GM Bailout Looking like a win for Obama

[Soggy in NOLA]

If GM wants to bury itself under crushing UAW contracts and obligations and bad business practices.. then they need to fail.

 

[CrusaderFrank]

The UAW is the biggest winner in this by far.

 

[Soggy in NOLA]

The UAW is the biggest winner in this by far.

For now... it can't go on though, and it won't. The taxpayer is gonna react very badly when they are told SSI is being cut but we're gonna ensure UAW pensions don't take a hit.

Mark my words.

 

[boedicca]

And BTW... The Volt Will be the Yugo for the new millennium.

But, but, but...I saw some long haired dirty hippie from Motor Trend defend The Volt as The CAR OF THE YEAR.

(Yet more proof of the lack of objectivity in the Obama-worshipping press.)

 

[CrusaderFrank]

The UAW is the biggest winner in this by far.

For now... it can't go on though, and it won't. The taxpayer is gonna react very badly when they are told SSI is being cut but we're gonna ensure UAW pensions don't take a hit.

Mark my words.

Oh please, like the stupid fucking tax payers will give a crap.

It's for their own good

 

[Flopper]

As the right wing revision of history begins!

A bankruptcy proceeding in Feb 2009 would have led to a destruction of the US Auto Industry. Nobody......Nobody was willing to buy into the US Auto industry. It was offered to Fiat, Toyota, VW...nobody wanted to put up the money

Except the US Govt who saved the US Auto Industry

You give too much credit to GM.
So what if one auto maker goes bankrupt due to their own poor business practices.

GM does not equal the "the US Auto Industry".
You listed other manufacturers like Toyota and Fiat. They may not be US companies but they do contribute to the afore mentioned "US Auto Industry". As does Ford and several others.

When all was said and done the world wouldn't be worse of without a few more Malibus on the roads.
The world wouldn't have imploded without GM. They could have, like dozens of other companies, went through a restructuring bankruptcy and came out ahead without my tax dollars.

Maybe. Maybe not. There were no buyers for GM. GM was headed toward liquidation and so were the jobs of 100,000 GM employees, not to mention the jobs of numerousness suppliers. GM was a sick company whose management and owners deserved the chocking block but not all employees, families, and suppliers. The administration risked 50 billion and so far tax payers are getting their money back and GM for the first time in many years is a growing and profitable.

 

[Flopper]

The IPO is only a win for the unions and banking cronies who were able to cash in on this Obamanation.

The price at which the U.S. taxpayers would break even is $53 - a level that GM has only reached a couple of times in history - and under quite different economic circumstances.

Given that the S-1 disclosed that: GM has poor financial controls which make the financial reports and projections unreliable; the pension liabilities are crushing, and the IRS made an exception to allow $45B of tax loss carryforward (which should have been voided in the bankruptcy proceeding) - GM is a con game being propped up with gimmicks for the benefit of Big Government Cronies.

The stock is currently at $33.44, just 44 cents above the IPO price. That's a far cry from $53.

I have not seen the prospectus, but I believe the government can sell shares below the $53 price and take some lose. I don't think the administration or anyone else expected that all the funds the government invested would be paid off. However, I think it's more likely that we will get our money back from GM than AIG.

 

[Gadawg73]

One difference between Obama and Bush

Bush just handed them money while Obama demanded they change the way they do business and give the taxpayers stock in return. The rightwing screamed they would be asking for more money in six months, GM would fail anyway.....we would never see a cent of our money

Major win for Obama...Saved tens of thousands of jobs, saved the auto industry in the US and we are gradually getting our money back

It didn't save the auto industry in the US. GM announced during it's appeal to Congress that it would be offshoring much of it's manufacturing to China. And GM has only proceeded along that path.

We saved GM so that GM could move to China.

Who's fault is it that GM has to go over seas?
GM UNION WORKERS that are over paid, lazy and demand unreasonable health care benefits.
The retiree health care benefits IS what killed American car maunfacturers.
And most all American companies.
The fact that most Americans will NOT admit that the rise in Big Pharma and corporate Med that took 6% of GNP in 1960 and now is taking almost at 20% of GNP has a serious negative effect on being competitive in the market have their fucking head in the sand twisting.
Surviving in business boils down to COSTS. Health care costs have sky rocketed here for the last 30 years. We demand too much in benefits and it is now UNSUSTAINABLE.
What is a business to do?
WAKE UP AMERICA.

 

[boedicca]

The IPO is only a win for the unions and banking cronies who were able to cash in on this Obamanation.

