J.P.

My reply was to Haitwun who said they are not making cars worth buying, want to say someone else said they are a dying company, which as of right now, they are on an upswing with some great products.

As far as the credit, while it doesn't make sense over all, to those quants that ran the math they can make money with sub-prime auto loans, those loans are often ofter 6-7-8% and they can afford to lose on some, since the asset is often recoverable they can lose on more than people know and still make money.

One point a local apartment conglomerate made was people with scores under 650 still need homes and cars, they mostly pay their bills, may not be on time but they do pay. So there is money to be made when the math works. Also with the middle class shrinking you will see more subprime loans, people want to live its just going to come with a price.

Lets face it, the economic crash was not your normal downturn, other than great depression like collapse, they will likely keep making money on subprime loans while also moving a ton of cars.

J.P.

From my test drive I thought the XTS would make a great company car......

We are doing some marketing down there which I did not have plans to go even with that but since it seems the GS-F will be there I want to go see the damn thing!

J.P.

Thats the key, what happened in 2008 hasn't happened since what the great depression? Sure it will happen again, it could be 5 years or 100 years, but it was not the typical 7 years downturn you see....

BTW most companies don't run their businesses thinking about 2008 type downturns, if they did you would see no capital expenditures at all and progress would stop.

gengar

Or even better yet, many of those sales would have simply gone to the reorganized, not-bailed-out GM, which would have continued operating without disruption through a Chapter 11 bankruptcy.


I'll "get over it" once people correctly recognize that the bailout was a disaster instead of cheerleading losing 9.7 billion of taxpayer dollars. As I said, with this type of delusional perspective, is it any wonder the USA is 17+ trillion in debt?

As far as "recouping the $9B in one way or another", what does that even mean? The $9.7 billion is gone - the taxpayer is not getting that back.

LeX2K

The total cost is way more than $9.7 billion. Think about Ford, who did not take bail out money, they were robbed of their capitalist success (as were other auto makers) because GM should have gone under. This is blatantly counter free market.

J.P.

It was a disaster, but I am not going to live in the past, and there isn't jack you or I can do about it. I am going to focus on moving forward and making my life better, its in the past.

I think the tax impact and cost of the unemployed would offset some of that $9B. I think corporations and people pay some kind of taxes right? I would rather have GM and all the Tiers up here booming rather than suffering. If they are making money then the corps and the employees are paying more taxes while keeping people off unemployment.

gengar

The whole point of my posts is focusing on moving forward and making my life better! The issue here isn't that the GM bailout happened, it's that people actually claim it was a good thing. If everyone correctly understood the bailout to be a disaster as you do, then of course everyone, myself included, would just move on. But so long as people still believe that it's a good thing to lose $9.7 billion of taxpayer money to build some cars, the lives of taxpayers and the lives of Americans won't be better. That's why I comment on this issue and why I will continue to comment on this issue, because - as I said before - this type of irrational thinking is precisely why the USA is $17+ trillion in debt.


Sure, but what has to be considered is the alternative scenario - that is, the impact on society is the difference between what actually happened and what would have otherwise happened. The problem is that automotive lobbying groups and union lobbyists claim that had GM not been bailed out, every employee of GM, its suppliers, and dealerships would have suddenly been unemployed (hence absurd claims of "saving" 1.5 million jobs ) and that consumers that would have bought GM cars would have simply bought nothing. That is a completely delusional hypothesis that utterly contradicts the most basic tenets of economics, business, and reality. Unfortunately, this thread shows that some people have bought into the political Kool-Aid.

What actually would have happened is a short-term reorganization and restructuring, allowing GM to ditch their worst liabilities while strengthening core profitable operations (notably, much like Ford managed to do in the mid-2000s - except that GM would have been more effective and efficient since Ford didn't have to declare bankruptcy to do so). GM's brand was obviously valuable enough that any new corporation would carry its name, and while surely many sub-brands would have been eliminated either way, typical consumers probably wouldn't have noticed a thing changed. As I discussed above, Chapter 11 bankruptcy is designed precisely so that businesses can continue operating without disruption, and pragmatically, that's exactly what happens. The notion that bankruptcy immediately results in liquidation is nonsense.

