Right Thinking From The Left Coast
The Government is merely a servant -- merely a temporary servant; it cannot be its prerogative to determine what is right and what is wrong, and decide who is a patriot and who isn't. Its function is to obey orders, not originate them. - Mark Twain

GM Lies

Government Motors has been running ads claiming they’ve repaid their government loans.  Bullshit says Shikha Dalmia:

Because a loan of such a huge amount [$49.5 billion] would have been politically controversial, the Obama administration handed GM only $6.7 billion as a pure loan. (It asked for only a 7% interest rate--a very sweet deal considering that GM bonds at that time were trading below junk level.) The vast bulk of the bailout money was transferred to GM through the purchase of 60.8% equity stake in the company--arguably an even worse deal for taxpayers than the loan, given that the equity position requires them to bear the risk of the investment without any guaranteed return. (The Canadian government likewise gave GM $1.4 billion as a pure loan, and another $8.1 billion for an 11.7% equity stake. The U.S. and Canadian government together own 72.5% of the company.)

But when Mr. Whitacre says GM has paid back the bailout money in full, he means not the entire $49.5 billion--the loan and the equity. In fact, he avoids all mention of that figure in his column. He means only the $6.7 billion loan amount.

But wait! Even that’s not the full story given that GM, which has not yet broken even, much less turned a profit, can’t pay even this puny amount from its own earnings.

So how is it paying it?

As it turns out, the Obama administration put $13.4 billion of the aid money as “working capital” in an escrow account when the company was in bankruptcy. The company is using this escrow money--government money--to pay back the government loan.

It actually gets worse.  They are applying for a $10 billion low-interest loan from DOE to work on fuel efficient cars.  In addition, they’re delaying the date at which they will make a public offering to sell their stock.  In short, the company is in a worse position now than they were a year ago.

I remind you that the automakers are the biggest drain on the TARP.  The evil bankers, who are today the subject of a Congressional grandstanding hearing did not plunder the taxpayers’ wallets nearly as badly as the auto companies did, are doing and will do into the foreseeable future.

Posted by Hal_10000 on 04/27/10 at 11:00 AM (Discuss this in the forums)

Comments


Posted by on 04/27/10 at 01:00 PM from United States

GM and Chrysler are dead and they don’t even know it yet. They were put on life support with the TARP funds. We need to either pull the plug or live with a vegetable for the foreseeable future. With this administration, I’m betting on vegetable.

Posted by on 04/27/10 at 01:46 PM from United States

Buy a Honda - you’ll be happy you did....

Posted by on 04/27/10 at 02:27 PM from United States

Why am I not surprised?

Posted by on 04/27/10 at 03:23 PM from United States

GM is using government money to pay off government loans and still failing.  Ford didn’t take any money and managed to turn a hefty profit. 

Take note: you can’t subsidize away incompetence.  The corollary to that would be that competent individuals do not require handouts.

Posted by on 04/27/10 at 06:00 PM from United States

These assholes basically did the equivalent of a credit card balance transfer.  A company that didn’t make a profit is able to pay back billions in government loans?  Yeah, right.

Buy a Honda - you’ll be happy you did....

Well, I just bought a Hyundai, because Honda was just out of my price range (I wanted a crossover, and I wanted new), so hopefully I don’t end up regretting the decision.  It’s easy to be happy with a new car purchase when I’ve only put 700 miles on it so far.

Posted by on 04/27/10 at 06:45 PM from United States

Excellent post, I’m glad someone is getting this info out there.

These assholes basically did the equivalent of a credit card balance transfer.

Indeed!

One huge question I have is- if Ford uses basically the same people AND the same union to build it’s cars then why is GM’s profits down so much? Eighteen months ago Ford was just as bad off as GM and Chrysler.
The two Ford dealerships in my area claim their sales are not up, nor have they been in the last two years.Business has been flat according to them.

From the very beginning the whole “Ford” thing has smelled strange to me.

Posted by Hal_10000 on 04/27/10 at 07:32 PM from United States

As I recall, Ford is very competitive in the European market and their American labels have been selling fairly well.  So people are willing to make them loans on the hope that they will turn things around.

Posted by AlexinCT on 04/28/10 at 06:07 AM from United States

I find the focus on this non-event to be despiriting. The people running the country are telling bigger lies than GM’s commerical, are flushing trillions down the toilet, are throwing away our future, and yet, we are focusing on GM’s piddly commerical playing fast & loose with the facts.

Posted by on 04/28/10 at 08:54 AM from United States

I find the focus on this non-event to be despiriting. The people running the country are telling bigger lies than GM’s commerical, are flushing trillions down the toilet, are throwing away our future, and yet, we are focusing on GM’s piddly commerical playing fast & loose with the facts.

It shows that we’ve got corporations that are working hand-in-hand with the government to present a rosy economic picture that, fundamentally speaking, doesn’t exist.

The GM commercial is a microcosm of the larger picture of lies and corruption that is occurring right now.  I think it’s extremely appropriate that this be discussed, at least in that context.

Posted by AlexinCT on 04/28/10 at 09:57 AM from United States

The GM commercial is a microcosm of the larger picture of lies and corruption that is occurring right now.  I think it’s extremely appropriate that this be discussed, at least in that context.

But that’s not what seems to be happening. Most people seem more pissed GM is playing fast & loose with the facts than the fact the government is not only doing even more of that, but now has a vested interest in GM playng fast and loose with the facts.

Posted by on 04/28/10 at 11:06 AM from United States

Well, I just bought a Hyundai, because Honda was just out of my price range (I wanted a crossover, and I wanted new), so hopefully I don’t end up regretting the decision.

Several of my coworkers drive Hyundai vehicles and are quite happy with them.  It took them a few years to get their overall quality up to Japanese levels, but once they did they really took off as far as sales and brand loyalty.  I’ve considered getting one at times over a Japanese brand just to save cash.

Posted by on 04/28/10 at 06:01 PM from Germany

Just bought a Hyundai.  My wife has had one for five years...no problems...great value for money.

Posted by Manwhore on 04/28/10 at 08:44 PM from United States

Gm started failing thirty years ago with all of the shit products they put out. The prevailing theory inside the walls was that the customer base was so loyal that they would buy anything Gm put out, and it just isn’t true.

Now Gm blatantly displays that they are out of touch with their market again. How many peole in this country can afford to spend 30000 on a car? This is really simple economics to me. Most people are not in the market for high performance super cars, the only thing besides trucks they put effort in. Gm is making it obvious they don’t care to join market reality and make an economy car. Gm might have almost destroyed themselves at this point.

Honda makes about a dollar on the sale of a civic, from what I was told. The idea is that they want a customer for life, through all phases of adult economic development. Gm conversely tells their market to fuck off unless they have at least 30000 to spend for quality.

Posted by on 04/28/10 at 10:19 PM from United States

If Micheal Moore hadn’t wrote “Roger and Me” GM could have cut back and there would be a Chevy in every pot.

Or maybe I’m the one… oh something shinny

Posted by club penguin cheats on 06/08/10 at 07:28 PM from China

It took them a few years to get their overall quality up to Japanese levels, but once they did they really took off as far as sales and brand loyalty.  I’ve considered getting one at times over a Japanese brand just to save cash.

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