GM Bailout

[Smallc]

Imagine that. People remembering, and not voting for a party that has continually and historically treated them like crap.

Seriously? How were they treated badly by Paul Martin?...or even Jean Chretien (of course you're going to point out his fights with Ralph Klien...but he had those with every premier).

[bjre]

http://www.leftlanenews.com/hummer-sold-to...nufacturer.html

Hummer sold to Chinese machinery manufacturer

After General Motors announced this morning that it has reached a tentative agreement with a potential buyer for its all-American Hummer brand, news comes from China that the buyer is Sichuan Tengzhong Heavy Industrial Machinery Company, a heavy industry manufacturer looking to get into the car-building business.

The report comes from the New York Times, which spoke to an anonymous source who said the Chengdu, China, company is Hummer’ssuitor. The paper estimates that Sichuan Tengzhong will pay less than $500 million for Hummer.

Earlier news from AP: http://news.yahoo.com/s/ap/20090602/ap_on_...e/us_automakers

DETROIT – General Motors Corp. took a key step toward its downsizing on Tuesday, striking a tentative deal to sell its Hummer brand to a Chinese manufacturer, while also revealing that it has potential buyers for its Saturn and Saab brands.

[madmax]

Thats great news. Hummers made in China.

And now the Selloff of SAAB after 20 years in GMs hands.

And Saturn... designed around the Japanese model.

Its nice to see where our Billion $ investments are going. Maybe they will revive Pontiac.

Edited June 2, 2009 by madmax

[fellowtraveller]

It is a much, much better deal than where we started.

Until now, all of GMs assets worldwide were pledged to the US govt. That meant every nickel the Opposition insisted we give the auto companies was unsecured. 100% unsecured. At least we have some equity in the company, though I agree it is highly dubious.

[bjre]

It is a much, much better deal than where we started.

Until now, all of GMs assets worldwide were pledged to the US govt. That meant every nickel the Opposition insisted we give the auto companies was unsecured. 100% unsecured. At least we have some equity in the company, though I agree it is highly dubious.

http://bloomberg.com/apps/news?pid=2060110...&refer=home

GM Shanghai Ties May Ease Bankruptcy Impact on Sales

GM’s operations in China are profitable and can finance future growth themselves, “likely” including a new factory, Reilly said in April. The automaker, which sold its first car in China in the 1920s, had said that it expects to double annual Chinese vehicle sales to more than 2 million over the next five years.

“Shanghai GM is certainly capable of developing itself independently,” Zeng of IHS Global Insight said. “It’s a company that has a very good financial position.”

...

GM, which employs more than 25,000 employees in China, sold 1.09 million vehicles in the country last year. That’s 13 percent of its global sales and about 75 percent of Asia sales. Across the Asia-Pacific region, the company has factories in six countries, including South Korea, Thailand and Australia.

In April, the automaker sold 151,084 vehicles in China. Industrywide sales jumped 25 percent to 1.15 million. In the first four months of the year, China’s vehicle sales rose 9.4 percent to 3.83 million, compared with a 37 percent drop to 3 million in the U.S.

[ToadBrother]

It is a much, much better deal than where we started.

Until now, all of GMs assets worldwide were pledged to the US govt. That meant every nickel the Opposition insisted we give the auto companies was unsecured. 100% unsecured. At least we have some equity in the company, though I agree it is highly dubious.

What amazes me was watching the news last night and seeing all these autoworkers in the US and Canada smiling, when they're going to be getting the shaft. The bailout money seems destined to be used, one way or the other, to ramp up production in cheaper locales.

[bjre]

and we're all going to have to pay....

You know, in China, GM worker's sallary is much less than in Canada, and gov asked much less tax from the workers, and the buyers don't pay bank mortgage expense for buying cars. So the cost is much less than Canada. So the company is much easier to survive there.

That is why I don't think we are paying for GM, it is pay for the high cost introduced by US gov and Canadian gov.

The money for the Iraq war and the cost of services to support the legal system and other services.

[Jerry J. Fortin]

This bailout package seems like a nice transfer of wealth from the public to the private sector. It looks to me like there is a lot of money being tossed around, money seems to be going into GM by the billions, but where the hell is it going? The banks claim they are not getting any money, we know the stock holders are not getting any money, neither did the bond holders. All of the pensioners and all of the employees would not cost what GM has already got from the governments. So where the hell is it going?

[Jerry J. Fortin]

Well folks, this is how the system is working. You have to love governments.............

[bjre]

Well folks, this is how the system is working. You have to love governments.............