The price at which the U.S. taxpayers would break even is $53 - a level that GM has only reached a couple of times in history - and under quite different economic circumstances.

Given that the S-1 disclosed that: GM has poor financial controls which make the financial reports and projections unreliable; the pension liabilities are crushing, and the IRS made an exception to allow $45B of tax loss carryforward (which should have been voided in the bankruptcy proceeding) - GM is a con game being propped up with gimmicks for the benefit of Big Government Cronies.

The stock is currently at $33.44, just 44 cents above the IPO price. That's a far cry from $53.

I have not seen the prospectus, but I believe the government can sell shares below the $53 price and take some lose. I don't think the administration or anyone else expected that all the funds the government invested would be paid off. However, I think it's more likely that we will get our money back from GM than AIG.

Any sale of shares by the government below $53 is at a loss.

They sold at $33. That's a BIG LOSS.

And please, do not mistake opposition to the GM bail out as being support for other bail outs.

 

[hortysir]

As the right wing revision of history begins!

A bankruptcy proceeding in Feb 2009 would have led to a destruction of the US Auto Industry. Nobody......Nobody was willing to buy into the US Auto industry. It was offered to Fiat, Toyota, VW...nobody wanted to put up the money

Except the US Govt who saved the US Auto Industry

You give too much credit to GM.
So what if one auto maker goes bankrupt due to their own poor business practices.

GM does not equal the "the US Auto Industry".
You listed other manufacturers like Toyota and Fiat. They may not be US companies but they do contribute to the afore mentioned "US Auto Industry". As does Ford and several others.

When all was said and done the world wouldn't be worse of without a few more Malibus on the roads.
The world wouldn't have imploded without GM. They could have, like dozens of other companies, went through a restructuring bankruptcy and came out ahead without my tax dollars.

Maybe. Maybe not. There were no buyers for GM. GM was headed toward liquidation and so were the jobs of 100,000 GM employees, not to mention the jobs of numerousness suppliers. GM was a sick company whose management and owners deserved the chocking block but not all employees, families, and suppliers. The administration risked 50 billion and so far tax payers are getting their money back and GM for the first time in many years is a growing and profitable.

Then maybe, just maybe, Obama and his Dem-controlled congress would have done something to actually help CREATE jobs instead of taxing them overseas.

 

[B. Kidd]

The UAW is the biggest winner in this by far.

The UAW took steep wage cuts and gave up its' pension fund that had preexisting guarantees of health and retiree benefits. In its' place, employees signed onto a voluntary employee benefit plan funded by a stake in GM stock. Future health and pension benefits now depend on the health of the company.
In reality, it's a small win for Obama as GM still needs to successfully compete and the UAW is not the biggest winner in this, by far.

 

[boedicca]

Even if that were true, it's wasn't enough to fix the pension problem. From the S-1 fling:

Our U.S. defined benefit pension plans are currently underfunded, and our pension funding obligations may increase significantly due to weak performance of financial markets and its effect on plan assets.

Our future funding obligations for our U.S. defined benefit pension plans qualified with the IRS depends upon the future performance of assets placed in trusts for these plans, the level of interest rates used to determine funding levels, the level of benefits provided for by the plans and any changes in government laws and regulations. Our employee benefit plans currently hold a significant amount of equity and fixed income securities. Due to Old GM’s contributions to the plans and to the strong performance of these assets during prior periods, the U.S. hourly and salaried pension plans were consistently overfunded from 2005 through 2007, which allowed Old GM to maintain a surplus without making additional contributions to the plans. However, due to a number of factors, including significant declines in financial markets and a deterioration in the value of our plan assets, as well as the coverage of additional retirees, including certain Delphi hourly employees, our U.S. defined benefit pension plans were underfunded on a U.S. GAAP basis by $17.1 billion at December 31, 2009. In addition, at December 31, 2009, our non-U.S. defined benefit pension plans were underfunded on a U.S. GAAP basis by approximately $10.3 billion. The defined benefit pension plans are accounted for on an actuarial basis, which requires the selection of various assumptions, including an expected rate of return on plan assets and a discount rate. In the U.S., from December 31, 2009 to June 30, 2010, interest rates on high quality corporate bonds have decreased. We believe that a discount rate calculated as of June 30, 2010 would be approximately 65 to 75 basis points lower than the rates used to measure the pension plans at December 31, 2009, the date of the last remeasurement for the U.S. pension plans. As a result, funded status would decrease if the plans were remeasured at June 30, 2010, holding all other factors (e.g., actuarial assumptions and asset returns) constant (see the section of this prospectus entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Estimates” for an indication of the sensitivity associated with movements in discount rates). It is not possible for us to predict what the economic environment will be at our next scheduled remeasurement as of December 31, 2010. Accordingly, discount rates and plan assets may be considerably different than those at June 30, 2010.