It's also ironic that you bring up GM's corporate taxation as a revenue stream. Keep in mind that GM was allowed to keep tax loss carry-forwards (something that is forbidden by law for companies in GM's situation - but hey, when the government wants something, it gets to ignore its own laws, right?). What this means is that GM has gotten to (and will continue to get to) deduct pre-bankruptcy losses from their current and future tax liabilities. Had GM gone through a typical Chapter 11 without intervention from the government, they would not have been able to carry forward these losses! The result of this is that the ultimate impact on taxpayer money is actually far more than $9.7 billion - I believe that GM reported that they would not have to pay around $14 billion in taxes due to the carry-forward. So while deductions are certainly favorable to destruction of taxpayer-funded capital, it's still $14 billion that is removed from taxpayer funds. The bailout is a gift that keeps on giving!

Finally, I don't understand why there is any talk of GM "suffering" or "failing". Of course a successful GM is good for the country so long as it's for the right reasons. The issue is whether GM would have "suffered" or failed without the bailout to the extent that bailout proponents claim, and the answer is clearly no - especially not to the tune of $9.7 billion of taxpayer money destroyed.

Trexus

Well it appears Chrysler got two bypass surgeries in my lifetime (one with Lee Iacocca and one with Robert Nardelli) ...never say GM couldn't go through another bailout/restructure within our lifetime...maybe not yours...not sure how old you are...

I wholeheartedly agree with gengar. I don't live in the past but bailing out GM was as disaster. Either way what's done is done. I personally feel if GM gets in financial trouble again we the taxpayers should not bail out GM another time...

mmarshall

It's been a while since I was considered young, but I don't have one foot in the grave by any means.

The two at Chrysler (especially the second one) are markedly different from what happened at GM.....that's why I did not specifically include them in my earlier statement. The first one, in 1981, involved classic mismanagement of the company in the 1970s when Lynn Townsend was in charge (and it showed in the p**s-poor quality of their products at the time). Lee Iacocca and Hal Sperlich had come over to Chrysler from Ford when Henry Ford II (a completely self-centered tyrant of a CEO who ran his company like a fiefdom) fired them. Iacocca had found a disaster at Chrysler waiting for him.....Townsend admitted to Iacocca he couldn't run the company the way it was structured, was ready to retire, and asked Lido to take his place. Lido had to work VERY hard (with also a certain amount of sheer luck) not only to try and rebuild the disorganized, failing company, but just as hard persuading Congress to approve the first loan....with some very strict terms to it. (all this is graphically described in detail, in Iaccca's a autobiography, which I've read). So Congress, in the first loan, didn't just idly or blindly toss money at Chrysler. It was a VERY structured loan, in a specific amount, with very specific terms, and, even so, just barely saved the company, along with Lidos reforms...but, despite all of Lido's TV ads and slick talk about quality, the fact was the company still made poorly-constructed cars a the time....some of the worst I've remember in my lifetime.

The second time, in 2008-2009, was something totally different.....under totally different circumstances......and I wouldn't even call it a loan because, technically, as I saw it at least, it wasn't a loan. Unlike in 1981 when it still had some life left if the loan could save the company, by 2008, Chrysler was clearly finished as an independent American-based corporation, and the money, unlike in 1981, simply was added to what Fiat was already putting up with its take-over buyout. Chrysler, like with the Daimler-Mercedes and Cerebrus buyouts some years earlier, was simply becoming part of Fiat, with Sergio Marchionne as the new CEO.