I don't think it has anything to do with love governments or not.

I just wonder why they are still putting so much energy on adding new laws that will cost more resources to process instead of review the existing laws and abolish some.

[waldo]

It is a much, much better deal than where we started.

so Harper fiscal conservatism shines through once again! Must drive the true-blue small-c types bat-shite crazy... once again.

Harper blows billions and his principles

In a jaw-dropping reversal of principle, Harper sold out to the corporate welfare mentality he'd steadfastly opposed before becoming a leader of rubber-band pragmatism and fiscal imprudence.

The Stephen Harper who insisted federal governments have no place picking winners and losers in the boardrooms of Canada has delivered the largest one-time, one-company gamble of taxpayer dollars in Canadian history.

A General Motors that has cut its Canadian car production by 50 per cent in just five years, with plans to shed half its domestic workforce in the next five years, has become a flagship Harpernomics investment that won't be declared a winner or loser until the deal expires long after he's gone, in 2018.

We, the taxpayers, now own $500-million worth of preferred shares and 11.7 per cent of a future common share issue that may end up worth as much as the current common shares. Which would mean, literally, nothing.

[jdobbin]

Now what do you people think the chances are we recover even half of what we're throwing away here? We'll never see that money again. The tax revenues from GM and parts suppliers will never make up the difference. This is so pathetic it hurts.

Do you think letting GM go under might have been better?

[ToadBrother]

Do you think letting GM go under might have been better?

I think the question is better put "Would it have been worse?"

GM is going to move huge amounts of production overseas. That means we won't be saving many jobs in the US or Canada. Because of the bankruptcy, for the forseeable future, investors are screwed. So the only people who seem to be helped here is GM itself, and if that's the only benefit, then I say "Let 'em sink". I'd sell the whole thing to Toyota for one tenth of a peso on the dollar, because we'd probably get more value out of that than out of this.

What's the point of GM surviving if it becomes little more than a branch of China Inc? Taxpayers lose their "investment". Investors lose out. Workers lose.

Edited June 3, 2009 by ToadBrother

[jdobbin]

What's the point of GM surviving if it becomes little more than a branch of China Inc? Taxpayers lose their "investment". Investors lose out. Workers lose.

Then I guess the answer is to let them fail.

I can't help wonder what that would have looked like.

[geoffrey]

That's a good question Jerry. If you look at GM's May 8, 2009 SEC filing 10-1, you can find PART 1.1, Consolidated Financial Statements. This is their most recent balance sheet prior to the bankruptcy.

There you can see that GM has the following current liabilities (due within 1 year):

Accounts Payable: $18.253B

Accrued Expenses: $36.989B

Subtotal... $55.242B

Now these accounts would need to be settled first, in order to continue production. These are amounts due to suppliers and likely their employees (in accrued expenses).

Plus Current short-term debt and long-term debt maturing this year... $25.556B

Now that amount will likely have to line up with other unsecured senior creditors, but a portion is probably payable now. None the less, GM has $80.8B in short-term liabilities that would need to be settled priored to continued operations. That's likely what the government money is doing. Paying the bills.

GM had $11B in cash on hand at this time, but much of that could be tied up in subsiduaries... and it's still insufficent to cover their payables. They have $11B in inventory on hand... that they can't sell... not to mention it's probably not worth $11B anymore.

That might have just been more confusing, but hopefully I provided some explanation of where the money is going.

[Jerry J. Fortin]

It would be even more ugly than it is now. The thing is that this nation is making a large mistake in how it is going about dealing with the problem.

[geoffrey]

We won't see a dollar back on this one, GM's stock value isn't going to $125/sh.

But I feel more for the bond holders of the firm that lost billions when their rights were trampled by Obama and his parade of socialisation. Bondholders have first right to the assets of the firm... unfortunately not in Obama's world.

Obama makes these bondholders look like evil speculators (whatever that means). The reality is that GM is one of the widest held debt securities by pension funds and many mutual funds. The evil bondholders are generally your average Joe that just wants money to retire.

Obama screwed individuals with 401k's (and Canadians with RRSPs in fixed-income funds) in order to help his buddies in the union secure their pension.

Now that's really low. But that's the way Obama is. His friends first. The law be damned. He is the savior after all, right?

[August1991]

It is a much, much better deal than where we started.

Until now, all of GMs assets worldwide were pledged to the US govt. That meant every nickel the Opposition insisted we give the auto companies was unsecured. 100% unsecured. At least we have some equity in the company, though I agree it is highly dubious.

That's a good point, fellowtraveller.

