The taxpayers’ $50 billion gamble on GM
DETROIT — General Motors Corp. filed for Chapter 11 bankruptcy early Monday, marking the humbling of an American icon that once dominated the global car industry and setting up a high-stakes gamble for U.S. taxpayers.
The bankruptcy filing, made in the U.S. Bankruptcy Court in Manhattan, marks the climax of a lengthy debate over the auto maker’s future after it sought a bailout from the U.S. government in December to stay alive. In the end, GM couldn’t complete its restructuring out of court and filed for bankruptcy-court protection to get billions more in aid from U.S. taxpayers.
The question now facing 56,000 auto workers, 3,600 GM dealers and the Obama administration: Will it work?
I’d say the American taxpayer might also be interested in that question, given that the government is expected to invest an estimated $50 billion in the company to keep it afloat. As the Journal also points out, the market for new cars isn’t exactly booming. New-vehicle sales in the U.S. “have dropped nearly 40% since January, to an annual rate of fewer than 9.5 million a year, it reports. “At that level, even Toyota Motor Corp., the world’s biggest car maker, is losing money.”
So yes, it’s a gamble. A gamble worth taking, I think, but no one should discount the possibility that the gamble will be lost. In this new economy, anybody who claims any degree of certainty is certainly not to be trusted.
The U.S. government has agreed to provide GM with another $30 billion in aid, in addition to the $20 billion the auto maker has already borrowed, to see it through its restructuring and exit from bankruptcy protection. In return, the government will get a controlling stake in the company. The Canadian and Ontario governments are putting in $9.5 billion for a 12.5% stake.
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181 comments Add your comment
I Rule You :-)/ You Whine :-(
June 1st, 2009
12:38 pm
Now the UAW can suck dry whatever remains. The government will keep feeding the host as long as the parasite is firmly attached to it.
Hundreds of billions is what we will end up paying for an automaker we would never buy a car from.
If people haven’t yet figured out what a clown Obozo is, this will help them out.
LOLO
June 1st, 2009
12:43 pm
Welcome to Fascism. Enjoy the ride…
TUESDAY VANDY GIRL
June 1st, 2009
12:43 pm
I think that auto analyist on CNBC was right, he said that GM will be Obambam’s vietnam …everytime he turns around, it will be in the news , losing money, needing another $20 billion….green little cars not selling, obama yellin
josef nix
June 1st, 2009
12:47 pm
LOLO–yes, but the trains should run on time!
jt
June 1st, 2009
12:50 pm
Even though I am a taxpayer, it isn’t MY gamble.
Nor one I would take.
Joey
June 1st, 2009
12:51 pm
In this gamble, similar to Vegas or AC, the House has the advantage.
I am not certain who or what entities are the House in this case or in the case of any of the bail-out, buy-out, loan programs. We know for sure is that Taxpayers are not the House.
Question is how many of us bought a return ticket home before this bet was placed?
Greg Mendel
June 1st, 2009
12:52 pm
GM, unless its management is replaced by executives from Honda, is a risky gamble. Obama would have better odds by putting all $50 billion on Ann Coulter in the Preakness.
ByteMe
June 1st, 2009
12:59 pm
I think the first $20B is a “sunk cost” and not recoverable. The $30B going forward should be able to be recovered through selling off GM Europe, Saab, Saturn, etc., as pieces and then issuing stock in the remaining entity as the economy starts to turn back up. Yes, it’s a gamble, but putting 600,000 people out of work (between GM and all the suppliers and dealers who would have to file for bankruptcy protection) this summer is a bigger gamble politically.
josef nix
June 1st, 2009
1:00 pm
GREGOR MENDEL
“Obama would have better odds by putting all $50 billion on Ann Coulter in the Preakness.”
That’s good! What are the odds?
getalife
June 1st, 2009
1:02 pm
So when does the government go bankrupt?
Redneck Convert
June 1st, 2009
1:02 pm
Well, I don’t beleive in gambling and neither does anybody down at the Church of Holiness. Except maybe a Lotto ticket now and again and maybe the stock market. We only got the lottery because it’s better to let folks gamble than raise taxes. The taxes is the biggest Sin. Sure, the Bible talks about rendering unto Caesar but it don’t say we can’t let Those People do most of the rendering for us.
Anyhow, I ain’t never buying a GM product. Unless they start making the Ford F-450. So I expect GM to be another big Obama flop and if we can raise enough sand about it and not say what we would do instead maybe we can get voted back into office and start Trickle Down trickling again and keep the tax cuts going before the librul Democrats just let them expire at the end of next year.
Leastwise, we ain’t never going to let people forget about the Obama Depression and how awful it was to vote him into office.
So start blasting, Conservatives. Get real loud about how evil gambling is and how we can’t afford it and need to let everything fall down around our ears so we can start fixing things again. Have a good p.m. everybody.
jt
June 1st, 2009
1:08 pm
“Bible talks about rendering unto Caesar but it don’t say we can’t ”
I remember the way that rendering plant use to smell near the country music park. The pond outside it had man-eating catfish.
