Taxpayers To Lose At Least $11 Billion On General Motors Bailout
When President Obama pushed his ill-advised plan to bailout two failing auto companies, we were told that the taxpayers were going to make a profit in the end. Well, it turns out that’s not going to happen at all:
The U.S. government plans to sell a significant share of its remaining stake in General Motors Co. this summer despite the disappointing performance of the auto maker’s stock, people familiar with the matter said.
A sale within the next several months would almost certainly mean U.S. taxpayers will take a loss on their $50 billion rescue of the Detroit auto maker in 2009.
To break even, the U.S. Treasury would need to sell its remaining stake—about 500 million shares—at $53 apiece. GM closed off 27 cents a share at $29.97 in 4 p.m. trading Monday on the New York Stock Exchange, hitting a new low since its $33-a-share November initial public offering.
“Planning for the sale of our remaining GM stock is still at an early stage, and the IPO lock-up does not expire until late May,” a Treasury spokesperson said. “At that point, we will consider all of our options, based on our twin goals of protecting taxpayers’ interests and exiting as soon as practicable.”
Shares have been hurt by rising fuel prices, industry production disruptions and management turnover. At Monday’s price, and taking into account shares sold during the IPO, taxpayers would lose more than $11 billion on the rescue if the government dumped the rest of its stake now.
Government officials are willing to take the loss because the Obama administration would like to sever its last ties to the auto maker, the people familiar with the matter said.
Of course, the government never should have had any ties to General Motors to begin with. The company should have been allowed to fail and let it’s assets be acquired by better suited competitors, rather than being bailed out by the government so that someone can produce an electric car that nobody wants to buy.
“Of course, the government never should have had any ties to General Motors to begin with. The company should have been allowed to fail and let it’s assets be acquired by better suited competitors, rather than being bailed out by the government so that someone can produce an electric car that nobody wants to buy.”
Yes, to hell with the millions of jobs in GM’s supply chain that would have been lost had they gone under, I’m sure those people being unemployed wouldn’t have made the recession eben worse.
I can only find 18 Volts within 50 miles of DC. Only 50ish within 100 miles of LA. As for the leaf, I can’t find any for sale within 100 miles of DC and only 18 within 100 miles of LA. Maybe the lack of availability has something to do with their sales numbers? Nevermind that Chevy sold nearly 700 volts in March ’11?
As for the main thrust of the article, 11 billion is a cheap price to pay to keep GM in business. Its not just those jobs that would go under, but when the suppliers went under they would take Ford down with them.
Doug is not bothered by little things called “facts”.
(and doug, I have to ask, how much would the US have lost in tax revenue if all those auto workers got laid off? How much would we pay in unemployment???)
Yeah and how much would the Democrats loose in campaign funding without the unions dues?
I was skeptical of the bailout, but I have to agree with commenters here. At least as things stand now. If $11b was all it cost, it was worth it. If five years from now we’re having to bail them out again, well, that may change my calculations.
An orderly liquidating Chapter 11 would have been far better than the idiotic mess that the Obama Administration came up with, especially the part where they strong-armed the secured creditors and gave the unions a sweetheart stock deal.
General Motors was a failing company. We should have let it run it’s natural course. Those of you who are saying it would have led to gloom and doom have absolutely no idea how either business, or complex bankruptcy cases, actually work.
Can you provide some evidence that there would have been no gloom and doom if the government hadn’t intervened?
Shorter Doug: If it doesn’t destroy a union, it’s not worth doing.
Ideology first, facts second, humans third. The Mataconis formula.
The only idiotic mess is the one between your ears, Doug. I can’t believe that you actually believe what you write here. Maybe you don’t – maybe it is just your mission to advance doctrinally pure libertarianism whenever you have the chance – secure in the knowledge that no one is going to take your screwy arguments seriously. But at least you can claim intellectual consistency.
Very important for those of small minds to keep those hobgoblins well fed.
Eleven billion dollars. What’s that, a month of war in Afghanistan? And for that we saved millions of good jobs — even if they do go to people who have the gall to belong to a union. Of all the things the government spends money on, I can’t see many better deals.
Simple question, where in the Constitution can the president take over a private company and fire the CEO? Simple answer, Comrade Obama, the Great One can do whatever pleases him.
Doug: GM showed their first profit in 7 years recently. You might be philosophically opposed to the bailout, but it appears to have worked. And while if the gov didn’t intervene, parts of GM could have survived under new ownership, but it was hard to sell off profitable parts of GM to other owners even with the gov guaranteeing the transactions. If the gov didn’t act, its very doubtful that much of GM would still be around. And that would have had major negative shockwaves in the car industry.