As much as I find this whole Chrysler/GM imbroglio distasteful, the Canadian/Ontario governments at least get some equity, a seat on the board and some kind of a guarantee of between 16-19% of North American production.

Is any of this worth $10 billion? I know that Margaret Thatcher would have thrown these GM/union negotiators out of her office but our governments aren't at that stage. As she said, all socialist experiments eventually run out of other people's money.

[Jerry J. Fortin]

I know the money is going to pay bills, but it is just hard to believe that so much money flies around in that company. The issues that I have with the company is that it has negotiated its way into a corner with its employees and marketed its way into a corner with its customers. The company was and in my opinion still is nonviable.

Even after restructuring, there is still the pension liability issue. That is not going to go away, under the current circumstances. I think what should happen with the company is not merely restructuring but instead complete liquidation. The public money already spent is already gone and it represents only a drop in the bucket of what is truly required to operate because this is one large mother of a company.

The guys that ran it into the ground were not hurt at all, in fact they made out quite well. They never bought any stock, it was given to them in bonuses and loans. Yet nobody sees this as a problem. I don't think it is worth doing anything about it, its just that they were a big part of the problem. What is needed is some regulations that serve to prevent this kind of thing from happening again. I mean the entire focus here is one of handing out public money, our tax dollars into supporting private enterprise and ignoring the root cause of the problem which still underlies most of the other corporations. So what happens when the next one bites the dust?

I was against handing over tax dollars to start with, now I think that our government should have the balls to use tax policies to secure the investments. I do think that there is a way to recoup the expenses. Chrysler owes millions in taxes, so does GM. I think the wise move is to take these guys on as soon as possible and make amends to the citizens. Use the current rates of interest and get what is owed in either dollars or property and do it quickly.

[August1991]

That's a good question Jerry. If you look at GM's May 8, 2009 SEC filing 10-1, you can find PART 1.1, Consolidated Financial Statements. This is their most recent balance sheet prior to the bankruptcy.

There you can see that GM has the following current liabilities (due within 1 year):

Accounts Payable: $18.253B

Accrued Expenses: $36.989B

Subtotal... $55.242B

...

Geoffrey, your numbers here are not entirely helpful. If I understand properly, GM is going into bankruptcy under the so-called Section 363. IOW, the good parts of Old GM will be hived off to a New Viable GM. The bad parts of the Old GM will go into "Ch. 11" bankruptcy and creditors will line up for what they can get.

The US/Canadian government cash (about $40 billion) will be used to operate the New Viable GM. But who decides how to divide Old GM assets into "good parts" and "bad parts".

But I feel more for the bond holders of the firm that lost billions when their rights were trampled by Obama and his parade of socialisation. Bondholders have first right to the assets of the firm... unfortunately not in Obama's world.

Obama makes these bondholders look like evil speculators (whatever that means). The reality is that GM is one of the widest held debt securities by pension funds and many mutual funds. The evil bondholders are generally your average Joe that just wants money to retire.

Obama screwed individuals with 401k's (and Canadians with RRSPs in fixed-income funds) in order to help his buddies in the union secure their pension.

Now that's really low. But that's the way Obama is. His friends first. The law be damned. He is the savior after all, right?

This is true. Obama has in effect changed the order of creditor priority by making the unions party to the New Viable GM entity. I think that in political terms, Obama needed the UAW on board for this thing to have any chance of success. Edited June 3, 2009 by August1991

[geoffrey]

I know the money is going to pay bills, but it is just hard to believe that so much money flies around in that company. The issues that I have with the company is that it has negotiated its way into a corner with its employees and marketed its way into a corner with its customers. The company was and in my opinion still is nonviable.

Absolutely. We'll be paying to have Cameros and Corvettes for decades to come. I heard one analyst on BNN yesterday indicating that we've paid $14,000 in tax money for every car that GM will produce next year. That's a big subsidy. You don't recover from that level of support.

The company is forever broken.

Take a look at the cash flow statement from that filing I referred to. GM burned through $10B in cash in 3 months, just operating activities. Another $2.3B was burned in investing activities. Easy to see the issue, right?

Even after restructuring, there is still the pension liability issue. That is not going to go away, under the current circumstances. I think what should happen with the company is not merely restructuring but instead complete liquidation. The public money already spent is already gone and it represents only a drop in the bucket of what is truly required to operate because this is one large mother of a company.

Funny how mom and pop that held a mutual fund get screwed when GM goes bankrupt, but the union is made whole (or will be, eventually). Retirees lose all claim on assets with bankruptcy, but the union liability remains. Weird socialist distortion there.

