« Commonwealth Budget Still Not Under Control | Main | Best Wishes for a Merry Christmas »

Taxpayers Take Loss as Government Bails on GM

At the National Taxpayers Union's blog, Government Bytes, on Wednesday, Doug Kellogg reports the government is closing it's bailout of Government Motors (oops, General Motors). According to Kellogg:

"The Treasury Department announced their exit strategy from the GM auto bailout today, and the bill taxpayers will receive will be in the billions.

"According to the Detroit News, if Treasury sells their remaining shares at the current market price, taxpayers would lose $13 billion on the sale. ZeroHedge.com puts the total cost to taxpayers at more than $40 billion.

"Needless to say, taxpayers got run over by the the government and powerful special interests. The question that remains is: will this all just happen in the future when, once again, the unsustainable business models and benefits of these companies drive them into a ditch."

The Detroit News, in their story, reported that:

"The exit timetable signals the end of one of the most extraordinary government interventions in the U.S. economy in history — the rescue and partial nationalization of two U.S. automakers and their finance arms supported by two U.S. presidents.

"Still, taxpayers will almost certainly lose billions of dollars in the $49.5 billion GM bailout - and the government would need to sell its remaining shares for about $70 each to break even. If the government sold the rest of its stock at current prices, taxpayers would lose more than $13 billion. But profits from the bank and AIG bailouts will largely offset the auto bailout losses."

Meanwhile at Forbes, Steve Schaefer adds:

"The announcement comes just days after the Treasury Department sold its remaining stake in AIG to exit its equity position in the insurer the government rescued in 2008.

"GM will buy Treasury’s initial slug of 200 million shares for $27.50 apiece, raising $5.5 billion and leaving taxpayers with a stake of 300.1 million shares, or slightly more than 19%,  worth $8.3 billion at that price. The remaining position will be sold over a period of time, beginning as soon as January 2013. A similar strategy was used to sell the Treasury’s stake in Citigroup in 2010.

"The government put $49.5 billion into the automaker in 2008 and 2009, and says it has recovered more than $28.7 billion of that investment including the proceeds from the sale announced Wednesday and those from GM’s 2010 initial public offering, which priced shares at $33 apiece."

An editorial in today's Washington Examiner asserted that "GM is alive and taxpayers got ripped off." Further, they wrote the bailout "didn't turn around America's manufacturing sector either. Since July of this year, the U.S. economy has lost, not gained, 26,000 manufacturing jobs," but added:

"No, what the bailout did was save Obama's allies in the United Auto Workers, whose "sacrifices" amounted to putting all of the pain on the company's new hires while protecting existing employees from losing the pay and benefits that helped make the company uncompetitive in the first place. People who actually invested money in the company took a bath. Just like the taxpayers now.

"That and the bailout gave Obama a persuasive talking point for voters in Rust Belt states Ohio and Pennsylvania.

"But it did cost taxpayers some dimes. About 310 billion of them, in fact."

At the same time, however, 24/7 Walll Street reported today:

"Profit-sharing bonuses for United Auto Workers’ members at Ford Motor Co. (NYSE: F) and General Motors Co. (NYSE: GM) are expected to be at least as large as last year’s payout at General Motors and larger than the year-ago bonuses paid at Ford. Approximately 55,000 GM hourly workers and 40,000 Ford employees are in line for the payments. (emphasis added)

"GM workers can expect bonuses of between $5,500 and $7,000, and Ford’s employees could receive a payment of more than $8,000 each, according to a report in The Wall Street Journal. The payments are based on a formula that gives workers a $1 bonus for every $1 million in North American operating profit at the two companies."

Finally, in a press release yesterday, the Competitive Enterprise Institute said:

"It is good news the government is winding down its misguided involvement in Government Motors. It has announced an 15-month plan to divest its stock. It also is good news the auto industry is expanding – though most of the growth has been enjoyed by foreign automakers who have built plants in right-to-work Southern states and had nothing to do with the bailout.

< . . . >

"What we do know is it is long past time for the Obama administration to stop meddling in this or any other industry. We know its meddling – such as the Corporate Average Fuel Economy Standards – will harm GM's top-selling Buicks, Cadillacs, and trucks and lighter vehicles and more vehicle deaths. We know that after the bailout, GM added less than 10,000  net new jobs, and that the bailout perhaps indirectly destroyed as many as 100,000 mostly blue-collar jobs through the administration’s insistence on rapid closures of auto dealerships. We do know the administration’s policies in Michigan favored the United Auto Workers over bondholders, stockholders – including the American people – employees and others.

"And we do know, once and for all, this is not the path to economic recovery."

And economic recovery is needed to get the country on the path to economic growth.

TrackBack

TrackBack URL for this entry:
http://www.acta.us/growls-mt/mt-tb.fcgi/2282