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US Lost Ten Billion Dollars on GM Bailout

Lutherf said:
A million employees?

Really?

At the time GM employed maybe 250k. There is no way in hell that parts of the operation wouldn't be picked up so the loss there might have been 100k jobs if things went really bad. They also had 6k dealerships. If the average dealership employed 100 people that would be 600k jobs but a lot of those dealerships would have simply switched brands so, again, the loss would be far less than "all".

On top of that if the whole thing burned to the ground we STILL wouldn't see all those people go on unemployment. Some would retire and most would move to another job. Inside of 2 months you'd likely have 80% of the employees that got bounced in a new job.
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1.0 was the conservative estimate.... try maybe as many as 2.6 million. Do you understand what the supply chain is? GM goes under, so do a lot of its suppliers. There is a multiplier effect to everything that happens in an economy. My numbers were crude and very conservative. If you take the Center of Automotive Research with some degree of credence, not saving GM would have cost 2.6 million jobs and the US government over $100B.

GM, Chrysler bailouts saved 2.6 million jobs - Autoblog

Retire and move to other jobs??? what other jobs were there in Detroit in 2008 / 2009? With the GM bailout, they had unemployment approaching 15%.... with the Dow at 6000, not many were retiring.

Yes, in the long-run, things might have shaken out... but the long-run would have been much longer (look at how slow the economy is recovering with GM in tact)... and, of course, in the long-run, we are all dead. Meanwhile, in the short-run, we would have had no auto industry, US unemployment in the 12-15% range and a US debt of $20T right now.
 
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upsideguy said:
1.0 was the conservative estimate.... try maybe as many as 2.6 million. Do you understand what the supply chain is? GM goes under, so do a lot of its suppliers.

GM, Chrysler bailouts saved 2.6 million jobs - Autoblog

Retire and move to other jobs??? what other jobs were there in Detroit in 2008 / 2009? With the GM bailout, they had unemployment approaching 15%.... with the Dow at 6000, not many were retiring.

Yes, in the long-run, things might have shaken out... but the long-run would have been much longer (look at how slow the economy is recovering with GM in tact)... and, of course, in the long-run, we are all dead.
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A real bankruptcy would have saved most of the jobs and led to a faster recovery.:peace
 
Jack Hays said:
A real bankruptcy would have saved most of the jobs and led to a faster recovery.:peace
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No history is more interesting than revisionist history....

And who was to provide the $60B debtor-in-possession financing in 2008?

...Da Plane, Da Plane!
 
upsideguy said:
Appreciate your concession on that point
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Your Sarcasm Warning Indicator Panel must have malfunctioned. In fairness, I know some people looked positively on the shutdown early, but I think most thought better of that pretty soon.
 
upsideguy said:
No history is more interesting than revisionist history....

And who was to provide the $60B debtor-in-possession financing in 2008?

...Da Plane, Da Plane!
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That's the good thing about bankruptcy: the price falls until a buyer steps forward.:peace
 
upsideguy said:
1.0 was the conservative estimate.... try maybe as many as 2.6 million. Do you understand what the supply chain is? GM goes under, so do a lot of its suppliers. There is a multiplier effect to everything that happens in an economy. My numbers were crude and very conservative. If you take the Center of Automotive Research with some degree of credence, not saving GM would have cost 2.6 million jobs and the US government over $100B.

GM, Chrysler bailouts saved 2.6 million jobs - Autoblog

Retire and move to other jobs??? what other jobs were there in Detroit in 2008 / 2009? With the GM bailout, they had unemployment approaching 15%.... with the Dow at 6000, not many were retiring.

Yes, in the long-run, things might have shaken out... but the long-run would have been much longer (look at how slow the economy is recovering with GM in tact)... and, of course, in the long-run, we are all dead. Meanwhile, in the short-run, we would have had no auto industry, US unemployment in the 12-15% range and a US debt of $20T right now.
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The bankruptcy doesn't happen in a vacuum. Different components of the business get picked up and continue under new ownership. The parts that don't get picked up shed employees but those employees don't generally sit around wringing their hands. They find new jobs or retire. The article you are citing presents an unrealistic scenario.
 