That was different from GM, which remained basically an independent corporation, though partially Government-owned for a few years until most of the loan was paid off. Another big difference between the two is that GM lost half of its divisions in the buyout, while Chrysler, even under Fiat, kept its Dodge, Jeep, and Chrysler, having shed Plymouth and Eagle years earlier in business-decisions not related to any Federal money. So, in hindsight, I would consider most of what happened to Chrysler in 2008 simply a sellout to a foreign corporation, not a U.S. government/UAW takeover like what happened at GM.

bitkahuna

iTrader: (20)

i think you're missing the point that the loans are through GM's financial arm, the dealers are just doing the paperwork to sell the car. GM is taking ALL the financial risk after the sale.

sorry, that's not how dealers work. the cars on their lot are basically on 'consignment' with a fee paid for each day they remain on the lot giving dealers more and more incentive to sell the car. when a car is sold, the dealer gets the sale price less the wholesale price less any finance fees, typically not much! dealers basically make very little on selling cars - the real money is in service.

you're entitled to your opinion although off-topic, and maybe you don't want to buy the 2nd best selling vehicle in america (silverado truck) or what is considered one of the best mass produced sports cars ever (C7), or their widely praised impala, or the pretty awesome cadillac cts... gm may not be for you or me, but millions find their vehicles 'worth buying'.

100% agree. i definitely wasn't a fan either, but gengar, to answer your question, govt will make its $9B from ongoing taxes from the company and its employees, suppliers, etc.

again, incorrect. gm certainly has made some horrendous decisions and bad deals with the uaw in the past which came back to haunt them, but the bankruptcy was more about the housing crash than gm, which was definitely headed in the right direction at the time of the economic crash.

again, they have aleady changed, but yeah, most likely, if another economic calamity happens, i suspect the govt will step in. but as they say, it's complicated.

that's not necessarily true, as the consumer had a vote, so without govt support, MANY consumers might not have bought a GM product while in bankruptcy, making the situation worse. so it's not black and white about what would have happened. philosophically though, even morally, i agree the bailout was bad.

the u.s. has just spent $1 TRILLION on afghanistan (so far). so the $9B loss on GM seems a bit tiny, no? the u.s. is building tanks the military has said it doesn't want but can't seem to stop. the f35 fighter was a vast waste of money since drones are the future. we have over 25,000 troops on the S.Korea/N.Korea border which i don't think S.Korea pays for (but should). not picking on military, but it's a giant sink hole of waste.

don't get me started on medicare/medicaid fraud, or that we have 50 MILLION people receiving food stamps now (you believe they all should really get them?), or that the govt is shelling out billions on bogus 'disability' claims... then there's public education (how about that high school in LA that cost over 500 MILLION to build ), and on and on...

the u.s. is not, in fact has never been a very free market. how about the scam of 'non-profit' corporations? why is the NFL allowed to be one? why is baseball exempt from anti-trust laws and governed by congress?

as for ford, they had JUST refinanced some debt at very favorable rates right before the crash and dodged the fatal bullet, JUST, due to timing, plus alan mulally's GREAT leadership. i do agree they were then left competing against government bailed out competitors. ford WAS offered the same deal however, and turned it down. they of course have the number 1 selling vehicle in america, and many other great vehicles - they're doing just fine.

mmarshall

Respectfully, I have to disagree. Much of what dealers actually loan out for car-financing comes from local banks. That's why their terms and interest rates are often different from regular GM financing....the bank is the one really calling the shots, through the dealership.



Yes, I'm familiar with holdback fees, consignment fees, and factory-to-dealer incentive fees paid to sell a car before the end of the month (one reason why it sometimes pays to bargain on the last couple of days each month, when dealerships are pressed to sell). And I'll agree that service is usually where most of the profits are made....unless some schmuck with a Gotta-Have-It-Right-Now attitude is willing to pay $55,000 for a $38,000 car, like we saw with the initial 2-seat Ford Thunderbirds in 2001 and Camaro SS in 2010. But I don't see how that changes what I said earlier...the factory makes its profit from the dealership paying wholesale, and the dealership makes its profit from whatever customers are willing to pay.

