Regarding the triumphalism attending GM’s IPO, let this post serve as a friendly reminder that GM still owes the U.S. government $43 billion; that its financing arm still owes $14.6 billion; and that its sick friend Chrysler still owes $8.2 billion. Before we start declaring GM an American success story, let’s keep in mind that the government lost $9 billion of taxpayers’ original investment on today’s partial stock sale. GM still has major problems stemming from its pension obligations. Yes, auto sales have rebounded, but that is thanks to a surge in light-truck sales, which are not the kind of clean, green machines that Obama wants GM’s customers to buy. And yes, China bought a 1 percent stake, but analysts are calling this “a diplomatic arrangement” made for the purposes of smoothing rocky U.S.-China relations.
Let’s also keep in mind that many conservatives did not object to the idea of government-backed debtor-in-possession financing for GM and Chrysler at the height of the credit crisis, arguing that bankruptcy was unavoidable but that it might be necessary for the government to play a limited role in keeping the lights on at GM. The counterargument at the time, which one encountered constantly when arguing with bailout proponents, was that GM could not survive a bankruptcy — even a government-financed one — because the damage to its brand would be too great. Like many of the scare stories the automakers were telling at the time, this turned out to be false. It eventually became necessary for both GM and Chrysler to declare bankruptcy, and this did not prove fatal to either company. However, instead of providing simple debtor-in-possession financing, the TARP-financed bailout of the auto companies gave the Obama administration more control over the process, which it used to allow its union supporters to jump the line ahead of senior creditors. That’s exactly the kind of thing conservatives feared, and why we called for the government to have a much more circumscribed role if it was to have any role at all.
Look, no one is rooting for GM to fail, or for thousands of autoworkers to be laid off, or for the taxpayers to lose their entire stake in the company. But it is just ridiculous to start popping champagne corks left and right over the fact that an industrial problem child like GM managed to put its pants on today without falling on its face. Let’s hope the company continues to see sustained profitability and that the losses to taxpayers from the auto bailouts end up being small. But the defenders of those bailouts who are now calling them a “success” haven’t even come close to proving their case. We know that at least one of the automakers’ scare stories — the one about nobody buying cars from a bankrupt auto company — turned out to be wildly overblown, and it is highly likely that the rest were, too. The country might very well have been better off following conservatives’ advice and letting the courts deal with GM and Chrysler. Taxpayers certainly would be.
"Look, no one is rooting for GM to fail, or for thousands of autoworkers to be laid off, or for the taxpayers to lose their entire stake in the company. "
Not true. I am. Unions and management have to be taught that if you run a company into the ground, bad things follow. Politicians have to be taught that if you bail out corporations, bad things happen.
Reply to this commentLinkReport AbuseI want them to fail - as long as they are beholden to a union that has its head in the sand I want a failure that can kill their labor agreement obligations. I want the green aspects to die because they are not good business.
I owned GM cars all my life and still do - but I need a new car in a few years. If GM still owes the government any money - and they will - I won't even step foot in their showroom.
Reply to this commentLinkReport AbuseI owned 1,000 shares of pre-bankrupt GM. I still can't believe that I now have nothing AND the GM unions own the company (or at least a big share). It was the unions that bankrupted GM in the first place. For me, I'm done with GM cars. Forever. Period. I won't even rent one. Same with Chrysler.
I can accept my loss, but don't tell me traditional bankruptcy wouldn't have worked. The unions should have no ownership interest now. Chevy and Cadillacs would be vastly better off if taken over by a marquee well run company.
Reply to this commentLinkReport AbuseYeah, I'm also kinda rooting for them to fail. I think it'd be a damned shame if they were able to get the federal government to finance their efforts to drive out competition by companies who live and die by the products they sell - as opposed to the political contributions they make.
GM is forever tainted for me, and not by the money. It's tainted by the influence peddling and quid pro quo. No company that buys favors from the President in order to defeat honest competitors will ever get my business While I don't wish a layoff on anyone, it seems there's no other way to drive this lesson home, and so I am hoping GM will fail.
Reply to this commentLinkReport AbuseI wish all citizens were as well informed as you guys. The posting is correct in every material respect. You were too polite to add that Toyota, Nissan, Honda, Kia, Hyundai, AND Mercedes and BMW all make money manufacturing cars in the US. Why? b/c they don't have unions and more important no union legacy health/pension overhang. Barry O and that consent decree crook steve ratner did the GM/Chrysler deals as a bald payoff to the UAW thugs, and in doing so they crushed the contract rights of bondholders just like in a third rate banana republic, no ifs ands or buts. That's what happened and no amount of Gibbs spin changes that.
Reply to this commentLinkReport Abuse"Not true. I am. Unions and management have to be taught that if you run a company into the ground, bad things follow. Politicians have to be taught that if you bail out corporations, bad things happen."
I am too. Praying for it, actually.
Reply to this commentLinkReport AbuseSad to say, but many people agree. Their failure going forward is the only way the company will have a real opportunity to re-structure and get long term costs back in line. This could have happened this time around if not for the political paybacks to the UAW.
Reply to this commentLinkReport AbuseJust wondering if anyone else is enjoying the delicious irony of people buying shares of GM today which are worth less than when they drove them off the lot?
