am sure everyone did not want the Gov to own them, not the car guys, not the govt but there were very few choices at the time. In my view at least I Joe taxpayer can see what they saved, I do not see what they saved with AIG, or helping out some home owner who took out a second mortgage so they could buy a 7 series, or some collage kid who borrowed 150K to get a art history degree and needs the govt to eat part of that student loan.

  • avatar
    cartunez

    Regarding the asinine statement of “I worked at a bank” I suppose if I worked at a hospital that would make me a brain surgeon. There is always a market for goods and services you just have to find the right price point. Would the free market have valued GM et al at the same values the government did? Absolutely not but the good aspects of the businesses would have found buyers. You guys are confusing the debt market and government cronyism with the free market. Had this house of cards been allowed to fall we would actually be pulling out of the nonsense right about now. Instead we have yet another housing bubble, distortions in the energy sector etc etc. GM cars are still not up the the level of the original LS400. I am taking fit and finish reliability you name it. If you want a good products you have to let the market decide not governments and politicians.

    • 0 avatar
      jmo

      “distortions in the energy sector ”

      Meaning what?

    • 0 avatar
      bunkie

      i suppose that comment is aimed at me. It doesn’t change the fact that everyone on our trading desk (i worked in operations and dealt with them every day), was scared as hell. In case you don’t know, in a trading environment, operations is responsible for making sure that deals are properly executed, meaning that the requisite parts of the deal (securities and cash) are delivered as promised. Each day our group alone (just one part of the Prime Services business) had hundreds of millions of dollars worth of transactions. Our counterparties included the other large banks and custodians. most of our transactions were not DVP (look it up) meaning that we had serious exposure risk should one or more counterparties either collapse or decide to hold onto cash to preserve liquidity.

      In short, I wasn’t sweeping the floor, i was directly involved in the systems that moved the money and securities. But, to use your analogy, even a candy-striper knows that if you unplug the heart-lung machine, the patient will likely die.

  • avatar

    Then again, the Iraq and Afghanistan wars have costed the U.S. taxpayer around three trillion dollars. That’s 3 billion with three zero’s more at the end. And for what? More insecurity in the region and at home.

    • 0 avatar
      APaGttH

      But 9/11 changed everything…

    • 0 avatar
      DeadWeight

      The 2nd war upon Iraq didn’t cost more than the 5 billion Rumsfeld & Cheney predicted that it would!

      Love it or leave it! Commies!

      /sarc (obvious, hopefully)

    • 0 avatar
      bd2

      And it’s going to keep costing the US taxpayers with all the vets that need continued medical care, etc. (they deserve it).

      And it was the tanking of the price of oil and the immense expenditure from their Afghanistan “adventure” that brought down the Soviet Union (and not Reagan).

      Actually, what Reagan did do is TALK to Gorbachev (who wasn’t some right-wing, Russian nationalist like what Putin is) and persuaded him that the US had no plans to invade the Soviet Union.

      The fact that Gorbachev believed that the US would launch a 1st strike is what got Reagan to push to nuclear arms reduction (Reagan got blasted by the right).

      Reagan actually wanted to get RID of ALL nukes.

      Just hilarious how most conservative Republicans today (esp. those who keep using Reagan as an example) don’t really know much about Reagan.

  • avatar
    alexndr333

    My only wish with the GM bailout is that President Obama would have required the resignation of the corporation’s Board of Directors as a condition of the loan. Those folks were asleep at the wheel for years as GM slid into deep, entrenched mediocrity. Shouldn’t the putative leaders of the corporation have also paid a price for their failed guidance? New leadership could more quickly address the cultural problems inside the organization, which is still trying to overcome itself.

  • avatar
    Conslaw

    I suspect that most, if not all, of the net loss could be accounted for by Ally Financial’s loss in the housing market. I also don’t know if the treasury department took into consideration the income taxes paid by the autoworkers during the duration of the auto bailout.