Brad Steel
June 1st, 2009
1:08 pm
“Ann Coulter in the Preakness”
That’s funny.
George American
June 1st, 2009
1:12 pm
TUESDAY VANDY GIRL @ 12:43: ” GM will be Obambam’s vietnam …”
No body at GM will die, you insensitive C.
Thanks for belittling my service and all other Vietnam vets sacrifice to our country.
You’re a really great person.
Brian
June 1st, 2009
1:14 pm
Perhaps the title should have read “Taxpayers forced to take a $50 billion gamble on GM. I agree with Byte Me, the first $20 billion is just wasted money now. I personally would like to opt out now and cash in my share of GM. I call.
TUESDAY VANDY GIRL
June 1st, 2009
1:18 pm
SOOO… Ann Coulter is a horse, and I bet the libs laugh and don’t shouit out SEXIST!.. but when i say Obama looks like a Lagothrix lagotricha, the libs shout out RACIST! (after they google , anyway)
Doggone/GA
June 1st, 2009
1:21 pm
“Thanks for belittling my service and all other Vietnam vets sacrifice to our country”
I’m not very fond of what TVG says either…but calling something someone’s “Vietnam” is NOT denigrating the service of ANY soldier in that conflict. Regardless of the courage shown and/or the sacrifices made there, it was NOT a shining moment in USA history.
We used to say someone’s “Waterloo” because that battle was a stinging defeat for Napolian Bonaparte. Now we say someone’s “Vietnam” because that was a stining defeat for the USA.
It’s hard enough fighting false information as it is, don’t be trying to fight an insult that only exists in YOUR mind.
AmVet
June 1st, 2009
1:21 pm
“Now the UAW can suck dry whatever remains. The government will keep feeding the host as long as the parasite is firmly attached to it.”
Curly, as you are such a proven champion of accuracy and facts(!) which of the following is true?
Auto manufacturer wages make up:
a) less than 10 percent of the cost of a car
b) 10 – 15%
c) 15 – 20%
d) 20%+
e) All of the above
And no worries, welcher, there is no money on the line here…
SOMALIDAWG
June 1st, 2009
1:22 pm
افراد بشر آزاد به دنیا میآیند و از دید حیثیت و حقوق با هم برابرند، همه دارای اندیشه و وجدان Cool you are.
Sotowhatever HA HA HA.برابر یکدیگر با روح برادری
I have big kitchen and car.
TUESDAY VANDY GIRL
June 1st, 2009
1:23 pm
To george american, I didn’t belittle it, those were the words of the CNBC auto industry analyist who sees no way to profit for the new “good” GM in the near term. I think the term “vietnam” means an albatross around a leaders neck that eventually drags them down , renders their grandious plans to change american society moot, and destroys them, in this case.
Thanks for your service and thanks for killing those communists…Unfortunatly some got away and they entered US politics as democrats.
Doggone/GA
June 1st, 2009
1:26 pm
“Ann Coulter is a horse, and I bet the libs laugh and don’t shouit out SEXIST!.. ”
Nobody said she was a horse. But it would be foolish in the extreme to bet on ANY person to beat a horse in ANY race, let alone the Preakness. I have no doubt HER names was used solely to get a rise out of someone and you obligingly provided it. Congratulations. Bet you didn’t realize you were so easy to manipulate…but you know it now.
N.J.
June 1st, 2009
1:27 pm
To put it more simply.
N.J.
June 1st, 2009
1:28 pm
To put it more simply, the taxpayer is now paying for the 50 billion that institutional investors sucked out of the company over the last 8 years.
@@
June 1st, 2009
1:32 pm
What I find most unsettling, jay, is that Obama and his boys gave me no options. Relinquish my seat at the table but leave my stack with which to “spot ‘em” in the game.
I can spot a political shark when I see one. Obama’s stealth.
Matt Hooper: I’m not going to waste my time arguing with a man who’s lining up to be a hot lunch. That’s a twenty footer!
Quint: Twenty-five. Three tons of him.
Brody: We’re gonna need a bigger boat.
Quint: The thing about a shark, it’s got lifeless eyes, black eyes, like a doll’s eyes. When it comes at you it doesn’t seem to be livin’… until he bites you, and those black eyes roll over white.
Show me the way to go home…
getalife
June 1st, 2009
1:33 pm
Yeah, cons will blame the workers but without credit lines, many more will lose their jobs to make the cons happy. cons are against the American worker.
Perhaps more tea bagging to support corporate greed that caused this mess are in order.
Kooks.
Doggone/GA
June 1st, 2009
1:36 pm
“that institutional investors sucked out of the company over the last 8 years”
How do “investors” suck money OUT of a corporation?
Voltaire
June 1st, 2009
1:38 pm
Just as W abused executive power to reward his pals, big oil and the defense industry, O is now doing the same to reward his constituents, the UAW. GM and Chrysler should have bean able to use the vehicle of Chapter 11 to void those horrendous union contracts, which were a big part of their problem to begin with. A newer, leaner GM will still collapse under the weight of the union.
