.General Motors sends Mr. Goodwrench to sidelines

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TerryMiller

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Not so sure on the payback. While this story is dated back in April, take notice of the bolded part of the story itself. The headline says, "GM Pays Off Debt to U.S.", but the information in the story itself says otherwise.

Also, at the time of this "payoff" it was reported that GM paid that bailout money back from other bailout money. Even the government's fund administrator said that GM paid it in that way.

Two sources:

http://www.factcheck.org/2010/05/general-motors-debt/

http://www.foxnews.com/leisure/2010/04/21/gm-pays-debt/

GM Pays Off Debt to U.S.
Published April 21, 2010 | Associated Press


DETROIT -- General Motors Co. has repaid the $8.1 billion in loans it got from the U.S. and Canadian governments, a move its CEO says is a sign automaker is on the road to recovery.

GM CEO Whitacre formally announced the loan paybacks Wednesday at the company's Fairfax Assembly Plant in Kansas City, Kansas, where he also announced that GM is investing $257 million in that factory and the Detroit-Hamtramck plant, both of which will build the next generation of the midsize Chevrolet Malibu.

GM got a total of $52 billion from the U.S. government and $9.5 billion from the Canadian and Ontario governments as it went through bankruptcy protection last year. The U.S. considered as a loan $6.7 billion of the aid, while the Canadian governments held $1.4 billion in loans.

The U.S. government payments, made Tuesday, came five years ahead of schedule, and Whitacre said they are a sign that the automaker is on its way toward reducing government ownership of the company. The payments on the Canadian loans were also made Tuesday.

GM still owes $45.3 billion to the U.S. and $8.1 billion to Canada, money it received in exchange for large stakes in the company. The U.S. government now owns 61 percent of the company and Canada owns roughly 12 percent. GM plans to repay both with a public stock offering, perhaps later this year.

"Nobody was happy that GM needed government loans — not the governments, not the taxpayers and, quite frankly, not the company," Whitacre wrote in an op-ed article that appeared on The Wall Street Journal's Web site Tuesday night. "We believe we can best thank the citizens of the U.S. and Canada by making sure that their investments are hard at work every day, building high quality, fuel-efficient vehicles."

The factory investments in Kansas and Michigan will not create any new jobs, but will preserve jobs at both plants. The Kansas plant, which employs 3,869 workers, also builds the midsize Buick LaCrosse luxury sedan. The Detroit-Hamtramck plant, which has 1,048 employees, now builds the Cadillac DTS and Buick Lucerne large sedans and is gearing up to make the Chevrolet Volt rechargeable electric car.

During the financial crisis that led to GM filing for bankruptcy protection last year, the automaker closed 14 factories and shed more than 65,000 blue-collar jobs in the U.S. through buyouts, early retirement offers and layoffs. The company now employs about 40,000 hourly workers in the U.S.

Preserving jobs at the two GM plants won't help the nation's unemployment picture, but it won't make it worse.

Employers nationwide in March added 162,000 jobs, the most in three years. But the pace of the economic recovery and job creation won't be robust enough to quickly drive down the unemployment rate. It's been stuck at 9.7 percent for three months, close to its highest levels since the 1980s.

GM had made about $2 billion in loan payments to the U.S. government and $384 million to Canada in December and March, and had promised to repay the full loans by June. But company officials have said its cash flow, mainly from the sales of newer models, has been better than expected, allowing it to make the remaining $5.8 billion in payments early.

Repaying the loans has been a top priority for Whitacre.

GM officials say the company's public stock offering will take place when the markets and the company are ready. They will not predict how much of the remaining government debt will be repaid from the stock offering, but said it likely will take years for the governments to divest themselves fully.

The stock offering hinges on GM posting a profit, which Whitacre has said could come this year. GM lost $3.4 billion in the fourth quarter of 2009 on revenues of $32.3 billion. After the event at the Kansas City plant on Wednesday, Whitacre heads to Washington, where he is scheduled to meet with House Speaker Nancy Pelosi and other lawmakers.
 

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Umm, that is basically what I outlined above. The current arrangement not called a loan. It is the government acting as a private equity investor, similar to when Chrysler was pulled from the market and sold off to Cerebus back in 2007. GM doesn't owe the Treasury any money at this point, as 61% of GM is PROPERTY OF the Treasury now.

The problem is that shares are going to go for $26-29 a share, but need to go for well over $40 in order for the Treasury to get back what they paid their 61% ownership stake.
 

TerryMiller

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And this story, dated in August:

http://www.theepochtimes.com/n2/content/view/41268/

GM Far From Repaying Government Debt, Despite IPO Intentions

News Analysis
By Frank Yu
Epoch Times Staff

Aug 19, 2010

NEW YORK—Automaker General Motors Co. this week filed a form S-1, laying the groundwork for issuing public stock at a later date.

Psychologically, the filing is an important step for the company, as merely a year ago, it filed a government-assisted bankruptcy to stave off insolvency. Today, it may be ready to shed its government support and move on as a public company.

The 550-page document laid out GM’s reasons for filing an initial public offering (IPO) of stock, but was short on details.

GM’s announcement to sell stock ultimately changes little for the company, until further details are sorted out. The filing states little on when it would occur—although most analyst predict October or November for a firm stock sale—or set a price for its shares. It also did not mention how much of the money would go toward repaying U.S. taxpayers, which own roughly 61 percent of the company.