Born Free said:
you have no idea that "doing nothing" would plunge the nation into anything.
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Yes, we do pretty much know it.

All the big car companies rely on the same suppliers. If 2 of the Big 3 collapsed (as would surely have happened without government support), it would have taken out the suppliers, which in turn would have taken out Ford, and the American auto industry would basically be crippled. You'd have around 1.2 million more people unemployed, with non-transferrable skills -- which in turn could have hit $28 billion in higher benefit spending and lost revenues.

Nothing you've said changes this. Actually, you've said nothing. So...


Further we're not talking about Asian governments. Last, can you post up a few times the Big Daddy has purchased stock in a structured bankruptcy.
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I'm talking about Asian governments, because this is the kind of thing they do, and they're who US companies compete against. And yes, it makes sense for the government to hold a bunch of stock when bailing out a big company like GM or AIG.


A normal bankruptcy was an option. period.
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If that was the case, the auto execs (including Ford's CEO Alan Mulally) wouldn't have debased themselves by driving to DC in a hybrid, to beg for government help.

It's also a little bit tough to have a "normal" bankruptcy at a time when the credit markets are frozen rock-solid, when no one wants to invest in anything, and when inventories were plummeting. Oh, and I'm sure Americans would be thrilled if the tattered remains of GM were bought out by, let's say... a bunch of Chinese companies. Yeah, that'll work.


Creditors would not have gotten screwed as much in a normal bankruptcy. Bond holder in a bankruptcy take a hit but don't lose everything....
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Uh huh. Well, in a normal bankruptcy, it would've been the employees and the pension fund who got screwed. Bondholders got 10% of the new company, currently worth $6 billion; they also got options for another 273 million shares at $18, for another $6 billion. 50 cents on the dollar, with more upside if the stock price goes up? Plus creditors collecting on credit default swaps? Yeah, I'm not broken up over it.


Last GM has also posted profits for the last 15 quarters, do you know why, a big clue. Their bond debt is gone....
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Is it? Is that why they have $62 billion in liabilities on their books?

Most of their losses weren't because of debt. It was because they couldn't sell cars.


And lets not forget the tax payer lost over 10 billion bailing out GM. Yes that is 10 Billion of some of my taxes went to bail out GM, actually my tax dollars went to bailout the unions. Period.
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If it hadn't gotten a bailout, not only would we have lost a premier industry, but the government would have lost nearly $30 billion in benefits and lost revenues.

The funny thing is, you read the critics complain about it last summer, and they were talking about "$25 billion losses" and "GM can't make a profit." 18 months later, the losses were cut to $10 billion, and GM has actually had years of profits.

Considering that we paid out $418 billion for TARP, and got back all of it except for $12 billion, and basically kept the US economy from crashing into a telephone poll, I'm OK with it.
 
Visbek said:
1.2 million.



Really. Report: GM bailout saved 1.2 million jobs

Some estimates go as high as 2.6 million jobs. GM, Chrysler bailouts saved 2.6 million jobs - Autoblog
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Of course some estimates go as high as 2.6M. Hell, I'll bet that by Friday there are reports out there that the GM "save" prevented the loss of 6.8 Billion jobs and $147T.

The fact of the matter, as I've already said, is that a bankruptcy doesn't happen in a vacuum. Hell in September of 2008 both Lehman Brothers and Washington Mutual went BK. Those two banks had combined assets of more than ONE TRILLION dollars compared to GM's $90B. You might have noticed that the world didn't end in 2008 even though all that money got sucked out of the financial sector.
 