LeX2K

This is complete bull, sorry. GM was trending towards bankruptcy for a long time a market crash is not the primary reason they went under. The bankruptcy was mostly about bad management and the economic crash just pushed them from standing on the edge to finally falling off the cliff.

gengar

I already discussed above why it is utterly irrelevant whether GM generates $9.7 billion of tax revenue in the future. To claim it is a wash if GM pays as much in tax as was lost by taxpayers in the bailout assumes that had GM not been bailed out, GM nor any of its reorganized entities would ever have paid taxes again. This is an absurd assumption. Even if GM was completely liquidated, its assets would have been put to some productive use - and that is a worst case scenario. A normal Chapter 11 process not interfered with by the government would quite likely have created an entity very similar to what exists today, as during the bailout, creditors and union workers were paid off handsomely - and the liabilities to these parties are a big reason why GM went bankrupt and are normally the first things to be restructured in Chapter 11. (Again, look at what Ford was able to do in the mid-2000s even without filing for Chapter 11.)

EDIT: I'll add here that I missed mmarshall's earlier comment that GM's "remaining employees" took a pay cut of as much as half during the bailout. This is inaccurate, as only new employees at the lowest tier of hiring were subject to those pay cuts. By and large, all workers who were already at GM had their pay secured, not to mention that many pensions were actually funded higher as a result of the bailout, something usually unheard of during a Chapter 11 reorganization. So if you want to know where the $9.7 billion went - well, that's where.

And as I already noted above, using the $9.7 billion figure is not accurate in terms of tax revenue. GM was granted tax loss carry-forwards worth apparently $14 billion in reduced tax liability, despite being against the law. So that's $14 billion more in taxes that is not being paid by bailout GM as compared to if GM had not been bailed out and instead gone through a normal Chapter 11 bankruptcy.

(This is also ignoring that the taxpayer loss on GM stock was actually $11.2 billion - the $9.7 billion reported in the article posted by Vh_Supra26 factored in gains from Ally Financial.)



Exactly. It's the mentality that is the problem. "It's OK to lose $9.7 billion in order to make a couple cars" is no different than "It's OK to spend $1.5 trillion dollars building a fighter of vague necessity for equally vague security interests" or "It's OK to spend additional billions of dollars on 'education' with absolutely no tangible societal benefit". You argue that it is the status quo, but that is precisely my point. It is the same mentality, and it is because of this mentality that we are in debt and continue racking up debt.

BTW, South Korea does pay for US military presence. I think it's about US $1 billion a year. No idea if this actually reimburses the total cost (I doubt it). Getting OT though.

Sorry, missed this earlier. Hope you had a good New Year's. If you want my thoughts on bailouts in general (such as where I "draw the line" on bailouts - the quick answer is I don't because I basically don't support any bailouts), I am more than happy to discuss in the Debate Forum.

nipponbird

You're pinpointing the single most salient problem: "Bad management". Committees, boards of directors etc. have never been good news in the motor industry. Every time there is a success story, single names come up: Henry Ford, Ferdinand Porsche etc. etc.. GM's cars have apparently improved, but if they don't buy great names, as per example Hyundai's recruitment of Albert Biermann, they are most probably some badly wounded soldier staggering forth on a booster injection and no Obama to give another one.

mmarshall

Well, many of the older workers went ahead and retired while they could still get their good pensions and benefits. I mean...wouldn't you do the same if you had the chance? That's just common sense. They had worked long and hard for those benefits, and a number of them may (?) have suffered the common repetative-motion muscular/skeletal injuries common on assembly lines. But, as you and I both noted, most of the newer people came on at lower wages and benefits...the figures I saw indicated that they were, on average, about half of what they were getting before, even with UAW jobs. And, of course, UAW itself out up part of the bailout money and became a part-owner, something very unusual in American business (that's the first time I ever heard of it, but i could be wrong).



Agreed...this thread probably would have been in the Debate forum if not for its GM-related nature. I only raised the question since you seem so intent on panning the GM buyout when similar deals have actually been going on for decades, both in the auto industry and other industries as well.