Monday, December 9, 2013
The United States Loses $10.5 Billion on its $49.5 Billion GM Investment: If Only The Treasury Department announced that it had sold its last shares in Government Motors for a net loss of $10.5 billion on the bailout. $10.5 billion was a small price for taxpayers to pay for President Obama carrying Michigan in 2012. The Treasury Department lost $1.3 billion on its $12.5 billion bailout of Chrysler. $1.3 billion was a small price for taxpayers to pay for President Obama winning Ohio in 2012. The Treasury Department will in the future report a loss on the $17.2 bailout of GMAC (General Motors Acceptance Corp.)(now called Ally). ‘GM is alive; Osama is dead.” “Detroit was saved” by the President. Detroit meant the industry – not the city. Remember “Cash for Clunkers?” The $3 billion program to bail out Detroit by offering $3,500 or $4,500 vouchers for the trading in of old cars for new, more efficient cars. That was a clunker. 690,411 vehicles were traded in for $2.877 billion in government rebates. Most of the vehicles purchased under the Cash for Clunkers Program were imports, mostly Japanese and Korean. Toyota had 19.4% of the sales, compared to 17.6% for GM, 14.4% for Ford, 13% for Honda, and 8.7% for Nissan. Subsequent studies showed that Cash for Clunkers essentially accelerated the purchase of cars that would have been bought anyway, resulting in no long term gain for Detroit. The forced bankruptcies of Chrysler and GM bankrupted existing bankruptcy law. It subordinated the debt of secured creditors to that of unsecured creditors, the United Autoworkers Union. The UAW was an unsecured creditor for the pension and health funds of its retirees. They received 100% on the dollar, resulting in 55% of the new Chrysler Corporation shares. The Chrysler salaried employees received only 40 cents on the dollar for their benefits, but the traditional bondholders, such as the Indiana State Teachers Pension Plan, were crammed down to 29 cents on the dollar. GM’s bondholders received even less. The new bonds issued to cover the UAW claims carry an interest rate of 18%. The Chrysler and GM bailouts were intended to save UAW jobs and that of President Obama. GM closed its unionized, highly efficient and productive, Moraine, Ohio assembly plant, which manufactured profitable SUV’s because it was a non-UAW plant. It was an IUE and not UAW plant. Therefore it was expendable. The further cost to America was the forced cancellation of dealerships, profitable dealers selling American cars to Americans. Chrysler arbitrarily terminated 789 dealers, or about 25% of its dealers. GM started with terminating 1,100 dealers. Over 100,000 American workers lost their jobs in the dealership closures, while the owners lost their large investments. Many of the terminated dealer properties now sell Hyundai and Kia cars. Chrysler and GM are again making money, by selling pickup trucks and SUVs. America is still paying a high price to fund the President’s reelection victories in Michigan and Ohio.