Lutherf said:
The bankruptcy doesn't happen in a vacuum. Different components of the business get picked up and continue under new ownership. The parts that don't get picked up shed employees but those employees don't generally sit around wringing their hands. They find new jobs or retire. The article you are citing presents an unrealistic scenario.
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I produced a study that told us that a GM shutdown would cost 2.6 million jobs and the US government $100B. You offered your pedestrian conjecture. If you want credibility on this issue, kindly show us something that supports your position... come up with something of sufficient authority that actually refutes.... ..

http://www.cargroup.org/?module=Publications&event=View&pubID=102 .. see .pdf which is the actual study.
 
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Jack Hays said:
Your Sarcasm Warning Indicator Panel must have malfunctioned. In fairness, I know some people looked positively on the shutdown early, but I think most thought better of that pretty soon.
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It functioned fine... check yours.
 
Jack Hays said:
That's the good thing about bankruptcy: the price falls until a buyer steps forward.:peace
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Do you remember the investment environment of 2008/09... I sure do, we closed on the sale of our company just as the markets were falling. There was almost no risk capital available q3 '08 to q3 '09. There was not sufficient capital to finance a GM bankruptcy.

Look, the GM/Chrysler/AIG/Bank bailouts, which may have been the last bi-partisan work of Washington (short of naming a post office in Montana) of our generation worked. Can't you concede one item of success?



is
 
Lutherf said:
Of course some estimates go as high as 2.6M. Hell, I'll bet that by Friday there are reports out there that the GM "save" prevented the loss of 6.8 Billion jobs and $147T.

The fact of the matter, as I've already said, is that a bankruptcy doesn't happen in a vacuum. Hell in September of 2008 both Lehman Brothers and Washington Mutual went BK. Those two banks had combined assets of more than ONE TRILLION dollars compared to GM's $90B. You might have noticed that the world didn't end in 2008 even though all that money got sucked out of the financial sector.
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Comparing bank assets to a manufacturing companies assets are comparing apples and oranges. The Fed Res knows how to deal with a bank insolvency. It can be done fluidly; not so much with a company like GM. In fact, an auto industry bankruptcy that manifested itself as it did, might be the most impactful type of bankruptcy possible...
 
upsideguy said:
I produced a study that told us that a GM shutdown would cost 2.6 million jobs and the US government $100B. You offered your pedestrian conjecture. If you want credibility on this issue, kindly show us something that supports your position... come up with something of sufficient authority that actually refutes.... ..

CAR Research Publications | Center for Automotive Research .. see .pdf which is the actual study.
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The study you presented was put together by the Center for Automotive Research and the Anderson Economic Group, neither of whom are disinterested parties. Furthermore, the study completely neglects to so much as contemplate outside acquisition of any of the distressed assets involved. That's a gross omission and makes the entire study little more than propaganda.
 
Lutherf said:
In most bankruptcies the employees hardly notice the difference at all. There's a new name on their check stub and benefits might change but for most people they hardly notice the change at all.
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Depends on the type of bankruptcy...... that is the "fun" of the US, bankruptcy for companies does not mean death, which it does most other places. It usually means screwing over someone and then going on until next bankruptcy.

Had they gone Chapter 11 then yea they could have continued while raping their employees.

But had they gone Chapter 7... that is a whole other ball of wax.
 
Lord Tammerlain said:
The demand for cars dropped from just under 17 million per year to around 10.5 million per year in the US. Chrysler was going under at the time and Ford was on the brink of it as well (Recall Fiat was pretty much given Chrysler). Had GM went under the parts suppliers that survived were going to go as well. Those suppliers also supply Ford, no suppliers no Ford.

It would have taken years if GM was shut down for the auto industry to recover,
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The idea that the government should supplement a company's bottom line when its sales tank is patently absurd.
 
upsideguy said:
I produced a study that told us that a GM shutdown would cost 2.6 million jobs and the US government $100B. You offered your pedestrian conjecture. If you want credibility on this issue, kindly show us something that supports your position... come up with something of sufficient authority that actually refutes.... ..

CAR Research Publications | Center for Automotive Research .. see .pdf which is the actual study.
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Subtitle should be "Or Why You Should Send Us Billion of Dollars"
 
Visbek said:
Yes, we do pretty much know it.

