General Motors Is Headed For Bankruptcy -- Again

http://www.forbes.com/sites/louiswoodhi ... tcy-again/

"President Obama is proud of his bailout of General Motors. That’s good, because, if he wins a second term, he is probably going to have to bail GM out again. The company is once again losing market share, and it seems unable to develop products that are truly competitive in the U.S. market.

Right now, the federal government owns 500,000,000 shares of GM, or about 26% of the company. It would need to get about $53.00/share for these to break even on the bailout, but the stock closed at only $20.21/share on Tuesday. This left the government holding $10.1 billion worth of stock, and sitting on an unrealized loss of $16.4 billion.".......................

Wow... So, all the conservative blogs in the echo-chamber, (and Forbes--which the Righties ignore when it suits them, and applaud when it fits their narrative), are saying GM is headed for bankruptcy...

Well, golly, if the "Conservative News" says it, it must be true?!?! Who knew??!?!?!

Why General Motors Is Not Headed For Bankruptcy Again

Introduction

A recent Forbes article by Louis Woodhill has received a lot of controversy for its claim that General Motors (GM) is headed for bankruptcy again. If you have not read it, I'll sum up his main points:

1. General Motors has a 18% market share in 2012, compared to 20% a year prior and 48.3% in the 1960s (reflecting a negative trend)
2. General Motors needs to have a strong presence in the D-segment, as it is the vehicle class in the U.S. with the highest volume (and the US is GM's home market)
3. GM is in the process of introducing a redesigned 2013 Chevy Malibu, which will compete with cars such as the Ford Fusion, Honda Accord, Volkswagen Passat and Nissan Altima
4. The Malibu came in at last place (6th) in a test against its competitors made by "Car and Driver"

My problem with the author

So basically, Louis Woodhill thinks General Motors will go bankrupt because one of its models didn't do very well in a test. His article contains no mention of an investment timeline, balance sheet, quality of other car models, their joint ventures in China, wages in Europe or anything that could have an impact on whether GM goes bankrupt or not.

What has changed at GM post-bankruptcy?

An analysis of his arguments

Critics will also argue that nothing has changed since GM's pre-bankruptcy days, but that is not entirely true. Here are some of the differences between the old GM and the new GM:
1. General Motors has sold off unprofitable brands such as Pontiac, Saturn, Saab and Hummer
2. They have eliminated 20,000 of their 88,800 US employees and reduced their dealerships
3. U.S. hourly labor costs per North American vehicle have been reduced from 3,295 in 2005 to 1,606 in 2012
4. Unlike in 2008, GM actually has large cash reserves of $37 billion (which come mainly from federal assistance), and they have been producing positive free cash flow each year since bankruptcy
5. Fitch has recently upgraded GM's issuer default rating to BB+

Conclusion

General Motors is a mediocre company and it will continue to be that for the foreseeable future. But they have way too large cash reserves to go bankrupt in the immediate future, and as long as they continue to make a modest profit they will prove to be a great investment for shareholders.

Full article at:
http://seekingalpha.com/article/847241- ... ptcy-again

Next......

Government Motors is doing well right?

Not so fast.

As it turns out, there’s a big reason GM experienced an increase in sales last month: “government purchases of GM vehicles rose a whopping 79% in June,” according to the National Legal and Policy Center’s Mark Modica.

If the government- federal state and local arebuying new cars (not like we can afford new cars) it's kinda like this....

Considering that the president fully intends to campaign on the company’s so-called “success,” the fed’s decision to bulk up its vehicle fleet with GM products would seem to be a clear conflict of interest.

Think about it in these terms [via NewsBusters’ Seton Motley]:

Barack Obama is now campaigning on the “success” of the government buying cars from … the government’s car company.

With our money.

That’s like you setting up a lemonade stand for your kids. You buy them the lemons, sugar, cups and pitchers – and then buy most of the lemonade yourself.

Except you are President Obama. Your kids are the United Autoworkers Union. And the lemonade cost $50 billion.

As always, what’s the bottom line?

“The long-term health of GM remains in question and the true financial picture may not surface until well after voters decide who will be running our country,” Modica writes.

“Eventually we will see just how successful GM really is.”
http://www.theblaze.com/stories/gm-boasts-strong-june-sales-but-is-that-the-whole-story/

Government Motors Bailout was 50 billion taxpayer dollars, and some of the money GM paid back was in the form of stocks.

The fact is that the government still owns about 24% of GM.

In fact the Treasury says that it's still out over $25 billion. Why?
GM's "payment" to the Feds included stock. A lot of stock. The government has sold some, but it still owns 500 million shares of General Motors.

GM's stock rose to almost $39 after its return to the public markets in late 2010, but it's been all downhill ever In fact since. Right now, GM is stuck around $20 to $21 a share, a range it has been in for a while.

Here's the problem: For the taxpayers to break even on the bailout, the shares of GM still owned by the Treasury have to get up to around $53 a share.

The Fed might dump its investment. 500 million shares is a lot of stock. If the government decides to bail on its investment after the election, the price will drop further as all of those shares hit the market.

What do you you say now LJ- I'm still a lyer?

If this happens, the taxpayers will be out billions!
Here's my source....
http://www.dailyfinance.com/2012/08/15/taxpayers-gm-investment-down-25-billion/

GM is a FAILURE eaten by the JAPS 1980-2010.....we paid the dolts $250,000 a year to put grease ojn a bolt----done for sure. SO is Chrysler (yes JEEP and Dodge are a part of that failed low class company).


Sooooooo it goes.

That would be a good argument except autoworkers aren't paid $250,000 a year to put grease on a bolt.

http://www.factcheck.org/2008/12/auto-worker-salaries/

BearMtnHIB wrote: What do you you say now LJ- I'm still a lyer?