But the S-1 also disclosed certain risks GM or its investors may face. It stated that the company may not yet be prepared to act as a public company with public financial reporting capabilities, as it stated that its internal controls over reporting was “not effective,” and warned that the U.S. Treasury may continue to hold substantial interest in the company even after the share sale.

The filing stated that it wants to sell 500 million shares. Assuming that it returns all of its taxpayer obligations under the IPO, roughly 305 million shares would have to be sold on behalf of the U.S. Treasury, which is owed $43.3 billion. GM’s shares would have to be worth $142 for it to repay the U.S. government in full—an impossible proposition as currently constructed.

Essentially, taxpayers should not get their hopes up that GM would repay its government obligations via an IPO right away—it may take some time, and may very well mirror American International Group Inc.’s slow but steady process to repay its government support.
 

TerryMiller

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Umm, that is basically what I outlined above. The current arrangement not called a loan. It is the government acting as a private equity investor, similar to when Chrysler was pulled from the market and sold off to Cerebus back in 2007. GM doesn't owe the Treasury any money at this point, as 61% of GM is PROPERTY OF the Treasury now.

The problem is that shares are going to go for $26-29 a share, but need to go for well over $40 in order for the Treasury to get back what they paid their 61% ownership stake.


According to the last story posted, which you couldn't have seen at the time of your post, they need to get closer to $142 per share to cover things.

Also, if the GOVERNMENT owns 61% of GM's stock, it is still the taxpayer's money that has NOT been repaid.
.
 

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According to the last story posted, which you couldn't have seen at the time of your post, they need to get closer to $142 per share to cover things.

Also, if the GOVERNMENT owns 61% of GM's stock, it is still the taxpayer's money that has NOT been repaid.
.

GM is also offering shares of preferred, which are not included in the common stock IPO, so the $140+ per share price is a fallacy. The common stock IPO is going to reduce the Treasury ownership share from 60% to 40-something%, so the actual sale price (if no preferred stock was to be sold) should be somewhere around 100 bucks (roughly four times the price of this IPO) if the Treasury wanted to see all the money come back. But the preferred stock lowers that number further.

While it sucks that We, The People, now are owners of GM, it doesn't mean we have a loan outstanding to GM. It means we own part of the company. The NYSE is not a pawn shop, though some try to act like it is. GM the company doesn't necessarily owe the Treasury (i.e. the Taxpayers) any money back, but rather they are trying to divest the Treasury's interest by offering the sale of shares. The taxpayers are never going to be "repaid" by GM - we can simply collect our money back by selling our ownership stake in the company we purchased.

If I buy a gun from Academy, I didn't loan them the money; I need to sell the gun to someone else if I want that money back.
 

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I have owned GM vehicles for years. Chevy, Buick, and Olds. Had very few problems with all of them. Maybe I was just lucky.

I don't think that's it. EVERY brand has it's problems, even Toyota and Honda. When I worked for Saturn back in the 90's some guy used to picket outside the Toyota dealer constantly for selling him a lemon. The gap between the brands has closed significantly. Even the latest Consumer Reports shows GM vehicles as making the biggest improvement. Those surveys are always perception-based anyways. They don't get to dig through everyone's records and post real facts. Its all based on how the customer feels their car is. I used to tell the customers at Saturn (who used to always be right there with Toyota and Honda): "We want you to be Completely Satisfied. Before you mark it as anything else, give us the chance to make you happy".

I have been just as "lucky" until the recent thing on my wife's tranny. Doesn't change my opinion of them, stuff happens.

.
 

landman873

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I've got a few of everything and had them all through the years. The 98 chevy 2500 truck i have had since new is a piece of junk tranny didn't last but 156k and a water pump only 100k. Eats tires every 70k and spark plugs every 50k. I'm tell you its junk. (That was sarcasm if you didn't pick up on it) Over all good truck. Seat didn't last forever but what seats do when your in and out 10+ times a day. They all have good ones and bad ones its a toss up know matter what you by. My dodge has 113k and only put a water pump on it at 90k. I do take care of my stuff though. which is a lot of helping something last these days.
 

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Umm, that is basically what I outlined above. The current arrangement not called a loan. It is the government acting as a private equity investor, similar to when Chrysler was pulled from the market and sold off to Cerebus back in 2007. GM doesn't owe the Treasury any money at this point, as 61% of GM is PROPERTY OF the Treasury now.

GM Paid back the money using TARP funds that act like a line of credit. While it technically may not be a loan, it's still a line of credit funded by taxpayer dollars. Taxpayers don't care how it's structured or what it's called, they just don't want their money tied up in a failing company.

http://www.politifact.com/truth-o-m...ceo-says-gm-has-repaid-government-loans-full/

Excerpt from the article:

Aside from the outstanding stock issue, Whitacre's announcement has come under fire from Sen. Chuck Grassley, R-Iowa, who notes that the loans were repaid not with GM earnings (in fact, SEC filings show GM expected to have negative net cash flows in the fourth quarter of 2009) but rather from GM tapping into a multi-billion-dollar TARP-funded escrow account.

"Therefore, it is unclear how GM and the Administration could have accurately announced yesterday that GM repaid its TARP loans in any meaningful way," Grassley wrote in an April 22, 2010, letter to Geithner. "In reality, it looks like GM merely used one source of TARP funds to repay another. The taxpayers are still on the hook, and whether TARP funds are ultimately recovered depends entirely on the government's ability to sell GM stock in the future. Treasury has merely exchanged a legal right to repayment for an uncertain hope of sharing in the future growth of GM. A debt-for-equity-swap is not a repayment."
 

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