@@
June 1st, 2009
1:39 pm
Perhaps more tea bagging to support corporate greed that caused this mess are in order.
Once a union rep, always a union rep. eh, Getalife?
Mr Ed
June 1st, 2009
1:39 pm
Ann Coulter a horse? Neigh, neigh.
AmVet
June 1st, 2009
1:40 pm
CNBC “analyst”?
Like Rick “Rant” Santelli?
Or Jim “Don’t take your money out of Bear Stearns, they’re not in trouble” Cramer? (They tanked six days later.)
Perhaps Power Lunch’s “Lehman Brothers management is no Bear Stearns, they’re incredibly engaged and responsive”. Bellied up three months later.
And on and on and on with the boneheaded “advice”.
If they weren’t such sycophants and criminal coddlers they’d be the new Comedy Central…
josef nix
June 1st, 2009
1:42 pm
Getalife–when will the government go bankrupt? Fiscally or morally?
Tuesday–Obama looks like Alfred E. Neumann.
Ditto
June 1st, 2009
1:42 pm
Why is it that this administration seems only one step behind Chavez’s nationalizing of everything in site in Venezuela????? What’s next — health care????? Oh, wait…..
ByteMe
June 1st, 2009
1:43 pm
Voltaire says “GM and Chrysler should have bean able to use the vehicle of Chapter 11 to void those horrendous union contracts”
Check your facts. They did the heavy work on getting employee costs in line with the industry before ever getting to bankruptcy.
booger
June 1st, 2009
1:48 pm
This money was not spent to bail out GM. This was a bailout of the UAW.
Walmart has 2,100,000 employees and does over $400 billion in sales yearly. GM has 235,000 employees and does $148 billion in sales. GM is too big to be allowed to fail.
Does anyone really believe Obama would bail out Walmart. I don’t think Jay would even think that would happen.
The difference…..The UAW, his voter base.
getalife
June 1st, 2009
1:48 pm
@@,
Nah, just support the American worker.
josef nix,
w did the morally and obama the fiscally.
getalife
June 1st, 2009
1:51 pm
Man, we need to tear up the government credit card.
They have a spending addiction.
booger
June 1st, 2009
1:52 pm
NJ
you have no any of how corporate bonds work, do you? Do you know who their largest investors are?
Doggone/GA
June 1st, 2009
1:53 pm
“They did the heavy work on getting employee costs in line with the industry before ever getting to bankruptcy”
What they couldn’t do was get most of their bond holders to take stock ownership in exchange for the debt bonds.
Brad Steel
June 1st, 2009
1:54 pm
I’m not saying Ann Coulter is horse. I think the term “horse” means horse-like, with a long snouty-face with sort-of oversized eyes too far on the outside of their head – like Tori Spelling, Paris Hilton, Ann Coulter and Mind That Bird.
Ann Coulter is also very jackass like.
ByteMe
June 1st, 2009
1:55 pm
Doggone: thought I read where they got a “majority” (something like 54%) to accept a sweetened offer.
RetLTC
June 1st, 2009
1:56 pm
The braying is the tipoff.
eagle scout
June 1st, 2009
1:58 pm
Doggone/GA
June 1st, 2009
12:40 pm
Doggone; Thanks for watching my back….Dusty never has been one to let the the facts get in the way of her mindless gibberish!
josef nix
June 1st, 2009
2:05 pm
Mr. Ed–that’s good! Likewise, RetLTC!
Getalife–you’re on it today! Tear up their credit card? Hell, they’d just steal another one from somewhere…
N.J.
June 1st, 2009
2:06 pm
heck both Bloomberg and Current. The institutional bond holders have hedged these stock and bond investments with “default swaps” They stand to make a net 2.4 billion dollar profit by driving GM into bankruptcy
N.J.
June 1st, 2009
2:06 pm
One business link:
http://current.com/items/90045795_hedge-funds-stand-to-make-2-4-billion-off-of-credit-default-swaps-if-gm-fails.htm
@@
June 1st, 2009
2:09 pm
josef nix, is it now?
At what moment in blog time did you come to be gay?
(ISH)
N.J.
June 1st, 2009
2:10 pm
Try Financial times:
http://www.ft.com/cms/s/0/1e2bf9ea-3e54-11de-9a6c-00144feabdc0.html?nclick_check=1
N.J.
June 1st, 2009
2:12 pm
And just google on “GM” “Hedge Funds” and “default swaps” and you will find that the bond holders, and just about all of the institutional investors are going to come up with a rather large profit by forcing GM into bankruptcy rather than accepting a “restructuring” without bankruptcy.
RealityKing
June 1st, 2009
2:12 pm
The 60 million idiots that voted for this clown should now be forced to buy a GM. Starting with Jay.., since he helped put them out of business by buying foreign cars.
RealityKing
June 1st, 2009
2:14 pm
I don’t support government through business and therefore will never buy another GM or Chrysler. Too bad I own one of each…, how naive I was to believe I was helping America by buying American.