  • avatar
    George B

    Unfortunately the GM and Chrysler bailout greatly confuses everyone regarding what rules will apply next time there is a government bailout of large company. It appears that the rules for bankruptcy restructuring depend as much on relative political connections as on well established bankruptcy law. I’m ok with the federal government funding bankruptcy restructuring in an emergency, but wish the normal chapter 11 restructuring had applied.

    I’ve been pleasantly surprised how well the Chrysler bailout has gone. At the time I was convinced the federal government was giving Chrysler to Fiat so Fiat would take the blame when Chrysler failed. Never imagined that the Fiat purchase would lead to a good Ram 1500 refresh and Hellcat!

    GM exited bankruptcy with some improvement, but to me they look pretty vulnerable to the next downturn. They finally got the message about refinement and interiors. However, they have had 3 generations of Toyota Camry to benchmark the Malibu against regarding size and weight and somehow they blew it.

  • avatar
    petezeiss

    My activities director always comes up with the greatest topics like this to keep ’em in the dining hall while we spray and de-hoard their apartments.

    I’ll approve her raise, you bet.

  • avatar
    Russycle

    Here’s a little perspective for you: $7 billion of your tax dollars flushed away on opium eradication in Afghanistan. Given the choice, I’ll take a domestic auto industry, thanks.
    http://www.csmonitor.com/World/Security-Watch/Backchannels/2014/0703/What-did-7-billion-spent-on-opium-eradication-in-Afghanistan-buy-More-opium

    • 0 avatar
      hriehl1

      Your argument presumes that $7B MUST be spent at all. Unsaid is the third choice that many (including me) would endorse… don’t spend the $7B on either opium eradication or a Detroit bailout.

      • 0 avatar
        Xeranar

        This is why you don’t have a say in this. In this pseudo-intellectual position of ‘do nothing’ it was considered and then realized as incredibly stupid. Your personal and moral preferences have no factor on reality of cold hard facts. So you can prefer we didn’t spend it and maybe you can get enough people to completely ignore economics to get into office next time it happens but don’t pretend that it ever makes sense.

        • 0 avatar
          hriehl1

          So when we abandon “rule of law” and accept “rule of whim”, we entrust our “leaders” with way too much power, in my opinion.

          Many felt extra-legal actions were warranted because we were going to “implode”. Whose call is that when extra-legal methods are OK? Our “leaders”?

          Consider that our “leaders” got us into the mess (“No Job? No Income”? Well, never mind those pesky details… here’s a mortgage for 110% valuation”).

          Or how ’bout this one? “We really don’t know what those confusing derivative products are… but go ahead and sell ’em anyway… we trust you.”

          For me, I’ll take the rule of law and the occasional pain it causes when we must periodically suffer the consequences of our “leaders\'” excesses. Trusting them to clean up their own mess any way they see fit is bad policy… or no policy at all.

        • 0 avatar
          hriehl1

          I do have a say. Just like you, I vote. I am just far less happy with those we’ve elected than you appear to be.

          You seem to be OK with extraordinary government action because we were about to “implode”. Can anyone tell me the attributes of an economy “about to implode” so I can anticipate the next one?

          And can anyone tell me the rules on when other extraordinary (and perhaps extra-legal) measures are OK? Or do we just make stuff up as we go along?

  • avatar
    Tstag

    So the Obama bailout is now a good thing? Wait weren’t plenty of people blaming Obama for bailing Tesla, GM, Chrysler out? Next you’ll all blame him for the USA having economic growth unlike the rest of the developed world ( except the UK)

  • avatar
    Gone4Day

    Percentage wise, any GM or Chrysler product I’ve ever owned lost more then that over 6 years.

  • avatar
    CoreyDL

    On the key of the treasury seal, that script T inside a rectangular solid block would make a nice auto emblem.

    “Introducing a new wave of automotive luxury. Talisman, by the Lincoln-Packard Motor Co.”