Southern Hoosier: The GM share/bond holders could have rejected the Government takeover, it was an optional offer that was accepted.
@Southern Hoosier: There’s a real simple way to fix that…why don’t you contact your Congressional Representative and ask him/her to bring forth articles of impeachment against the Great One…according to our resident Palin booster, maybe that’s exactly what the president wants…
http://alicublog.blogspot.com/2011_04_01_archive.html#683867493806329137
“Those of you who are saying it would have led to gloom and doom have absolutely no idea how either business, or complex bankruptcy cases, actually work.”
You don’t seem to have any idea how the automotive supply chain works.
Eleven billion dollars. What’s that, The Obama vacation doctrine?
At the time of the deal we were hearing that our 50 billion was gone. And that there’d probably me more.
Now we’re talking about 11 billion, and GM is back in business and profitable.
And the critics think they were vindicated?
Huh?
Ummm, President Obama simply finished off what Bush started. Bush did the bailing out. Funny how short memories Republicans have.
But Comrade Obama never had the authority to make the offer in the first place.
Don’t be silly Comrade Obama is above the law.
“conservatives” did not seem to have a problem with the billions we poured into Iraq. Hell, they were cheering as it happened. It is only when we invest in our own country that they respond with white hot fury.
And Doug.. given the vast amount of utter nonsense you have published on business and the economy, you might want to think twice about telling people they “have no idea how business works”. You just end up looking a little silly.
11 billion to keep GM alive is money well spent. You will have to do more that simply assert that Obama created a mess, you will have to prove it. I will not be holding my breath, as you seem to be much better with slogans than facts.
Well, you do have SH in your corner. And probably bithead and zels too. You can take solace in that.
They have great memories. Everything in America was A-OK before Obama took office. Just peachy. And if there were any problems, which there weren’t, it was Carter’s fault. Or Clinton’s.
This party line bickering must stop. Things in Washington have gone so far out of control/reach that we all need to come together. If we keep dividing the way that Obama is currently doing in his campaign as well as Republicans pointing fingers, we will no longer have a voice. See 14+ Trillion & growing bigger.
As for the 11 B loss, if GM is to have a so called profit, it needs to be AFTER their debt is paid in full.
So? We spend as much on NPR, right?
Southern Hoosier: show where the fed government is barred from making the offer to a private company. Reagan nationalized a bank during his term, and it even wasn’t in bankrupcy.
Seriously guys? You’ve read his other posts here at OTB, he’s one of the less Libertarian, more liberal authors here. Are you really capable of disregarding all of his past posts because he’s taken a more fiscally conservative stance on this one topic?
@michael
Actually no. Not with any reasonable accounting rules. The entity now called “GM” looks profitable because some debts were stuck into a “bad GM” holding company, and other debts were moved onto the federal balance sheet.
“GM” is profitable because …. don’t look behind the curtain.
BTW, I think this thing probably was only “quasi-legal” (picture Dr. Evil saying that) but that at the end of the day the pricel wasn’t too bad. Or, $11B (if that is a fair number!) looks small because we’ve got trillion dollar problems.
You’ve read his other posts here at OTB, he’s one of the less Libertarian, more liberal authors here.
No, he’s not. He’s just critical of so-called “conservatives.” That doesn’t make him a liberal.
The title of Doug’s post
Is more than a bit ironic. First of all, taxpayers may lose (or see a gain) on the sale of the stock should the government choose to sell it today, which they have no intention of doing. The irony is that obviously Doug feels they shouldn’t have been bailed out and that the government should extricate itself from GM as soon as possible.
And that could result in the loss.
There’s just no pleasing some folks!
By the way, GM is up 51 cents today so I suppose taxpayers have reaped a quarter billion dollar gain today alone!
Are the only corporation to play that game?
Nothing as long as we are living in a 3rd world country where 2 bit dictators nationalize private with out proper compensation.
Once again, if anyone thinks that what the president did was illegal, it is in their best interests to contact their Congressional Representatives and urge that articles of impeachment be brought against the president…
GM is nowhere near profitable. For starters, new GM was allowed to carry its tax losses with it out of bankruptcy, something that actually was unprecedented and helped them to show a profi. That amounted to somewhere in the neighborhood of 40+ Billion. Add that to the 50B they are already on the hook for and you can see they have quite a hole to crawl out of.
And while there certainly would have been some pain by allowing GM to fail, they still had plenty of assets (Cadillac, Chevy) that would have been bought out of bankruptcy. GM would not have disappeared overnight and taken all of its supply chain down with it.