If this happens, the taxpayers will be out billions!
Here's my source....
http://www.dailyfinance.com/2012/08/15/taxpayers-gm-investment-down-25-billion/

So:

1) GM paid back the billions in TARP money...WITH INTEREST, which put a LOT of money back in the Treasury.
2) The gubm'nt still owns 500,000 shares of stock which may go up, or may go down, but which hasn't taken one penny out of anyone's pocket until it is sold, and either realizes a profit or a loss.
3) The gubm'nt owns a minority share and doesn't control what GM does; (and that bullsh*t that "tax-credits = interference" is just that: bullsh*t....)
4) The gubm'nt stepped in and kept the auto industry alive, saving over 1 million jobs, (including the support companies that make parts, tires, glass, radios/electronics, etc.) and thereby keeping over 1 million FAMILIES off of the unemployment roles
5) You still can't prove that you've lost ONE F'ING DOLLAR as a taxpayer...

So, yeah, you're still a liar... And I'm still waiting for a link where you prove that the gubm'nt is forcing GM to do ANYTHING, and that you've lost a dollar of taxpayer money....

Your a hopeless lost cause....

I need not go on if you don't understand how finance works.

GM got 50 billion dollars of our money- so it could sibsidize a losing business with (borrowed) taxpayer money. They ripped us off for 25 billion dollars so they could build cars at a loss.

Democracy4Sale wrote: So:

1) GM paid back the billions in TARP money...WITH INTEREST, which put a LOT of money back in the Treasury.
2) The gubm'nt still owns 500,000 shares of stock which may go up, or may go down, but which hasn't taken one penny out of anyone's pocket until it is sold, and either realizes a profit or a loss.
3) The gubm'nt owns a minority share and doesn't control what GM does; (and that bullsh*t that "tax-credits = interference" is just that: bullsh*t....)
4) The gubm'nt stepped in and kept the auto industry alive, saving over 1 million jobs, (including the support companies that make parts, tires, glass, radios/electronics, etc.) and thereby keeping over 1 million FAMILIES off of the unemployment roles
5) You still can't prove that you've lost ONE F'ING DOLLAR as a taxpayer...

So, yeah, you're still a liar... And I'm still waiting for a link where you prove that the gubm'nt is forcing GM to do ANYTHING, and that you've lost a dollar of taxpayer money....

I suppose that if you believe that less than 2/10ths of 1 percent is a LOT of anything (which is approximately what $5.8 Billion represents in the federal budget) your first point might be true.

Point 2 is an utter and complete falsity. Those 500 million shares were granted in exchange for money that was provided in the bailout of the old GM. We have money tied up in those 500 million shares and to recoup what we paid for them we will have to get $53/share. GM stock, meanwhile, is trading at 40% of that figure, and has been for quite some time now. Every day it sits in the stock is a day that it is absent from the treasury, another day that the union has to pay interest on the money that it borrowed to purchase the shares. We are losing money on the investment each and every day that it is held onto because that money can't be put to work elsewhere. That is why money is invested after all, to be put to work earning more money.

The federal government is the largest shareholder in GM at the moment (FactCheck.org had ownership at around 33% not 26% in June of this year). Even though that is not a majority of the stock, it is the largest share of the stock held by a single entity.

Point 3, that tax policy is interference should apply equally to your thinking about the tax policy for GM as it does for the tax policy with regards to Big Oil. If tax policy towards Big Oil is classified as a subsidy in your twisted vein of thinking, then so too should tax policy with regards to GM products. That it only is considered a subsidy in one of them puts your partisan hypocrisy on full display yet again.

The last point, which I won't quote verbatim to display your complete lack of class, isn't shared by anyone. I can show you that we've lost far more than one dollar as a result of GM refinancing the debt that was owed to the taxpayers compared to what we would have received had they paid that debt over the original term.

BearMtnHIB wrote: GM got 50 billion dollars of our money- so it could sibsidize a losing business with (borrowed) taxpayer money. They ripped us off for 25 billion dollars so they could build cars at a loss.

Well, not really.

Uncle Sam gave GM $49.5 billion last summer in aid to finance its bankruptcy. (If it hadn't, the company, which couldn't raise this kind of money from private lenders, would have been forced into liquidation, its assets sold for scrap.) So when Mr. Whitacre publishes a column with the headline, "The GM Bailout: Paid Back in Full," most ordinary mortals unfamiliar with bailout minutia would assume that he is alluding to the entire $49.5 billion. That, however, is far from the case.

Because a loan of such a huge amount would have been politically controversial, the Obama administration handed GM only $6.7 billion as a pure loan. (It asked for only a 7% interest rate--a very sweet deal considering that GM bonds at that time were trading below junk level.) The vast bulk of the bailout money was transferred to GM through the purchase of 60.8% equity stake in the company--arguably an even worse deal for taxpayers than the loan, given that the equity position requires them to bear the risk of the investment without any guaranteed return. (The Canadian government likewise gave GM $1.4 billion as a pure loan, and another $8.1 billion for an 11.7% equity stake. The U.S. and Canadian government together own 72.5% of the company.)

But when Mr. Whitacre says GM has paid back the bailout money in full, he means not the entire $49.5 billion--the loan and the equity. In fact, he avoids all mention of that figure in his column. He means only the $6.7 billion loan amount.

But wait! Even that's not the full story given that GM, which has not yet broken even, much less turned a profit, can't pay even this puny amount from its own earnings.

So how is it paying it?

As it turns out, the Obama administration put $13.4 billion of the aid money as "working capital" in an escrow account when the company was in bankruptcy. The company is using this escrow money--government money--to pay back the government loan.

http://www.forbes.com/2010/04/23/genera ... almia.html