  • avatar
    Jeff S

    I don’t really see that much depreciation on any vehicle I own because I keep them at least 10 plus years. After I am finished with a vehicle it doesn’t really matter what it is worth because I have more than gotten my money’s worth out of it.

    • 0 avatar
      DeadWeight

      Same here.

      But I also hit ’em where they ain’t, buying new cars that are sleepers (bit that fit me well), getting 20% to 25% off the MSRP, as a bonus.

      I’ll even take a vehicle with less useless equipment as long as I get everything of real value if the stealership knocks even more $$$ off the MSRP as a % of the purchase price, since used buyers who must have streaming Xfinity in their vehicles are irrelevant to me.

  • avatar
    reclusive_in_nature

    Little off topic, but I wonder what would happen if GM moved its HQ and North American production to Texas or another southern state? It would help win over some of the “refuse to buy GM because of the bailout” crowd. Might make production and labor a bit cheaper too. Not sure if their current labor contracts keep them from making such a move or not.

    Back on topic, as much as I hate admitting it the bailout probably helped more than it hurt. It sets a terrible precedent for any failed, beggar corporation with a politician in their pocket and both hands outstretched to exploit. It was an evil, but a necessary evil.
    Still there should have been some better strings attached:
    1. The bailout would occur on the condition that another bailout would be strictly prohibited. You get this ONE chance to fix yourself.
    2. A percentage of manufacturing must take place in the United States.
    3. A percentage of all parts must be American made.
    4. Salary cap for all executives. (Some blue meat for our left leaning friends.)

    I’m sure some of you could think of better strings, but I’m sure most of you agree that the bailout was more of a handout than a loan. if you’re going to come begging to the American taxpayers, you better be prepared for some quid pro quo. It’s the elected officials’ fault for not demanding more in return and our own fault for electing them.

    • 0 avatar
      APaGttH

      If those rules applied, than Chrysler should have died. Seems people forgot they got bailed out in 1979. The ire to GM specifically to the bailouts is stunning to me as it is.

      Lets ignore that fact that Chrysler was owned by a private equity firm with deep pockets, that could have on their own covered Chrysler’s losses. Instead federal tax dollars went to bailout private individuals of said large equity firm, Cerberus, and protect the assets they already had in place.

      How this is just white washed and ignored by the same people screaming, “death to GM,” is stunning.

  • avatar
    Jeff S

    Agree DeadWeight hit them where it hurts, but usually the dealers get some extra hold back money so they don’t come out entirely losing which is fine by me as long as I get a deal. That happened when I bought my Isuzu the dealer was able to reach down and lower the price some more. True if I didn’t keep my vehicles so long I would lose on depreciation but I knew that I would be keeping the Isuzu at least 10 years so not that much to lose when you get a good enough deal especially when you get a 31k vehicle for 21k with heated leather seats, cruise, towing package, crew cab, 4×4, fog lights, and auto dim mirror. Six and a half years later I do not regret my purchase. In the case of my Isuzu it was the fully loaded model that had the best discount and the cheaper models moved fairly fast.

Read all comments

Back to TopLeave a Reply

You must be logged in to post a comment.

Recent Comments

  • cprescott: GM should cancel Cadihack and then push GMC further upmarket and less like a professional grade Chevrolet....
  • Art Vandelay: So many S#!theads in here nowadays. You can quote me on that
  • cprescott: The recent Genesis new products prove that flat images do not do them justice. I watched a Korean...
  • volvo: Lots left to be desired in the appearance and powertrain. I would only accept the ugly upright tablet display...
  • JimZ: F-Series was still the #1 seller in 2009, the nadir. The industry hit the skids when annual sales dropped from...

New Car Research

Get a Free Dealer Quote

Who We Are

  • Timothy Cain
  • Matthew Guy
  • Ronnie Schreiber
  • Bozi Tatarevic
  • Chris Tonn
  • Corey Lewis
  • Mark Baruth