Reply to this commentLinkReport AbuseYeah, I'm all for them failing too. Especially as if they had been allowed to fail "naturally" we wouldn't be on the hook for billions. And anything that hurts the unions is a good thing
Reply to this commentLinkReport AbuseThere's more at stake here than people's jobs.
There's the principle. Once you insert a distortion into the market, you get a suboptimal allocation of goods and services. Period. The government should not be in the business of redistributing wealth. If people lose their jobs, have to uproot their families and live in trailers in North Dakota, eat cat food, whatever, that's unfortunate, but the Founders planned a government, not a church.
Reply to this commentLinkReport AbuseI'm a bit biased, because I'm a native Detroiter. I fully concur that GM has screwed up in the past, but also believe they will never get credit for doing anything to right the ship. They have a permanent black eye and it hurts me to see people hope they fail, knowing too well, how hard people have worked and how badly family's have been hurt in the downturn. So, yes, it is not time to pop the champagne cork, but this is a big first step in the process of paying the taxpayer's back. How's Fannie Mae and Freddie Mac doing on their re-payment plan?
Reply to this commentLinkReport AbuseSomebody explain to me why conservatives have not made a bigger deal of the brazen illegality of Obama's use of TARP money to bail out GM.
Reply to this commentLinkReport AbuseStephen - looks like you might need to edit your article. Haha!
No, really, I worked there for many years, left of my own accord when I knew what was coming. The company has lots of really bright, good people. And that includes the people who actually put the vehicles together. But the hourly workers' union representatives are worried about retiring while not working and placating the 5-10% of the workers who need to lose their job.
The management team is now led by a wall street money guy who doesn't know cars from trucks and is a tyrant.
The government is forcing them to follow a green product strategy that is just absolutely stupid. Ford has figured it out much better while also pumping out powerful large vehicles most people want to buy.
I also lost money when my shares went belly up, only to see the union who assisted in driving the business into the ground handed partial ownership. I figure I was robbed - I can't imagine what the Chrysler bondowners must feel like.
No Stephen - they need to fail, just like Obama and Pelosi need to fail. I will probably not purchase a GM car again. Not until the UAW gets what they truly deserve and the company really reimburses the American public for the gift they received as not much more than a political payoff. And looking at the posts - it seems I am not alone.
Reply to this commentLinkReport AbuseNo rooting for GM's failure is necessary. It will happen someday on its own. No question.
The "new" GM still has the same fundamental problems that the old one had. This is just the next chapter in the kick the can down the road, band-aid "solution" to the automakers problems.
A regular bankruptcy is the first step to healthy GM. This time around was too screwed up to work for the long term.
If GM is too far gone by that point, a breakup of it's remaining assets could be the forming blocks for the creation of several new, more nimble, union free, car makers. Just because GM would disappear doesn't mean everything would go. In fact it may be the best solution. Imagine,, instead of Chevy and Cadillac being separate brands but separate companies!
Reply to this commentLinkReport AbuseDon't forget too that Ford shareholders were robbed the chance of gaining more market share and increasing the value of their holdings. There are plenty of alternatives to GM. A failed GM means jobs and opportunity for employees and suppliers of GMs competitors.
Reply to this commentLinkReport AbuseConservatives can talk a good game but when it comes to governing, GM would have been saved no differently.
Reply to this commentLinkReport AbuseTraditional bankruptcy - Unions lose and have to negotiate new contracts at drastically lower compensation and benefits.
Reply to this commentLinkReport AbuseGovernment bailout bankruptcy - Unions not only get to keep their outrageous contracts, they get a large stake in the company, insuring larger future contracts and the inevitable failure and complete Gov't takeover in the not to distant future.
Hello Socialism!
A regular bankruptcy would have allowed the tens of thousands of cars in the pipeline to be sold off, generating cash. A few decades ago, GM Canada sold 10,000 special Chev Malibus to Saddam's Iraq. The deal fell through and the cars sat on the east coast dock. Finally GM decided to sell them off to the Canadian public at a sharply cut price. The cars had a terrible disadvantage in that they had old-fashioned three-speed manual transmissions and gearing to suit Iraq's flat terrain.
Reply to this commentLinkReport AbuseNevertheless, these "Iraqimobiles" sold like hotcakes. I could only get a used one, from someone whose sister worked for a GM dealer.
If GM would have failed, Ford, Toyota and any other company building cars in the US would fail. You can't be an extremist when it comes to business. Wall St loves this IPO and when the government divest itself when the stock price hits $50, tax payers make a profit.
Reply to this commentLinkReport AbuseI used to work for GM in management during the 80's and 90's. Nobody, NOBODY within GM saw the whole kit-and-kaboodle as nothing but a dead man walking. We did make a good call going into China, but most everything else was just to keep the lights on. GM should have refused G'ment bailout and went BK on it's own. Now it's stuck with loser cars, loser trucks are on the way..really sad. Want a sample? Look at the UK: ROVER, ROLLS ROYCE, ASTON, JAGUAR, all out of business or owned by another country. All these were bailed out by the UK G'ment. now, there's nothing left. GM will go the same way.
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