The guys that ran it into the ground were not hurt at all, in fact they made out quite well. They never bought any stock, it was given to them in bonuses and loans.

And they all sold everything a few months back, pretty funny. The execs exited around $3/share.

I was against handing over tax dollars to start with, now I think that our government should have the balls to use tax policies to secure the investments. I do think that there is a way to recoup the expenses. Chrysler owes millions in taxes, so does GM. I think the wise move is to take these guys on as soon as possible and make amends to the citizens. Use the current rates of interest and get what is owed in either dollars or property and do it quickly.

Won't happen, the cat is out of the box. Further, all industries are now lining up for the same benefits, some will get them. We're just seeing the beginning.

[geoffrey]

Geoffrey, your numbers here are not entirely helpful. If I understand properly, GM is going into bankruptcy under the so-called Section 363. IOW, the good parts of Old GM will be hived off to a New Viable GM. The bad parts of the Old GM will go into "Ch. 11" bankruptcy and creditors will line up for what they can get.

Yes, but current suppliers and employees need to be paid, otherwise they won't provide more parts. These liabilities must be settled for the New Viable GM to proceed. That's what the money is for (and transitioning into the new GM).

Just provided the numbers as Jerry was wondering where it was going. Showing that it's going to suppliers and employees.

The US/Canadian government cash (about $40 billion) will be used to operate the New Viable GM. But who decides how to divide Old GM assets into "good parts" and "bad parts".

The bankruptcy judge, with Obama's hand hovering above his head.

Obama will be quick to intervene or dismiss the judge as a traitor to the US nation if he does anything other than benefit the union.

This is true. Obama has in effect changed the order of creditor priority by making the unions party to the New Viable GM entity. I think that in political terms, Obama needed the UAW on board for this thing to have any chance of success.

The cost of that might be huge in the long run though. Do you want to hold bonds in industrial companies now? No way. Your money will be given to the unions. There will be an increase in the cost of capital for industrial firms in order to reflect the "Obama Risk" as one of the bond traders I know calls it. You can see it in yields for industrials now.

I just don't understand how you can put retiree savings out to the dogs while protecting union pensions... pensions that the employees just started contributing to last year. Life savings versus above market perk. Let's support the perk because it's union. Dumb dumb dumb.

[Moonbox]

Then I guess the answer is to let them fail.

I can't help wonder what that would have looked like.

Helping them restructure is one thing. Setting the precedent that secured bond holders are no longer first in line upon bankruptcy and that the union should get first dibs is another. This is political pandering that, in my opinion, equates to extreme political corruption.

Obama is selling the country out to ensure he and the democrats maintain the good graces of Michigan, Indiana etc. Canada's getting a brutal deal as well.

Like I said earlier, we're getting an equity stake in the new company, but we're being FORCED to divest it over 8 years. For us to make our money back, GM share prices need to go from $1 to $120ish. There's no chance in hell that we're to go even a third that far before we're forced to sell off. We're paying $10B to ensure that GM jobs stay here until 2016 (I think). After that there's no guarantees and there's once again ZERO chance that GM's contributions to our economy will equal a current valued $10B investment over the next decade.

Obama and Harper had a chance here to make meaningful and fundamental changes to the way unions and corporations do business. Instead, they sold us out for a handful of jobs and votes and we're going to be paying off the difference for a long time.

The best part is that the bankruptcy has tainted GM's image for a long time to come, and there's no guarantee that it will even survive AFTER the restructuring. GM's ads right now are PLEADING to people to keep buying their cars.

[bush_cheney2004]

....Obama is selling the country out to ensure he and the democrats maintain the good graces of Michigan, Indiana etc. Canada's getting a brutal deal as well.

That's what Obama is supposed to do. Canada's choice could have been different.

GM was already failing.

[geoffrey]

Helping them restructure is one thing. Setting the precedent that secured bond holders are no longer first in line upon bankruptcy and that the union should get first dibs is another. This is political pandering that, in my opinion, equates to extreme political corruption.

I think Obama should be impeached over the issue.

Obama is selling the country out to ensure he and the democrats maintain the good graces of Michigan, Indiana etc. Canada's getting a brutal deal as well.

That's 25 electoral votes for only $30b and the destruction of a principle of the capitalist system! Not bad.

The best part is that the bankruptcy has tainted GM's image for a long time to come, and there's no guarantee that it will even survive AFTER the restructuring. GM's ads right now are PLEADING to people to keep buying their cars.

I'll never buy one of their cars. I've given them enough money. I encourage others to not buy GM product as well.