The next U.S. pension funding valuation date based on the requirements of the Pension Protection Act (PPA) of 2006 will be October 1, 2010. However, based on a hypothetical funding valuation at June 30, 2010, we may need to make significant contributions to our U.S. pension plans in 2014 and beyond (see the section of this prospectus entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Contractual Obligations and Other Long-Term Liabilities” for more details).

If the total values of the assets held by our pension plans decline and/or the returns on such assets underperform the Company’s return assumptions, our pension expenses would generally increase and, as a result, could materially adversely affect our financial position. Changes in interest rates that are not offset by contributions, asset returns and/or hedging activities could also increase our obligations under such plans. If local legal authorities increase the minimum funding requirements for our pension plans outside the U.S., we could be required to contribute more funds, which would negatively affect our cash flow.

Form S-1


GM has $27 Billion of unfunded defined benefit pension liabilities.

 

[B. Kidd]

Even if that were true, it's wasn't enough to fix the pension problem. From the S-1 fling:

Our U.S. defined benefit pension plans are currently underfunded, and our pension funding obligations may increase significantly due to weak performance of financial markets and its effect on plan assets.

Our future funding obligations for our U.S. defined benefit pension plans qualified with the IRS depends upon the future performance of assets placed in trusts for these plans, the level of interest rates used to determine funding levels, the level of benefits provided for by the plans and any changes in government laws and regulations. Our employee benefit plans currently hold a significant amount of equity and fixed income securities. Due to Old GM’s contributions to the plans and to the strong performance of these assets during prior periods, the U.S. hourly and salaried pension plans were consistently overfunded from 2005 through 2007, which allowed Old GM to maintain a surplus without making additional contributions to the plans. However, due to a number of factors, including significant declines in financial markets and a deterioration in the value of our plan assets, as well as the coverage of additional retirees, including certain Delphi hourly employees, our U.S. defined benefit pension plans were underfunded on a U.S. GAAP basis by $17.1 billion at December 31, 2009. In addition, at December 31, 2009, our non-U.S. defined benefit pension plans were underfunded on a U.S. GAAP basis by approximately $10.3 billion. The defined benefit pension plans are accounted for on an actuarial basis, which requires the selection of various assumptions, including an expected rate of return on plan assets and a discount rate. In the U.S., from December 31, 2009 to June 30, 2010, interest rates on high quality corporate bonds have decreased. We believe that a discount rate calculated as of June 30, 2010 would be approximately 65 to 75 basis points lower than the rates used to measure the pension plans at December 31, 2009, the date of the last remeasurement for the U.S. pension plans. As a result, funded status would decrease if the plans were remeasured at June 30, 2010, holding all other factors (e.g., actuarial assumptions and asset returns) constant (see the section of this prospectus entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Estimates” for an indication of the sensitivity associated with movements in discount rates). It is not possible for us to predict what the economic environment will be at our next scheduled remeasurement as of December 31, 2010. Accordingly, discount rates and plan assets may be considerably different than those at June 30, 2010.

The next U.S. pension funding valuation date based on the requirements of the Pension Protection Act (PPA) of 2006 will be October 1, 2010. However, based on a hypothetical funding valuation at June 30, 2010, we may need to make significant contributions to our U.S. pension plans in 2014 and beyond (see the section of this prospectus entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Contractual Obligations and Other Long-Term Liabilities” for more details).

If the total values of the assets held by our pension plans decline and/or the returns on such assets underperform the Company’s return assumptions, our pension expenses would generally increase and, as a result, could materially adversely affect our financial position. Changes in interest rates that are not offset by contributions, asset returns and/or hedging activities could also increase our obligations under such plans. If local legal authorities increase the minimum funding requirements for our pension plans outside the U.S., we could be required to contribute more funds, which would negatively affect our cash flow.

Form S-1


GM has $27 Billion of unfunded defined benefit pension liabilities.

It remains to be seen if GM stays viable over the long term. If they do, it gets covered eventually out of operating profits. If not, hello to a 2nd bankruptcy.
One point to keep in mind is that the gov't did play hardball with GM as opposed to, lets' just say da' banks.