All the big car companies rely on the same suppliers. If 2 of the Big 3 collapsed (as would surely have happened without government support), it would have taken out the suppliers, which in turn would have taken out Ford, and the American auto industry would basically be crippled. You'd have around 1.2 million more people unemployed, with non-transferrable skills -- which in turn could have hit $28 billion in higher benefit spending and lost revenues.

Nothing you've said changes this. Actually, you've said nothing. So...
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So, as the companies are broken up and purchase by other these suppliers are still in business. Further there XX cars needed to be supplied and if makes no difference if GM's name is on the office door or not. The cars that are needed will be made as before but under new ownership.



I'm talking about Asian governments, because this is the kind of thing they do, and they're who US companies compete against. And yes, it makes sense for the government to hold a bunch of stock when bailing out a big company like GM or AIG.
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No. They should have been allowed to go bankrupt. Big Daddy has not business picking winners and losers. Period.

It's also a little bit tough to have a "normal" bankruptcy at a time when the credit markets are frozen rock-solid, when no one wants to invest in anything, and when inventories were plummeting. Oh, and I'm sure Americans would be thrilled if the tattered remains of GM were bought out by, let's say... a bunch of Chinese companies. Yeah, that'll work.
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You make assumptions that have no basis of fact.

Uh huh. Well, in a normal bankruptcy, it would've been the employees and the pension fund who got screwed. Bondholders got 10% of the new company, currently worth $6 billion; they also got options for another 273 million shares at $18, for another $6 billion. 50 cents on the dollar, with more upside if the stock price goes up? Plus creditors collecting on credit default swaps? Yeah, I'm not broken up over it.
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Of course, protect the unions and screw the bond holders. Typical liberal ideals.

Is it? Is that why they have $62 billion in liabilities on their books?
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Where did all the bond holder debt go? It's gone, without having to make bond payments that money goes to the bottom line. You can't eyewash how Obama structured this bailout that the Tax Payer lost over 10 billion and the unions were made whole and the bond holders got screwed.

Most of their losses weren't because of debt. It was because they couldn't sell cars.
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And who's fault is that? Ford had no problem. Again you pick winners and losers.

If it hadn't gotten a bailout, not only would we have lost a premier industry, but the government would have lost nearly $30 billion in benefits and lost revenues.
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What are you talking about, we would have lost a premier industry. How so. I repeat the need for cars is still there, the production would continue but under a different name or names.

The funny thing is, you read the critics complain about it last summer, and they were talking about "$25 billion losses" and "GM can't make a profit." 18 months later, the losses were cut to $10 billion, and GM has actually had years of profits.
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At the expense of the bond holders and the tax payer.

Considering that we paid out $418 billion for TARP, and got back all of it except for $12 billion, and basically kept the US economy from crashing into a telephone poll, I'm OK with it.[/QUOTE]

Picking winners and losers. Sure that is OK with you. Again those companies would have been broken up and restructured and the needs of those companies would have been provided under a new ownership. One thing you continue to ignore is the need for these protects are still in demand, it AIG is not producing that need it will be under a different name. The need for products does not diminish because a company goes broke. If a restaurant goes out of business you go to a another restaurant, or the restaurant that went broke is taken over by a new owner and you continue to go to that same restaurant. Get real, if GM goes out of business you don't say "now we'll won't be able to buy a new car the car industry is no longer"
 
Born Free said:
So, as the companies are broken up and purchase by other these suppliers are still in business.
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That's assuming the companies can handle a) not getting paid on what they owe, during the bankruptcy period and b) the almost certain loss of business that would result from an unaided bankruptcy.

Why else would Ford have asked for the government to bail out two huge competitors? Why didn't they tell GM to get bent, push for a normal bankruptcy, and buy a bunch of GM assets and brands? It's because they knew they'd be dragged down as well.


