As GM shares near record low, taxpayer loss on bailout rises to $35 billion [It’s All The Union’s Fault!]
To quote Lando Calrissian, this deal’s getting worse all the time.
General Motors(GM) shares fell to a fresh 2012 closing low of 19.57 on Monday. The stock hit 19 in mid-December, the lowest since the auto giant came public at $33 in November 2010 following its June 2009 bankruptcy.
Normally you might say, tough luck investors. But this is Government Motors. The Treasury still owns 26.5% of GM, or 500 million shares. Taxpayers are still out $26.4 billion in direct aid. Shares would have to hit $53 for the government to break even.
Those shares were worth about $9.8 billion as of Monday. That would leave taxpayers with a loss of $16.6 billion.
But that’s not the full tally. Obama let GM keep $45 billion in past losses to offset future profits. Those are usually wiped out or slashed, along with debts, in bankruptcy. But the administration essentially gifted $45 billion in write-offs (book value $18 billion) to GM. So when GM earned a $7.6 billion profit in 2011 (more on that below), it paid no taxes.
Include that $18 billion gift, and taxpayers’ true loss climbs to nearly $35 billion.
I don’t know where they are getting these numbers from since GM has already repaid all of its government loans. But you can get a clue where these guys are coming from here:
Union workers did make sacrifices in bankruptcy, but not nearly enough. GM only narrowed the labor cost gap vs. what Japanese automakers pay their workers. Given that Toyota(TM) still enjoys a price premium over similar GM vehicles, the U.S. auto giant needs a labor cost advantage, not near-parity. And Toyota has relatively high costs. Volkswagen(VLKAY) pays workers at its new Tennessee plant only about half what GM does.
WTF!! Why is paying workers HALF the negotiated union fair wage a “good thing” for anybody?
General Motors has posted its most profitable year ever in 2011, coming a long way since being bailed out in 2008 and going bankrupt in 2009. And for once, reading a corporate profits report feels pretty good, with news that union members are getting a nice payday for their part in GM’s good year.
America’s largest car company earned $7.6 billion in 2011, a 62 percent increase from 2010 and the most ever in GM’s 103 years of existence. And as a reward of the banner year, GM “says union workers will get $7,000 profit-sharing checks.” So union members can thank Americans wanting to buy more American cars again (profits were up in North America but down in Europe and South America) plus, of course, the contract the union renegotiated with the company last year that guaranteed at least $3,500 in profit-sharing. Ultimately, Presidents Bush and Obama should get a thank yous, too, for bailing out their employer. Just don’t tell the Republican candidates that the bailout worked.