 

[NYcarbineer]

The price at which the U.S. taxpayers would break even is $53 - a level that GM has only reached a couple of times in history - and under quite different economic circumstances.

That's only if you assume the taxpayers would have lost nothing if GM had been allowed to collapse entirely.

Businesses fail... all the time. It isn't always a bad thing. GM would not have collapsed the U.S. PERIOD. All we've done is reward bad behavior.

We'll be having this discussion again.. very soon.

You free market anti-government extremists aren't capable of common sense solutions.

 

[boedicca]

Even if that were true, it's wasn't enough to fix the pension problem. From the S-1 fling:

Our U.S. defined benefit pension plans are currently underfunded, and our pension funding obligations may increase significantly due to weak performance of financial markets and its effect on plan assets.

Our future funding obligations for our U.S. defined benefit pension plans qualified with the IRS depends upon the future performance of assets placed in trusts for these plans, the level of interest rates used to determine funding levels, the level of benefits provided for by the plans and any changes in government laws and regulations. Our employee benefit plans currently hold a significant amount of equity and fixed income securities. Due to Old GM’s contributions to the plans and to the strong performance of these assets during prior periods, the U.S. hourly and salaried pension plans were consistently overfunded from 2005 through 2007, which allowed Old GM to maintain a surplus without making additional contributions to the plans. However, due to a number of factors, including significant declines in financial markets and a deterioration in the value of our plan assets, as well as the coverage of additional retirees, including certain Delphi hourly employees, our U.S. defined benefit pension plans were underfunded on a U.S. GAAP basis by $17.1 billion at December 31, 2009. In addition, at December 31, 2009, our non-U.S. defined benefit pension plans were underfunded on a U.S. GAAP basis by approximately $10.3 billion. The defined benefit pension plans are accounted for on an actuarial basis, which requires the selection of various assumptions, including an expected rate of return on plan assets and a discount rate. In the U.S., from December 31, 2009 to June 30, 2010, interest rates on high quality corporate bonds have decreased. We believe that a discount rate calculated as of June 30, 2010 would be approximately 65 to 75 basis points lower than the rates used to measure the pension plans at December 31, 2009, the date of the last remeasurement for the U.S. pension plans. As a result, funded status would decrease if the plans were remeasured at June 30, 2010, holding all other factors (e.g., actuarial assumptions and asset returns) constant (see the section of this prospectus entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Estimates” for an indication of the sensitivity associated with movements in discount rates). It is not possible for us to predict what the economic environment will be at our next scheduled remeasurement as of December 31, 2010. Accordingly, discount rates and plan assets may be considerably different than those at June 30, 2010.

The next U.S. pension funding valuation date based on the requirements of the Pension Protection Act (PPA) of 2006 will be October 1, 2010. However, based on a hypothetical funding valuation at June 30, 2010, we may need to make significant contributions to our U.S. pension plans in 2014 and beyond (see the section of this prospectus entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Contractual Obligations and Other Long-Term Liabilities” for more details).

If the total values of the assets held by our pension plans decline and/or the returns on such assets underperform the Company’s return assumptions, our pension expenses would generally increase and, as a result, could materially adversely affect our financial position. Changes in interest rates that are not offset by contributions, asset returns and/or hedging activities could also increase our obligations under such plans. If local legal authorities increase the minimum funding requirements for our pension plans outside the U.S., we could be required to contribute more funds, which would negatively affect our cash flow.

Form S-1


GM has $27 Billion of unfunded defined benefit pension liabilities.

It remains to be seen if GM stays viable over the long term. If they do, it gets covered eventually out of operating profits. If not, hello to a 2nd bankruptcy.
One point to keep in mind is that the gov't did play hardball with GM as opposed to, lets' just say da' banks.

No. The Government played hardball with GM's creditors who had a superior claim over unions in a bankruptcy proceeding.

 

[Flopper]

There just no telling how profitable you can make a business when you're allowed to fuck over the Senior secured creditors

Those who invested in GM, whether it be common stock or bonds were taking a risk. High yields attracted investors into GM bonds. It was no secret that GM was mismanaged and struggling for many years. There was ample opportunity to bail out but investors held on hoping for a miracle. They gambled and they lost. It's that simple.

 

[Revere]

No, government short circuited their claims in bankruptcy court by wiping out their stake without due process.

And when that happens, those companies close or reorganize. So GM had it both ways.

Not the same as losing money in the stock market.

Now they set up a brand new subprime lender to offer lease deals on Volt nobody else can touch.

Don't embarass yourself by claiming the market worked, or is now working for GM.