The cars that are needed will be made as before but under new ownership.
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Right. Like Toyota, or Honda, or Hyundai, or Fiat, or....


No. They should have been allowed to go bankrupt. Big Daddy has not business picking winners and losers. Period.
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The government does have a legitimate interest in making sure the biggest manufacturing industry in the US doesn't go down the tubes. In fact, I'd say that allowing a huge chunk of the US economy to implode because of a conservative talking point is downright irresponsible.

Besides, the government wasn't "picking winners." They didn't pass laws mandating purchases of GM, they didn't discriminate against Ford. They weren't doing anything that Japan didn't do for Toyota or Honda, or South Korea did for Hyundai and Samsung. All they did was keep GM and Chrysler in business.


You make assumptions that have no basis of fact.
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It's a fact that the credit markets were frozen, that GM and Chrysler's biggest competitors were not screaming about an unfair government buyout, that no one had expressed much interest in buying up GM or Chrysler. And I'm very confident that if Chinese companies wanted to buy Pontiac, Americans would be screaming.

Even the Economist, which initially said that the bailout was a huge mistake, changed its mind by 2010: General Motors: Government Motors no more | The Economist


Where did all the bond holder debt go? It's gone....
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1) The point was that the bankruptcy did not eliminate all of GM's debts, and they are not profitable solely because of the debt reduction.
2) Bondholders got 150 million shares, and options on another 273 million shares at $10-18 each.
3) They were not going to be made whole, no matter what.


And who's fault is that? Ford had no problem. Again you pick winners and losers.
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There's no question that GM and Chrysler primarily caused its own problems, and the recession brought it to a hed. The point is that in this circumstance, letting them go bankrupt was not the solution.


One thing you continue to ignore is the need for these protects are still in demand...
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That's sort of like saying "when a ship sinks, people still need to float. They can just use the life rafts." ;)

The economy is not perfectly frictionless, especially at a time when the country was mired in recession, credit markets were frozen, people were buying fewer cars and already worried about the economy. People have emotional reactions to things like "GM going bankrupt." There also would have been tertiary effects from people being thrown out of work. At this point, there is little question that however imperfect the bailout was, it was undoubtedly better than twiddling our thumbs while American manufacturing went down the tubes.
 
upsideguy said:
Do you remember the investment environment of 2008/09... I sure do, we closed on the sale of our company just as the markets were falling. There was almost no risk capital available q3 '08 to q3 '09. There was not sufficient capital to finance a GM bankruptcy.

Look, the GM/Chrysler/AIG/Bank bailouts, which may have been the last bi-partisan work of Washington (short of naming a post office in Montana) of our generation worked. Can't you concede one item of success?



is
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A success because it was bi-partisan? I think we would already be in robust recovery if real bankruptcies had been allowed. At some point before the price fell to zero a buyer for GM would have been found.:peace
 
Visbek said:
That's assuming the companies can handle a) not getting paid on what they owe, during the bankruptcy period and b) the almost certain loss of business that would result from an unaided bankruptcy.

Why else would Ford have asked for the government to bail out two huge competitors? Why didn't they tell GM to get bent, push for a normal bankruptcy, and buy a bunch of GM assets and brands? It's because they knew they'd be dragged down as well.



Right. Like Toyota, or Honda, or Hyundai, or Fiat, or....



The government does have a legitimate interest in making sure the biggest manufacturing industry in the US doesn't go down the tubes. In fact, I'd say that allowing a huge chunk of the US economy to implode because of a conservative talking point is downright irresponsible.

Besides, the government wasn't "picking winners." They didn't pass laws mandating purchases of GM, they didn't discriminate against Ford. They weren't doing anything that Japan didn't do for Toyota or Honda, or South Korea did for Hyundai and Samsung. All they did was keep GM and Chrysler in business.



It's a fact that the credit markets were frozen, that GM and Chrysler's biggest competitors were not screaming about an unfair government buyout, that no one had expressed much interest in buying up GM or Chrysler. And I'm very confident that if Chinese companies wanted to buy Pontiac, Americans would be screaming.

Even the Economist, which initially said that the bailout was a huge mistake, changed its mind by 2010: General Motors: Government Motors no more | The Economist



1) The point was that the bankruptcy did not eliminate all of GM's debts, and they are not profitable solely because of the debt reduction.
2) Bondholders got 150 million shares, and options on another 273 million shares at $10-18 each.
3) They were not going to be made whole, no matter what.



There's no question that GM and Chrysler primarily caused its own problems, and the recession brought it to a hed. The point is that in this circumstance, letting them go bankrupt was not the solution.



That's sort of like saying "when a ship sinks, people still need to float. They can just use the life rafts." ;)

The economy is not perfectly frictionless, especially at a time when the country was mired in recession, credit markets were frozen, people were buying fewer cars and already worried about the economy. People have emotional reactions to things like "GM going bankrupt." There also would have been tertiary effects from people being thrown out of work. At this point, there is little question that however imperfect the bailout was, it was undoubtedly better than twiddling our thumbs while American manufacturing went down the tubes.
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Translated you believe there are US companies to big to fail. Really
 
Born Free said:
Translated you believe there are US companies to big to fail. Really
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Yeah, that conservative talking point doesn't work either.

If the problem is that the companies are "too big," what are our options? We can't just let them fail, without causing massive collateral damage to the economy. What else can we do? Break up the companies? At what size? Based on the number of employees? The number of vendors? Annual revenues? Would anyone have suggested, prior to 2005, that GM was "too big?" Is Ford currently "too big?" How do we know which companies actually pose a threat, before it's too late? Who gets to choose which apparently healthy companies get sliced and diced?

Even if we could look into a crystal ball and resolve all these issues, we're back to your other talking point -- that of government "picking winners."

Another problem is that a constellation of smaller companies doesn't actually solve the issue; all it does is obscure it, and make it harder to fix the damage. For example, the S&L crisis of the 90s wasn't caused by the collapse of a single company, but by almost 750 companies doing the same things, and suffering the same types of collapses. Care to guess how much it cost the taxpayer to clean that one up? $341 billion in 1996 -- or $500 billion, in 2013 dollars.

TARP basically bailed out a relative handful of companies. Net cost to the taxpayer? $12 billion. And $10 billion of that was GM. So you tell me, which was a more effective bank bailout?

In addition, uttering a slogan doesn't change the fact that if GM and Chrysler didn't get a bailout, the US auto industry would've been totally ****ed.
 
Visbek said:
Yeah, that conservative talking point doesn't work either.

If the problem is that the companies are "too big," what are our options? We can't just let them fail, without causing massive collateral damage to the economy. What else can we do? Break up the companies? At what size? Based on the number of employees? The number of vendors? Annual revenues? Would anyone have suggested, prior to 2005, that GM was "too big?" Is Ford currently "too big?" How do we know which companies actually pose a threat, before it's too late? Who gets to choose which apparently healthy companies get sliced and diced?

Even if we could look into a crystal ball and resolve all these issues, we're back to your other talking point -- that of government "picking winners."

Another problem is that a constellation of smaller companies doesn't actually solve the issue; all it does is obscure it, and make it harder to fix the damage. For example, the S&L crisis of the 90s wasn't caused by the collapse of a single company, but by almost 750 companies doing the same things, and suffering the same types of collapses. Care to guess how much it cost the taxpayer to clean that one up? $341 billion in 1996 -- or $500 billion, in 2013 dollars.

TARP basically bailed out a relative handful of companies. Net cost to the taxpayer? $12 billion. And $10 billion of that was GM. So you tell me, which was a more effective bank bailout?

In addition, uttering a slogan doesn't change the fact that if GM and Chrysler didn't get a bailout, the US auto industry would've been totally ****ed.
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That's what bankruptcy is for. There would have been buyers at some price, and auto manufacturing would have continued.:peace
 
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