 

[Trajan]

There just no telling how profitable you can make a business when you're allowed to fuck over the Senior secured creditors

Those who invested in GM, whether it be common stock or bonds were taking a risk. High yields attracted investors into GM bonds. It was no secret that GM was mismanaged and struggling for many years. There was ample opportunity to bail out but investors held on hoping for a miracle. They gambled and they lost. It's that simple.

uhm what? its ALL risk and you pay or not for the risk you take...thats why you sign a legally binding agreement.

if the company folds they always had the contracted guarantee to be first in line...thats why they took lower rates even during poorer quarters etc...

and....
snip-

Taking the hand-off, the new Obama Presidency created an auto-industry task force. On February 17, GM asked for another $30 billion. It got $36.1 billion—ultimately pushing the total taxpayer commitment to $50 billion. And so began an unprecedented relationship—through bankruptcy, reorganization, and now what is being called the renewal of General Motors.

What have we learned? If you are a major U.S. industry, with many supplier dependencies, who arrives at the brink of bankruptcy amid a major financial crisis, the U.S. government will step in to save you.

We have also learned that when the government recapitalizes a big private company and wipes out its long term liabilities, it is indeed possible—at the expense of bondholders and to the benefit of unions that contributed to the original problem—to restart a broken company.

snip-

Traditionally, a new company emerging from bankruptcy has to forfeit the old company's tax losses. Instead, the government will let GM exercise a tax-loss carry forward on some $45 billion of net operating losses. Translation: Taxpayers will continue to aid GM for years. Meanwhile, to help sell GM's signature "green" vehicle, the Chevrolet Volt, buyers will receive a $7,500 tax credit toward the $40,000 sticker price.

http://online.wsj.com/article/SB100...622870447979134.html?mod=WSJ_newsreel_opinion

 

[Flopper]

One difference between Obama and Bush

Bush just handed them money while Obama demanded they change the way they do business and give the taxpayers stock in return. The rightwing screamed they would be asking for more money in six months, GM would fail anyway.....we would never see a cent of our money

Major win for Obama...Saved tens of thousands of jobs, saved the auto industry in the US and we are gradually getting our money back

It didn't save the auto industry in the US. GM announced during it's appeal to Congress that it would be offshoring much of it's manufacturing to China. And GM has only proceeded along that path.

We saved GM so that GM could move to China.

Who's fault is it that GM has to go over seas?
GM UNION WORKERS that are over paid, lazy and demand unreasonable health care benefits.
The retiree health care benefits IS what killed American car maunfacturers.
And most all American companies.
The fact that most Americans will NOT admit that the rise in Big Pharma and corporate Med that took 6% of GNP in 1960 and now is taking almost at 20% of GNP has a serious negative effect on being competitive in the market have their fucking head in the sand twisting.
Surviving in business boils down to COSTS. Health care costs have sky rocketed here for the last 30 years. We demand too much in benefits and it is now UNSUSTAINABLE.
What is a business to do?
WAKE UP AMERICA.

I certainly don't blame GM workers for asking for the benefits. GM management gave in to the union rather than fighting it. They made the wrong decisions over and over. When VW's came to the US in the mid 20th century, they thumbed their noses saying that America would never buy small foreign imports. VW and Toyota proved them wrong by selling millions on reliable economical cars. GM thought they could compete by selling hyped up small junkie cars. Again they were wrong. They produced small cars as American taste turned to larger cars. Ford skunked them with the introduction of the Explorer and Chrysler grabbed the minivan market. I think the only thing that management really did right was moving into foreign markets. Had they not done this, they would have failed much sooner.

A lot of GM top management left in years before the bailout. The CEO and other top management were ousted. About 25,000 UAW employees lost their jobs. Healthcare benefits were reduce. Many employees had pay cuts. The employees also lost their right to strike.

The new GM is a lot smaller. Their profit margins are higher than they have been in years and they are making billions in profits. GM is certainly not the same company they were in the past.

 

[asterism]

There just no telling how profitable you can make a business when you're allowed to fuck over the Senior secured creditors

Those who invested in GM, whether it be common stock or bonds were taking a risk. High yields attracted investors into GM bonds. It was no secret that GM was mismanaged and struggling for many years. There was ample opportunity to bail out but investors held on hoping for a miracle. They gambled and they lost. It's that simple.

They didn't "gamble," they took a risk based on contracts that gave them recourse in the event of bankruptcy, which meant they had a right to liquidate the assets. They lost because they were assured that the government wouldn't nationalize the company and give away their property.